When is a Vendor Management System not a ‘VMS’ anymore?
  • 5 min read

When is a Vendor Management System not a ‘VMS’ anymore?

Vendor Management Systems have been around for over three decades. They began as simple ‘spreadsheet replacement apps’ to manage indirect staffing costs, but what are they today? And are they right for your business?


The Emergence of Indirect Labor Spend

Many of us are old enough to still remember an era when ‘temps’ were very much that—individuals employed to ‘fill in’ when full-time employees were unavailable for a while. You’d meet ‘temps’ in your office when Marjorie was on maternity leave, or John was off looking after his parents. But that period, that extended into the late 1990’s is behind us.

Working up to Y2K, talent shortages in areas of technology, science and healthcare became the impetus for large numbers of US employers to start experimenting with indirectly employed talent, sourced from staffing vendors.


Managing Vendors was like Herding Cats

Back then, employers began to realize that managing this indirect supply chain wasn’t easy when spreadsheets were your only friend. There were issues in distributing information on vacancies, vendors would exploit the lack of oversight and governance to charge unsupportable payment terms, and a handful would exploit personal relationships with Hiring Managers to charge extortionate fees. The whole biosphere of vendor relationships was out of control, uncoordinated, untamed.

It wasn’t long before we started to hear the term ‘Vendor Management Systems’ connected with primitive software applications that could organise vendors into tiered groups to organize job vacancy distribution in smarter ways and account for terms, fees, insurances, contracts, and spend.

When the Staffing Industry Grew Up

The 2000s has seen this love affair with contingent workers mature—and spiral into something much more significant. Post-Y2K, industries started to see a migration away from permanent employment because they needed the flexibility to adapt their workforces to the ebb and flow of faster changing markets. The pace of change in business models was speeding up; affected by digital technologies and the Internet that was creating global markets. Mostly, talent shortages were getting unsustainable and employers were happy to consider qualified and competent workers sourced ‘from anywhere.’


From Vendor Management Systems to Something Else

Today, flexible and contingent workers represent a significant part of the permanent workforce. Employers have found advantages in this new-found ability to turn up and down the volume of contractors in their working capacity; it’s proven invaluable to manage the ebb and flow of business demands. There are also economies too in employment costs, not to mention risk advantages.

The emergence of a ‘gig’ economy characterized by workers happy to run multiple employments and perform short-term gigs is today powered by social platforms like LinkedIn—and micro-task portals like Upwork, Fiverr, Toptal and Freelancer. It means that indirect sourcing of contractors through staffing vendors is no longer the only way to get work done.

Modern employers, scarred by near-continuous staff re-orgs are determined not to go back to an age when full-time employment contracts were the default mechanism to hire workers.

Faced by this paradigm shift in market expectations, the tech industry has re-invented the humble Vendor Management System into something beyond the yesteryear tools previously used to manage squabbling staffing vendors charging exorbitant fees.

Talent Portals that Move Beyond the VMS

While the industry insists on still calling them Vendor Management Systems, modern state-of-the-art enterprise technology platforms for managing contingent talent do much more than ‘herd cats.’ In fact, of the total feature-set of a modern VMS, scarcely 25% of the features relate to managing vendors. So what else can you expect from a VMS technology?

Modern best-in-class VMS platforms are designed in modules to let user organizations choose the aspects of contingent workforce management they need to enrich what they already do. Modules include tooling to manage vendors, bring controls over each step of the hire-to-train stage, and orchestrate the purchase-to-pay journey. This ability to ‘gear’ common staffing processes (including such things as publishing and distributing vacancies, managing interviews, shortlisting, running background checks, paying timesheet and organizing insurances) is where many people think Vendor Management Systems run out of steam. But not today.

Technology advances like artificial intelligence, video conferencing, chatbots, software robots, big data, mobile computing, blockchain and cloud computing, etc. are now webbed into the feature-set of your VMS.

It means much of the ‘human-in-the-loop’ activity required to run a contingent workforce is largely performed by software robots.

Arduous administrative tasks, such as background checks, are now made simpler and more robust thanks to clever computing algorithms.

The dexterity of VMS solutions has increased too: platforms also support Statement-of-Work hiring, Direct Sourcing (i.e. enabling organizations to use social medias to exploit their brand attraction and job pools to find their contingent talent directly, without the aide or costs of indirect staffing suppliers) and micro-task ‘gig-working’ contracting.

Summary – Is it Time to Consider a VMS for your Business?

Every business today needs to find best-fit talent at the right price and time.

Such is the pace of change in the transformation of VMS platforms that many organizations have yet to update themselves on the possibilities of applying next-generation VMS technologies to overcome their hiring challenges and to prevent avoidable spend.

Modern VMS platforms are surprisingly affordable—and a VMS might be just what you need to create the control and flexibility you need to optimize your hiring when faced with a myriad of talent sourcing challenges.