I met with Jeff Brooks (former Marketing Director of Parity Solutions) last week. In a forum set-up to discuss Master Vendors / Managed Service Programmes we looked at the Pros and Cons. Of overriding interest was the likely reality in the current market:

• Master Vendor agreements will continue to grow for the foreseeable
• They will be less effective in most instances
o … because the level of saving are not longer there to be met (existing agencies have already agreed to highly competitive margins)
o … because out of process hires will remain prolific where subcontracted margins are too poor

(Master Vendor proved an attractive option for all when 20+ % margins were the norm. (Agencies were often willing to take 2-5% cut for a greater slice of the  resourcing and Clients were impressed by the volume of saving / single point of invoicing. It gives the client (Procurement) the impression (and sometime reality)  of greater control).

• Master Vendors will look to outsource some of their low margin business. Multi-million pound deals that impressed shareholders are no longer looking quite so attractive with creeping debtor days and higher borrowing rates from reticent lenders

The next 12 months, will in my view, be a good test of the best MV deals and the breaking of many that were hurriedly signed on the basis of market share as opposed to profitable business.