From Spend Matters, Andrew Karpie discusses the evolution of the MSP and VMS soluitions and wonders what innovation lies in the future for independent contractor compliance services if buyers push for independence and neutrality in compliance. Andrew writes:
Making the Connection
IC compliance providers are, of course, different from contingent labor program providers; their business similarities are not the point. What is important about the comparison is that each of the underlying services currently being provided by “full service” IC compliance providers are severable, just like VMS, MSP and staffing services were and still are severable. That means each service can be delivered as a standalone service; each service can be priced separately; each service responds to separate and distinct price/cost drivers; each service has its own unique risks (not procurement risks, but service delivery risks like classification risk, payment risk, etc.); and each service drives unique and usually different contractual terms (e.g., indemnification, insurance, liabilities, paid-before-pay, etc.).
Most markets are reasonably efficient and evolve with changes in supply and demand. The changes we have seen with VMS and MSP providers have proven that the contingent labor market is no exception to that rule. To date, the spend on IC compliance providers has been small enough to escape interest or scrutiny. As they scale with base industry growth, though, the importance of their structural economics, which is based largely on absorbed testing fees and distinct downstream services with different margins, will certainly become more visible. Many of the same contingent labor stakeholders also oversee or influence their company’s IC compliance strategy and access to independent workers. So it is not a surprise that we have seen a few RFP’s recently inquiring about the IC compliance provider’s willingness to provide a more targeted solution versus the traditional bundle. And it is not a big stretch to predict that we will see a continued push for independence and neutrality within the IC compliance space. The real question is timing and how our current providers and new entrants will innovate to meet the emerging demand. Now that is a panel discussion I would like to see at future industry conferences!
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