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Why managed services can help reduce cost and improve efficiency

Posted on 03/06/2013 by Jon Milton in Category Managed Services

I am often asked the question, what exactly is a managed service provider?  Basically, it’s a 3rd party business that manages the provision and oversight of a particular service to a business with the aim of improving work flow, increasing productivity and controlling costs.

A lot of businesses across the public and private sector are now using managed service providers for the supply of temporary staff and contractors as well as the provision of IT (commonly known as Vendor Management Systems) to manage usage. There is also increasing use in other supply categories such as training, consultancy, and repairs and maintenance. The introduction of managed services to UK business often results in reduced costs and risks, and greater efficiency in the use of the service under management.

Private, public and not-for-profit businesses have found that using a managed services provider can have multiple benefits.  As well as the aforementioned reduction in cost and risk, managed service providers also look after contractual issues with suppliers and control transactional processes that are administratively heavy and time consuming. This frees up valuable resources in-house, leaving management to get on with running their business. 

Businesses have a choice as to the kind of model they can choose when it comes to managed services.  You either choose:

  • ​an independent managed service provider (these providers are known as vendor neutral) who will provide access to a wide range of suppliers,
  • the services of a managed service provider who is associated with a particular recruitment supplier(s) and in turn will aim to maximise the revenue of its own supply capability.  This is commonly known as master vendor. It should be noted that in this case the managed service arm and the supply brands are very different, with different interests and functions.

So what is the best option for you? This rather depends on your company’s needs, and some research will have to be done right at the start to establish the best fit for your organisation.

I would start by looking at the different service sub-categories within your business and figuring out how much you spend on each over a certain period of time. You then need to ask your suppliers what they have supplied and at what cost. When it comes to categories such as temporary labour, this can be hard to audit with multiple suppliers where hours and pricing are variable and complex.

Once you have a detailed breakdown of spend, you should be able to understand how many different types of suppliers you are using. If you use a lot of different suppliers for various types of services, you will need to establish why this is, and then start looking at who might be best placed to deliver these more effectively.

If your starting position involves using quite a few suppliers across multiple sub-categories there’s normally a good reason for this. There are over 11,000 suppliers of temporary agency staff in the UK, and no single business has managed to ‘corner’ the market so working with an independent, vendor neutral managed service provider who can offer you access to a wide range of suppliers is often the best option. This is because, a managed service provider who is affiliated to a supplier is likely to  want to channel as much supply as possible to maximise profits, which in turn may impact the quality, cost and availability of services delivered.

If your needs are relatively simple however, a ‘master vendor’ managed service provider may be better as you can leverage volumes of supply for lower prices.

Either way, remember what you are buying –  in a vendor neutral service that manages supply on your behalf the supply element is delivered separately by a supply chain. Whereas most master vendor managed service providers have built their reputations on supplying a service, not managing supply, so it’s important to do your research from the very start.