Multinationals Hopping Aboard Managed Services

     "Typically, this has been a North American model," says Stephen Holmes, a vice president of Kelly Services Inc. who heads the firm’s global contingent workforce outsourcing practice. "Now companies are looking to deploy this all over world. We just opened a Dubai operation for the Middle East. We opened an office in Brazil. The appetite continues to grow."

     Multinational staffing companies like Kelly, Manpower Inc. and Adecco International are leading the global charge and are seeing their managed services businesses prosper even as overall demand for contingent and temporary workers slows in the weakening economy. Those big staffing firms are also benefiting from their financial transparency as publicly traded companies, which provide client companies with a measure of extra comfort after the collapse of a major player in managed services.

     Two acronyms define the business: MSP and VMS. Managed service providers oversee contingent staffing efforts for a client company. One of the primary tools to accomplish that is a vendor management system, a software program that centralizes the screening, evaluation and use of companies that provide temporary and contingent labor.

     Ensemble Chimes Global, the largest provider of vendor management systems, collapsed in January after its parent company, Axium International of Los Angeles, abruptly filed for bankruptcy. Pending contracts and hundreds of millions of dollars in unpaid bills for contingent labor were thrown into disarray.

     The Ensemble Chimes collapse prompted a broad re-evaluation of the managed services industry. Companies that use managed services responded by placing greater attention on the financial strength of managed service providers and vendor management system firms. Client companies have also pressed for tighter control over the flow of money from clients through managed systems to staffing companies, sometimes asking that payments be held in escrow accounts rather than in VMS company accounts.

     Some corporate users of managed services are also looking to large staffing companies to play a bigger role as managed service providers. Rather than develop their own VMS systems, companies like Kelly are partnering with existing technology companies to provide that service as part of an overall MSP offering.

     Manpower reports it now offers managed services in 80 countries. "We continue to see increasing demand for us to provide this service, and increasingly on a global basis," says Jonas Prising, president for North America at Manpower Inc. "This is a U.S. export that does not exist as a solution in other parts of the world."

     The legacy of Ensemble Chimes is that corporations are being more selective in who they allow to run and participate in their managed services programs. That may make it more difficult for enterprising but undercapitalized small companies trying to sell new managed services systems or software from breaking in without a large, financially stable partner like a big staff­ing firm.

     "Customers are being smarter and making sure that individual companies are healthy," Holmes says. "If you are not financially healthy, you are probably not going to be in the mix."

Workforce Management, October 20, 2008, p. 34 -- Subscribe Now!