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MSPs vs. Freelancer Platforms: Battle for mid-market


Small-and-mid market firms have been leveraging contingent workforce for their unmet talent needs for quite long. They have their preferred staffing suppliers who are solely responsible for providing them contingent workers, whenever they are in need. While these organizations were operating happily in their own small world, the onslaught of digital technologies combined with talent shortage and economic uncertainty, shook their world. Now, there is no more abundant talent, their revered staffing agencies are failing to provide them with relevant talent and expenses are piling up in not so great economic conditions. Hence, these firms are looking for external help

This external help is coming in two forms – Managed Service Providers (MSPs) and freelancing platforms. These two set of talent providers are vying for the growing pie of the market by catering to the demands of small-and-mid sized buyers. These demands include the need to reengage talent to save time and money by avoiding sourcing and screening, need to reduce number of staffing firms and avoid their big fat margins, compliance and proper worker classification. Now, given these demands, MSPs seem like a natural choice. To add on to it, MSPs are developing specialized offerings to cater to this segment of the market.

These specialized offerings include direct sourcing of contingent workers, a basic technology platform, operational expertise and a preferred set of suppliers. Now, this direct sourcing of contingent workers is a key component as it offers the MSP to increase their margins and incentivizes them to invest in the relationship. While all this sounds great, buyers still have concerns around supplier margins, expensive nature of VMS platforms and the nature of supplier engagement which is mostly master vendor.

As a result, another set of vendors in freelancer platforms are catching the eye of these enterprises. These platforms offer huge talent pools, direct engagement with talent, lower engagement fee, faster talent matching and sourcing and no concerns about vested interests with supplier. While these platforms earlier offered only freelancer engagement, they have started engaging W2 workers and provide payrolling solutions as well for traditional temporary labor. Some of these solutions have evolved to provide managed services as well which makes it all the more easier for small-and-mid sized buyers to avail their services. 

While these freelancing platforms were traditionally meant to augment the temporary labor talent pool of staffing firms with freelancers and Independent Contractors, they are emerging as worthy adversary for staffing firms and MSPs alike. None of the two set of players have any dominance over the market and it will be interesting to see how this battle between the two will play out in the future.

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