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PODCAST: Analysing industry trends with Everest Group

Book open Reading time: 12 mins

This month, Subject to Talent welcomes Arko Basak, partner at Everest Group, to share findings from Everest Group’s recent report on the future of managed service provider (MSP) and recruitment process outsourcing (RPO) services. The unprecedented talent shortage is accelerating macro trends in the industry as well as forcing organizations to shift their siloed approach to permanent vs. contingent talent, to looking at the full workforce as one. Listen in for a future-focused conversation rooted in the top talent challenges of today that you won’t want to miss.


Bruce Morton: Welcome to Subject to Talent. Brought to you by Allegis Global Solutions. Similar to you, we're always trying to learn more. On this podcast, we speak to workforce and talent experts from around the world, covering market trends, technology, and our ever-evolving dynamic industry.

Hi, I'm Bruce Morton, the host of Allegis Global Solutions' Subject To Talent podcast. Today I'm joined by Arko Basak, partner at Everest Group. Arko leads their talent advisory and research practice, and assists Fortune 500 firms and services, and technology providers, on topics related to the entire talent service and technology value chain, including both permanent and contingent talent.

Great to have you here today. Welcome Arko.

Arko Basak: Thanks, Bruce.

Bruce: So, we like to kick off our podcast by getting to know our guest a bit. If you don't mind, could you please share your journey within the workforce solutions industry, and how you got to where you are today?

Arko: Interesting question, Bruce. I joined Everest Group 10 years back, as an analyst, tracking the entire workforce solutions industry. Both on the permanent and contingent side. We were small back then, in Everest Group, and over the years we have expanded our research, and it has been the most interesting journey. People are the most interesting aspect that you can think of.

And then over the years, the way technology and digital has played in this space, it has just been a wonderful experience tracking all the ups and downs, and changes, and disruption in this industry.

Bruce: Great. Well obviously we have a great partnership and relationship. But for those people listening in today that aren't quite sure who Everest Group are, could you please give us a few minutes on explaining who the Group are?

Arko: Yeah, absolutely, Bruce. Everest Group is a global research and advisory firm. We are focused on the global services and technologies industry. When we say global services, it can mean either outsourcing of services, or organizations setting up their own internal shared services. And all the technologies that you require as part of that. As part of our work, there are two key avenues that we work in. One is the published research, which I think a lot of people are familiar with. I think you are very familiar with the PEAK Matrix®?

Bruce: Right, yeah.

Arko: PEAK Matrix is a place where we compare service providers, across various market segments, such as RPO, or MSP, or VMS. But besides the research, we also provide a lot of custom advisory services, where we solve specific needs of a particular client. That can be an enterprise looking to outsource, or select a new service provider, an end of term situation, price benchmarking, or it can be service providers such as yourselves. And we've helped service providers with their go-to-market strategies.

Arko: So yeah, again, pretty interesting. And over the years, we have constantly expanded to various aspects of the workforce industry. And in fact, various aspects of the global services and tech industry.

Bruce: Wow. So, a really envied position with the amount of organizations, on both sides of the fence, that you speak to. Both the providers, and the users of those services, across the human resources spectrum. And as you say, covering everything from pay or benefits, learning, broader talent management, outsourcing, everything else.

I say envied because you get to see inside some crystal balls. Let me ask you, what are some of the macro trends happening right now, that you see impacting the global talent market?

Arko: I think it's no big news, but everyone understands that there's an unprecedented talent shortage. The entire talent supply-demand gap is in a very precarious position.

And honestly, our read of the situation is, we do not see this to be getting solved anytime soon. And the primary reasons are, it's not just COVID related. COVID might have been a trigger, but there are a lot of systemic issues around demographics, shrinking size of the working population, changing personal preferences, which is likely to sustain this supply-demand gap into the future as well.

And of course, as part of that, we see rising salaries and rising wages, rising attrition, and overall massive pressure on the entire talent market and talent acquisition organization, and the HR teams across organizations.

The only flip side, of course, with the rising inflation and central banks increasing rates across the globe, probably there's a recession looming down the line. Which will probably moderate the situation a bit. But if you think about some of the highly skilled roles around tech, or life sciences, or healthcare, I don't think even a recession will really solve the entire talent supply and demand gap. That's how we see it.

Bruce: You sound like you're saying, this was coming anyway, and perhaps COVID expedited the impact.

Arko: Yep. Yeah, that's our belief.

Bruce: It was going to happen.

Arko: Yeah. This was going to happen.

Bruce: Yeah. I think it was '89 when McKinsey, the "War for talent." And it's finally here.

I guess it's always been here, but now it's at the forefront of everybody's mind. So, as you think about that, particularly in the contingent space of the contract workers, and freelance, et cetera, how has this talent shortage impacted the way companies think about strategically using the contingent worker? Has that become more of a opportunity for them to use contingent workforce? Has it expedited that growth as well, do you think?

