Have you ever had one of those networking calls where you thought this would make a great blog post? Well, that’s precisely how this came about. We were chatting with a manager running a contingent workforce program and a prospect searching for creative solutions to cut costs and boost efficiency. Their question:
"Should we keep managing our contingent workforce internally or outsource to a Managed Services Provider (MSP)?"
Great question! And like most things in workforce management, the answer is… it depends. So let’s break it down.
Show Me the Money: The True Cost of Each Approach
There is no surprise here—cost is always the most significant factor in this decision. But let’s not get fooled by surface-level math. The spend of your program depends heavily on the MSP’s pricing model if you go that route or on hidden internal costs if you keep things in-house.
Outsourcing to an MSP: What's the Price Tag?
MSPs typically charge in one of three ways:
Supplier-Funded Model – The MSP gets a cut (usually 1.65 to as high as 8%, with an average just below 3%) from suppliers.
Sounds good. Except suppliers often need to pass those costs right back to you.
Client-Funded Model – You pay the MSP directly as a percentage of spend or a flat fee. Transparent? Yes. Cheap? Not always.
I have had some success negotiating flat fee-per-month models where there is a tier to spend and an allocation of the number of resources from the MSP.
Hybrid Model – A mix of both, trying to keep everyone happy, but does it?
MSPs promise efficiency, cost savings, and compliance expertise. But be sure to read the fine print—those fees add up, and you might find yourself paying for services you don’t need.
Managing Internally: Not Always "Free"
Keeping your contingent workforce program in-house feels like a cost-saving move, but there are plenty of expenses lurking in the background:
Technology & Integrations – Vendor management systems (VMS), HRIS tie-ins, and analytics tools don’t come cheap.
People Power – Your HR and procurement teams need time (and lots of coffee) to handle sourcing, compliance, and reporting.
Compliance Risks – Misclassify a contractor? Ignore a labor law update? That could mean lawsuits, fines, and a significant headache.
Still, if you have strong internal processes and the right technology stack, keeping control in-house can preserve brand identity and align with company culture.
Brand Control: Who's Representing You?
Regarding brand identity, who’s in charge of your company’s first impression of contingent workers?
Outsourcing to an MSP means handing over supplier and worker relationships to a third party. This can be great if your MSP is top-notch, but if they drop the ball? Your brand perception takes a hit.
Keeping it in-house ensures that your policies, communications, and workforce culture stay consistent. But it also means more internal effort.
Internal control makes sense if your company has a strong employer brand and values direct engagement with contingent workers. If you’d instead let specialists handle the heavy lifting, an MSP could be the way to go.
System Integrations & The ROI Equation
Whether you outsource or manage internally, technology is your best friend (or your worst enemy if it’s not set up correctly).
VMS + HRIS Integration – Whether you use SAP, Workday, or another HRIS, ensure your contingent workforce data flows seamlessly.
Real-Time Reporting & Analytics – Both approaches should track spending, performance, and compliance in real-time—if you’re still using Excel for this, we need to talk.
Automation & AI – The right tech can make a lean internal team as efficient as an MSP.
Tracz Consulting specializes in ensuring system integrations work—whether you keep things in-house or outsource, we’ll help you find the ROI in either scenario.
How Tracz Consulting Supports Your Workforce Strategy
Here’s what we don’t do:
Charge hourly fees for endless “strategy sessions” that don’t deliver results.
Here’s what we do:
Work on milestone-based deliverables to drive actual value. Whether you’re looking to:
Evaluate the actual costs of outsourcing vs. in-house management
Build a contingent workforce strategy that aligns with your goals
Just like a program model (outsource vs internally managed varies by organization, so do the program's goals!)
Optimize system integrations to avoid costly inefficiencies
Ensure compliance without unnecessary bureaucracy
…We’ve got you covered.
Final Thoughts: What’s Right for You?
If you want cost transparency, brand control, and direct engagement, managing internally might be the way.
An MSP could be better if you prefer scalability, process efficiencies, and compliance oversight.
Regardless of your direction, Tracz Consulting is here to help you make the best decision for your business—without the hidden fees and overcomplicated processes.
Let’s discuss finding the right workforce strategy for your organization because making smart decisions about your contingent workforce shouldn’t feel like rolling the dice!
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