How Does an MSP/VMS Pay for Their Program?

When it comes to choosing an MSP, your company has a lot to consider, including pricing structure. There are several ways that MSP programs can be funded, and it helps to understand those pricing models before making a choice.

Vendor-Funded Pricing Models

Vendor-funded pricing models have become popular in recent years. In this type of pricing structure, the management costs of the MSP program are absorbed by the vendors, with no extra cost to the client. This ensures that companies can maintain a predictable payment structure to the MSP.

It works like this: The processes associated with sourcing talent, selecting talent, on-boarding hires, managing workers, off-boarding and paying employees are all fully mapped out by the MSP.  From there, the MSP can analyze cost and effectiveness, and identify waste. This allows them to streamline processes and reduce costs. The vendor-funded model shows savings on the vendor side while also decreasing costs over time to the client.

This is possible because the MSP retains a percentage of vendor invoices to cover the management costs of the program. Vendors accept this arrangement because they can increase market share by working with MSPs and the more efficient their program, the more the MSP will rely on them for their clients.

Other MSP Pricing Models

Vendor-funded pricing is the most popular and typically the most appealing to businesses, but MSP pricing models come in other structures including:

  • Transactional fees: This structure is complicated to manage because every time a client requests a specific form of support (per-hire, functional task, etc.), the costs must be priced out and approved. In a fast-paced environment, the transactional model can be a bit slow and complex, and costs can be nearly impossible to predict.
  • Monthly fixed-fee: This type of pricing structure is self-explanatory but it does not allow room for agility or change. Often times, clients who are happy with their legacy processes but want access to more modern tools often look for a fixed-fee structure. It’s important to remember that fixed-fee programs don’t scale, they don’t allow for simple changes and over time, they can actually be more expensive than a vendor-funded model if you’re not getting true value from the MSP.

What Type of Pricing Model is Best For your Company?

The truth is, only you can decide which pricing structure works best for your organization. The vendor-funded pricing model has become so popular because it is scalable and promotes long-term cost savings by encouraging vendors to be as efficient and effective as possible. The real key to realizing long-term cost savings and efficiency with an MSP is to work with the right company. A strong partner will be able to deliver their promises of a more streamlined and effective approach.

If you are ready to attain the business benefits of working with an experienced MSP/VMS, the team at CSS vSource is here to help. CSSvSource is an independent company of Contemporary Staffing Solutions offering vendor-neutral, customized solutions. Call us today at 610-832-2500 to learn more about our managed services or to set up a free consultation to determine how CSS can save you money.