Arko: It's been an opportunity, but it's also been a necessity, right?

Bruce: Right.

Arko: In this entire talent scenario, you can't really look at permanent and contingent as two separate silos. You ultimately need to look at workforce as workforce.

And as part of that, I think the contingent space has seen bigger disruption, and bigger widening of minds, because the definition has changed from the traditional staff org, or the talent provided by staffing suppliers, to anything extended workforce. Anyone who's not permanent is now included within that definition. That can be services procurement, statement of work, freelancers, that can be direct sourcing. It can be a lot of models. And we see organizations having a much more open mind, in terms of experimenting, and starting to adopt these models. Because, as I said, it's both a necessity, as well as an opportunity for them.

Bruce: Right. And at some point we'll stop calling employees permanent, as they're not. And stop calling contingent workers, contingent. Because they're not either. But anyway, interesting. Fascinating to read your report recently, the MSP 4.0. Could you share with our listeners some of the key findings that you found in that report?

Arko: Yeah. I think the two key aspects that we focused on in the report. One is, what outcomes can you expect from MSP 4.0?

Some of them were purely dictated by COVID. For example, the entire speed and agility has become very important post COVID. But the other, more important, factor to me was now MSP, or even if we talk about RPO later, they now have the potential to directly impact business outcomes. Because companies are so dependent on talent, and talent is so scarce now, a success or failure of an MSP, or an RPO program, has the potential to directly impact top line and bottom line. MSPs, if the program works well, if the provider really does their job, and the enterprise really partners with the MSP, it has the potential to really impact strategic and business outcomes.

The next question is, of course, how do you do that? And we have talked about the eight D levers. So, I won't get into each of those Ds, but a couple of them, which are most important. One is, of course, the redefinition of contingent workforce, which we just talked about. A lot of these categories beyond the staff augmentation.

The other key aspect is the entire digital and technology. Again, within that, there are multiple things, like bringing in the right analytics. But to me, the most important aspect is, can you include all these plethora of tools that are out there in the market, and integrate them into some sort of a platform-based ecosystem, where all these tools speak to each other, there's seamless flow of data, and the experience is great across using all these platforms?

Having 10 different systems, which don't speak to each other, doesn't really make sense. So, can you bring them all together? I think that is probably the next milestone on the digital side.

Bruce: Right. The definition of MSP being managed service providers, is that's what they need to do – manage service providers – and manage the tech as well.

Arko: Yeah. I mean, honestly, I think the MSP name is slightly old and dated now.

Bruce: It's a little.

Arko: We like to call it, at least, contingent workforce management. I'm sure there can be better terms as well. But MSP sounds too restrictive in today's world.

Bruce: Yeah. Yeah. And, in that same report, you noted that, similar to the contingent space, in the global RPO market has experienced a, let's call it a V-shaped economy, last year. Then it came back much quicker than any of us, I think, could have predicted. The need for organizations to go out and hire.

RPO became a very popular choice in 2021, because organizations, perhaps, have downsized their own talent acquisition function. The need to hire people very, very rapidly saw that explosion. How are you seeing the recruitment process outsourcing (RPO) industry stepping up to that? And how is that going to shape that industry in the future?

Arko: Yeah, I think in some ways, if you compare to the MSP industry, there are quite a few common levers. Digital and technology, again, very important across both. You think about, design thinking led experience design, that's important across both.

Again, a key aspect here is experience. Not just for candidates, but for all stakeholders. That includes candidates, hiring managers, and the senior leadership.

And the other, probably, third most important aspect, is the entire diversity piece. And when we were recovering from the pandemic, for quite a few organizations, it was a nice to have, but today it's more a must have. It's not just the right thing to do, but diversity, equity, and inclusion initiatives can actually help bring you those untapped talent pools, which you may not have been looking otherwise. And that can help solve or mitigate some of the talent challenges.

Bruce: And are you seeing in your research that becoming... I mean, hopefully that's a real thing now, D&I, it's not something just talking about and ticking boxes. You're seeing true hard evidence of organizations, not only having a strategy around it, but actually seeing the benefits of that, and truly understanding the value programs like that can bring.

Arko: Yeah. It's still early days. Probably not a lot of organizations have still seen value, or even if they have seen value, that it’s still anecdotal. It's really difficult to quantify the benefits around D&I, unless you do some deep research around it. But anecdotally, yes, organizations are finding value, and this is becoming a key criteria in terms of their service provider selection. Is the provider bringing in enough D&I capabilities, and ultimately will the provider help me build a diverse workforce?

