How to Choose an MSP (Managed Service Provider)

In today’s uncertain socioeconomic landscape, organizations need to find various methods to remain nimble and overcome skills shortages. At the same time, they need to successfully manage their contingent workforce as well, which is a key advantage in maintaining flexibility. Partnering with a Managed Service Provider (MSP) helps organizations more effectively manage and optimize their contingent talent by centralizing expertise, improving visibility through data, and streamlining compliance and processes.

But choosing the right MSP is a decision organizations must make carefully to ensure they are aligned on business goals and strategies. This blog post is going to explore the various considerations in choosing an MSP partner, including evaluating requirements, stakeholders, and budget, as well as assessing the various services offered by an MSP.

Evaluating Organizational Needs

Requirements

To begin the process of choosing the right MSP partner for your organization, start by evaluating your current talent needs and future goals. Consider the types of roles and skills required, the size and geographic spread of your contingent needs, and the typical length of engagements. Identify the mix of talent categories you use, including staff augmentation, Employer of Record (EOR), direct sourcing, or consultants because each requires specialized expertise.

Finally, clarify the specific challenges you're aiming to solve and what success looks like over the next one to five years. This clarity will help ensure any MSP you consider is equipped to address your current pain points and support your long-term talent strategy.

Stakeholders

Identifying key stakeholders involved in contingent talent management is a critical step when evaluating an MSP. While HR and procurement are typically central, it’s important to also include voices from IT, legal, finance, operations, and especially the C-suite. Executive engagement and sponsorship is increasingly vital, as nearly half of leaders recognize the need to expand flexible work models to drive long-term growth.

If, on the other hand, your leadership team hasn’t historically been involved, now is the time to educate them on how a contingent workforce program can impact access to talent, quality, visibility, cost management and compliance.

Budget

Another important consideration is your organization’s budget constraints and expectations. To help ensure you’re balancing cost and quality, it’s wise to build in some flexibility and keep an open mind in the early stages, since higher initial investment may yield better long-term efficiencies and less risk.

Remember to also identify potential internal technology integrations that will be required, as well as change management and implementation cost. Doing this initial homework will help guarantee the chosen MSP offers optimal value within the organization’s budgetary framework.

Assessing The MSP Services Offered

Supplier Optimization

The ability to maximize sourcing efficiency by managing relationships and negotiating terms with suppliers to enhance performance and reduce costs is critical. Assess the MSP's supplier network and its ability to source diverse talent efficiently, negotiate rates, and manage vendor relationships to ensure a robust and cost-effective contingent workforce pipeline.

Compliance and Risk Mitigation

Amidst ever-shifting global regulatory guidelines, understanding co-employment risk is more complex than ever, and labor misclassification can cost millions and damage company reputation – especially for geographically dispersed organizations. Evaluate each MSP’s track record in navigating legal frameworks, ensuring compliance with local labor laws, managing payroll taxes, and implementing risk mitigation strategies to safeguard against regulatory issues and potential liabilities.

Data and Analytics

Pay intelligence and talent metrics are critical in informing data-driven decisions and driving organizational change. An MSP’s access to high-quality workforce data and its ability to harness it and provide actionable insights can vary widely from one MSP to another. Carefully examine the MSP’s analytics capabilities, the quality of its data, and its proficiency in providing insights into predictive modeling for:

• Informed decision-making
• Strategic planning
• Contingent workforce performance
• Cost efficiencies
• Talent retention

SOW

Massive cost savings opportunities exist in services procurement, but decentralized management and visibility gaps are limiting organizations’ ability to approach this area in a more transformational way. MSPs can help, but they vary widely in their ability to deliver turnkey procure-to-pay services, Services Procurement, consultancy and procurement analytics. With that in mind, evaluate the MSP's proficiency in managing project-based engagements, ensuring clarity in deliverables, tracking progress, and effectively managing resources within defined scopes and budgets.

Direct Sourcing

Direct sourcing, i.e. leveraging an organization’s brand to source talent from their own private talent pools, can drive cost savings and higher talent quality. However, its successful implementation requires a mix of AI-driven technology, data, curation services and program management that may be outside the scope of some MSPs.

Additionally, assess their platform, networks and strategies to streamline direct sourcing, which will optimize access to top-tier talent while managing costs effectively.

Reaching Diverse Pipelines of Talent

While many organizations recognize the value of a diverse talent pool, only 26% have a defined strategy for their contingent workforce, according to HRO Today. When evaluating MSPs, it’s important to assess their commitment to inclusive hiring, equitable opportunities, and operational practices that enable everyone to thrive. Look for an MSP partner that actively promotes inclusion, measures outcomes, and aligns with your organization’s values.

Importance of Vendor-Neutrality

Pure vendor neutrality means an MSP has no affiliation with a staffing agency, and no one staffing firm is prioritized due to ties with the MSP. This unbiased approach levels the playing field among staffing agencies and creates a highly competitive environment for sourcing the workforce. (Understand whether your MSP is truly vendor-neutral when you check out our infographic).

A vendor-neutral MSP prioritizes an organization’s goals over supplier affiliations, leading to more transparent, unbiased talent engagement. This approach expands access to a wider talent pool, improving candidate quality while driving cost savings through increased supplier competition. It also supports access to talent by engaging a broader range of vendors, some niche or specialized, providing greater flexibility across roles and regions.

Additionally, supplier collaboration enhances data sharing, which gives clients deeper insights to inform smarter workforce decisions. Through removing bias and encouraging equal participation from all suppliers, a vendor-neutral model fosters a healthier, more competitive supplier ecosystem that drives continuous program improvement.

By understanding the benefits of vendor neutrality and how the model works, your organization can make better-informed decisions when evaluating a potential MSP.

Discover more insights on choosing the best MSP partner for your organization when you download our ebook.

Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.