What are the VMS features to look out for in 2023?
Vendor management systems have been around for decades. In fact, most companies that utilize the external workforce within their organization will already use a vendor management system to manage their workforce. But that doesn’t mean they have never changed. Rather, VMS platforms have adopted new technology and features to keep up with the changing talent market.
This means that those companies who continue to use an outdated system will be at a competitive disadvantage to those with updated ones. Keeping your platform up-to-date, helps businesses and makes life easier for both job candidates and hiring managers. But what makes a VMS up-to-date in 2023, and what features should you look out for?
Vendor management systems have evolved over the last 20 years
The very first vendor management systems will look completely unrecognisable when compared to modern platforms. They have evolved through three separate stages during their lifetime.
1. Original systems of record
The very first VMS platforms were designed to manage indirect spend and the supply chain that served up talent. They did little beyond keeping a simple record of the total supplier spend of an organization and an overall list of vendors. This could include purchase orders and purchase requisitions from suppliers.
They were primarily used by procurement teams to track supplier performance and had no scope to interact with or manage an external workforce at all. Fundamentally, they were created to displace spreadsheets used by procurement teams as an instrument to manage the hiring of contractors through indirect staffing vendors.
2. Move onto the cloud
By the end of the 2000s, VMS platforms had largely shifted onto the cloud. This meant organisations could access their supplier spend records and workforce management platforms on the go. Rather than being confined to a specific location or department, it meant that the total stakeholders in workforce management processes increased. This started the shift towards HR and other stakeholders having access to VMS platforms, thus evolving capabilities that best suited their needs.
3. A complete end-to-end workforce management system
Since the pandemic, VMS platforms have yet again evolved to include features that allow stakeholders to manage their entire workforce. To do this, they have had to adopt capabilities to interact with candidates from both the external and internal workforce within businesses.
It has also resulted in a change in the key stakeholders involved in the workforce management process. Rather than having separate spaces and systems for HR and procurement teams, vendor management software is beginning to be used on a corporate level across all departments.
It has become much more important for these stakeholders to be able to have access to an internal talent pool from which to draw external candidates. This has meant that the scope of a VMS platform has changed dramatically since the first generation of software.
Your business cannot afford to rely on outdated software
Rather than being simple systems of record, modern platforms need to be able to directly source candidates to your external workforce and provide a way to interact with candidates on a long-term basis. Without these features, you will not be able to access workers in the increasingly competitive talent market since the pandemic. To remain an attractive employer, companies need to ensure that their technology platforms are fully up-to-date to give them the best chance at finding the right people for their business.
2023 brings new challenges to the talent market
What has driven these changes?
The talent market has undergone a series of rapid changes over the last few years. As workers have sought to redress the balance between their work and personal lives, their demands towards their employer have changed. Workers are now much more likely to favour external working roles that allow them to work when and where they want than before 2020. As a result, it is more important than ever for business leaders to champion worker well-being and design their workforce management processes around this.
Research has found that 39% of the entire US workforce engaged in freelance work in 2022 and contributed a total of $1.35 trillion in revenue to the US economy.
But these changes have not just been driven by workers’ demands alone. Business leaders have increasingly been looking towards the external workforce to find the optimal talent mix for their organization. Many leaders have realised that certain roles within their company are much better served by an external worker and only the business critical roles that demand a high level of security need to be filled by full-time employees.
How has this changed the demands of a vendor management system?
To accommodate these changes, VMS platforms have also needed to adapt. As many candidates have looked to the external workforce as a new path in their career, rather than remaining in an internal full-time role, the number of companies that need to have access to the external workforce has greatly increased. This means that communication between hiring managers and candidates has become more important than ever.
It has become much more beneficial for companies to develop and maintain a long-term working relationship with a candidate rather than bringing in new individuals for different roles. This is not only because they already have a working relationship and knowledge of your business processes, but also because it is a key demand of candidates who want to make external work their career, rather than just a job.
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What features do businesses need in 2023?
To accommodate these changes in the market, VMS platforms have had to adapt their capabilities and features in 2023. Specifically, there are three new features that will become essential for any business looking to maintain an external workforce.
