Managed Services is the concept that one agency is chosen as a "partner" to work with the employer to manage procurement and administration of contract labor. In most cases, the partner is paid a management fee or given increased opportunities to generate revenue. Usually the agency assigns one or more staff (depending on the volume of contract usage) on-site with the customer to work with purchasing, human resources, and the departmental managers involved, and so provide a "one point of contact" solution. Any other agencies that support the customer also work through the partner.

• Structure One: (Tier 1 Staffing Firm; No Automation Tool)

• Structure Two: (Tier 1 Staffing Firm; Automation Tool)

• Structure Three: (Multiple Tier 1 Staffing Firms; Automation Tool)

Research indicates that 20 percent of the Fortune 500 companies have evaluated and selected a VMS. While the features of these tools vary slightly, they perform most of the tracking, job order distribution/fulfillment, and reporting functions.

The current popular pricing for these tools is uniquely positioned so that no installation costs are incurred by the user. While fee structures vary, the typical range is one to three percent of the billing cost. The payment is shown as a reduction on the supplier's invoice. In many cases suppliers pass on the majority, if not all of the cost to the consultant via a reduction in the consultant's pay rate. Depending on the depth and breadth of the installation, the user may find that it makes more sense to purchase a license for the software and pay the VMS provider for installation assistance and support.

Criteria used in VMS selection includes pricing structures, references from other customers, understanding of the ease of implementation, the ability to interface with existing back office systems, data security, financial strength of the VMS supplier, and how the VMS supplier will support both the installation and ongoing use of the tool. Some VMS tools are in their third and fourth releases and have impressive functionality. As with any new software niche, there have been several suppliers in this new space that have not survived due to lack of funding and lack of revenue. Although the ongoing financial viability of VMS suppliers is becoming more encouraging, some "shakeout" will continue as the industry moves from infancy and consolidation to growth and maturity.

Benefits of Managed Services Alternative
A growing alternative is the use of a traditional staffing firm as the Managed Services Provider as described in the "Structure One and Structure Two" examples. There are numerous advantages to selecting a Managed Services Provider that has pre-established contractual alliances with one or more VMS vendors. However, because a non-VMS solution may be a better solution in some situations, organizations should consider aligning with a staffing partner that can implement with or without a VMS tool.

Managed Services Features	Managed Services Benefits
Standard, company-wide rates for skills	Eliminates widely varying rates for identical skill sets
A defined list of supplier(s)	Guarantees set price, reduces "maverick" spending, and ensures volume discounts
Single supplier for permanent and contingent talent	Reduced costs, volume discounts, single staffing agreement
Simple job requisition process	MSP assumes all responsibility to produce the right candidate
Cost and efficiency reports	MSP consolidates data and produces standard and customized performance reports
MSP becomes extension of the internal staffing team	Screening process tailored to the individual business' corporate culture
Uniform accounting for contingent labor	Consolidated worker invoices and streamlined Accounts Payable process