Bruce: Right. And as you think across that MSP 4.0 and RPO 4.0, you mentioned earlier about the MSP should be, and needs to be, more strategic than it was in the past, when it first started out as a thing, when it was more about compliance/ risk management. But now it’s organizations seeing that as a competitive advantage. Are you seeing much traction yet in the combining of permanent and contingent workforce, and companies thinking of that holistically in the way they operate?

Arko: Yeah. Great question, Bruce. And honestly, this is something that we've talked over the years. And this has been out there for a very long time. But something that fundamentally changed, one, people have moved beyond the talk. People realize, and organizations realize, that this is something that they really need to, going forward.

I think right at the beginning, we said, we can't really look at permanent as permanent, and contingent as contingent. It is just workforce. And organizations are realizing that.

They're starting to take action on the ground. They're having those conversations internally. And HR and procurement  departments are speaking more to each other. And they're speaking more to their service providers around this. Real action on the ground is still slow, but definitely, at least the preparatory steps have been taken, and taken much more than we have seen previously.

Bruce: Right. And so, as you think about your client base, the enterprise level that are buying your research, and taking note of your advice on that, are there particular industries that are doing better than others, or are more likely to be more open to change than others? Are there any trends there?

Arko: Difficult to sort it by industry, but any company where the talent situation is more acute, and their problems are more than the average, we see them much more open to these ideas around total talent, or total workforce solutions.

Bruce: Because they were a bigger challenge to solve, I guess.

Arko: Yeah. A bigger challenge to solve. So, bigger steps to take.

Bruce: Right. And obviously you're in a global role, so you look across the whole global landscape. Are there certain regions that are ahead of others, in this type of thinking, and the innovation needed?

Arko: Traditionally, we have seen Europe to be ahead in terms of some of the more total talent solutions. In part due to organizations having a different mindset. In part due to, probably, HR having a greater role on the contingent side. In part due to regulations. In part due to the service provider landscape. But, we have seen quite a bit of this in Europe historically, but lately we have seen much more of these conversations, and actions, being taken in US, or even in parts of Asia Pacific.

Bruce: Right. What advice would you give those folks listening in that might be in an HR position, or procurement, and they're agreeing with what we're saying, and what you're saying, and they understand the challenges, and that we need to start thinking differently. What advice would you give them? How do they start?

Arko: They need to have a proper plan in place. Both in terms of the action steps, and what do they expect out of it.

On paper, total talent management can have very wide-ranging benefits – from cost advantages to really strategic advantages.

But practically, it's probably not easy for anyone to achieve all of that in a short period of time. And it's also a pretty big change management. That entire risk management, and being careful is a key part. And that is where having well-planned, phase-wise plan, proper change management, proper communication management, and buy in from a wide group of stakeholders, is important. Probably not go big bang, probably take a step-by-step approach.

Bruce: Based on all of the research that you've been doing, Arko, and this is almost an unfair question to ask you, because everything you do is scientifically based on the research. But bringing your crystal ball out for a second, and thinking about, and pick a time, you might say three years, five years, pick your own timeframe, but as you think about the future in this space, what are some of your predictions in terms of, what will be different in three to five years’ time? From the way organizations are operating, compared to how they operate now.

Arko: That could really put me on a spot, Bruce. But probably this entire total talent management is something to keep an eye out for. And probably move beyond talent, to probably some of the things that you are talking about. How to get work done, whether it's by permanent or contingent talent, doesn't matter.

In fact, it doesn't even matter whether it's by human beings or by automation. How do you get the work done? What's the quickest, best, and most cost-effective way to get it done? I think that will become very important.

And in general, we'll probably see much more pervasiveness of technology in this entire space. And we know, I've heard a lot of times that extra technology, or too much of technology, can harm the user experience, or harm the stakeholder experience. My belief is a lot of technology, used the right way, actually enhances experience. It doesn't really diminish experience.

Bruce: Right. And one final question for you then, the good old HR versus procurement question. In the research that you do, is it still a different audience when you're talking RPO versus MSP? Or are HR and procurement truly starting to actually get in the room together?

Arko: They're starting to get in the room together, but in most cases they're still operating quite independently. In the sense that one of them is leading, with support from the other.

We still speak to one group of stakeholders, but the more important thing is the questions that they're asking us are starting to sound very similar. So, essentially they're asking almost the same questions. Doesn't matter which group of stakeholders they are. Which, to me, really bodes well for the future.

Bruce: Yeah. Yeah. Well, let's finish on that high note. Hopefully our listeners will be wanting to learn a lot more about Everest after this conversation. Where can they go to find you, and find more detail on Everest Group?

Arko: Viewers can visit our website, which is everestgrp.com, or they can reach out to me on my email.

Bruce: Great. Okay. Arko, it's been a pleasure. Thank you so much for your time today.

Arko: And thanks for having me here, Bruce, today. Thank you.

Bruce: Cheers.

Arko: Cheers.