1. Business intelligence and AI maturity will expand
The advancement of machine learning and artificial intelligence over the last few years has revolutionized how information is displayed within a vendor management platform. Rather than just providing an internal review of your own supplier, performance and vendor information, a modern vendor management system can provide industry-specific business intelligence.
For example, they can monitor and display average pay rates across different industries and through many different factors, such as location, level of experience and type of role. This information will become priceless for hiring managers, as well as corporate-level stakeholders for two reasons.
Firstly, it will mean that your business is offering the right pay rate to attract talent. If this rate is too low, then you risk pricing yourself out of the market and making your business unattractive to potential candidates. Equally, it will also mean that you are not charging too much for different roles across different regions. This will help to make your external workforce more cost-effective and saves money.
2. Predictive decisioning and market insights will become irreplaceable
Artificial intelligence will not only be able to provide market insights, but also make predictive decisions for your workforce management. By allowing AI tools to have access controls the amount of work that hiring managers need to do to successfully onboard, engage with and manage external candidates.
The kind of decisions that AI tools are able to make include scanning and pre-screening CVs from potential candidates to determine which ones are best suited for the role. It can then recommend a shortlist of candidates to hiring managers, saving room time from sifting through different applications and from tedious tasks such as data entry.
Data from one study has found the proportion of external workers within the total workforce rose from 35% in 2018 to 50% in 2022.
These tools can also be used to manage vendor relationships once candidates have accepted the role. They do this by managing a timeline of different events during the relationship between your business and a candidate to keep all of the hiring manager’s tasks in a single place and to ensure that no step in the communication process is missed.
3. Diversity in an external workforce matters.
With many businesses still feeling the effects of the Great Resignation, talent shortages continue to rock all industries. While adopting an increased proportion of external workers has been a remedy for some, this itself has its limits. In especially competitive roles that demand a high level of skill, there is simply not enough talent to go around.
To combat this, business leaders need to look beyond traditional candidates and include much more diversity within their organizations. While many steps have been made over the last few years to make the workforce more inclusive, there is still more work to be done. One particular group that is often overlooked in the external workforce are neurodiverse candidates.
These candidates are often more than capable to perform the role that is required of them and even possess a unique creative ability that many of their counterparts lack. They often provide creative solutions to problems that another candidate would not think of. They are undoubtedly a significant benefit to your workforce.
All organizations and business leaders should strive to make the external workforce hiring process more accessible to a diverse range of candidates. Luckily, modern vendor management systems are perfectly placed to achieve this. Their tools can be configured to create an internal, neurodiverse talent pool and design, separate hiring processes, specifically to cater to and include neurodiverse candidates. Those businesses that choose to invest in this will be able to access a largely untapped area of the talent market.
Executive teams need to embrace the technology
These technology capabilities have already made their way into modern platforms. As a result, it is not the capability of a vendor management system itself that is holding many businesses back. Instead, it is the apprehensive nature of many executive teams to adopting a new software solution.
It is easy for stakeholders and leaders to think that they have a technology platform that works for them in the present, so they have no need to update their software solution. However, this viewpoint is set to be a costly mistake for those businesses. They will struggle to attract talent in a market where the demands of candidates have fundamentally changed over the last few years.
Similarly, they risk trying to operate a manage their workforce without having the market insights that their rivals do. This will make the management much more costly as they lose out on valuable data, such as accessing payment insights for different industries and regions and other information. Without visibility of this data, they are at a competitive disadvantage to their rivals.
You should expect more from your vendor management system in 2023
The best way to ensure that you are using a fully up-to-date vendor management system is to partner with a reputable external technology provider, such as Simplify Workforce. By maintaining a collaborative and open relationship with a technology provider, they will ensure that your system best suits your workforce needs and gives you the best possible tools to compete for skilled talent.
Having an outdated vendor management system is one of the biggest mistakes business leaders can make. Only the best vendor management system will be able to provide your business with the competitive advantage needed to survive in an increasingly contested talent market. If you are yet to bring your VMS up-to-date, 2023 is the perfect opportunity to do so.