The Funky Market Dynamics of Procurement Technology: Vendor Management Systems (VMS) Jason Busch - February 26, 2015 3:42 PM | Categories: Analysis, Procurement Strategy & Planning, Technology, Vendor Snapshots | Tags: Sourcing and Categories Earlier today, Spend Matters PRO published a detailed company and geographic update on IQNavigator, IQNavigator: From Strength to Strength – 2015 Company and Solution Outlook. This was the first research brief in a series providing an updated look at one of the top 3 VMS providers by volume and growth (Fieldglass, Beeline and IQNavigator together control the majority of the VMS market). Once a tactical tool to manage compliance and basic workflow for contingent labor, the humble VMS is growing into a full-fledged source-to-pay suite for the broader services procurement market. But the VMS is an atypical relative to other procurement technologies for a number of reasons: Managed services providers (MSPs) rather than consultants, SIs and the independent analyst community still tend to be important influencers in selection processes for technologies (outside of internal company analysis, which is growing based on our own discussions with practitioners). The traditional technology industry analysts such as Gartner, IDC and Forrester are not as relevant in this area (compared with others) in terms of influence and knowledge Decisions for VMS tools are still made independent or broader procurement technology suites (as an example, it is our view that the success SAP is having with Fieldglass is a result of commercial traction and the strength of the solution – not a broader integrated message with Ariba or other SAP solutions) Typical spend penetration levels for a VMS (as a percentage of total addressable spend) outside the top 10% of deployments is still low. VMS success is clearly a case of “haves and have-nots” with a tremendous amount to be learned from the most successful deployments To this last point, spend penetration and the lack of using of available features is one of the top reasons for vendor churn (compared with significantly different functional capabilities between vendors) Supplier-paid models still dominate the VMS market usually without any significant value to suppliers (e.g., early payment financing) for participating. Granted, while business model dynamics are changing (and the growth of non-staffing spend is helping drive this) old approaches are still entrenched in many cases VMS providers without MSP arms are still more active in non-deployment related services than any other sector of the procurement technology market, except perhaps advanced sourcing/sourcing optimization providers. It is a myth that a VMS is “technology only” – in fact, the non-technology elements of what a VMS provider can deliver often yield the keys to higher penetration levels and throughput To date, VMS providers have not yet focused on delivering a true “platform” model in which the VMS is an on-ramp to other complex services categories, third-party systems and knowledge-based tools (outside of system-to-system integration), nor have most VMS providers fully integrated their offerings to address the rise of freelancers, independent contractor models and talent marketplaces. The changes that IQNavigator has made to its business in the past 18 months are in many ways reflective of where the VMS market is headed overall. But more change is coming in the remainder of 2015 than ever before. Read Spend Matters research to stay on top of the VMS market and to augment the staffing industry perspective alone (which is valuable, but incomplete). Is your company not yet a subscriber? Contact us for a free trial to learn more. Voices (2) Arunkumar: 03.03.2015 at 1:02 am It’s fantastic to see something so far removed from the gradients and reflections of the current web. I love them. Reply Brian Hoffmeyer: 27.02.2015 at 1:02 pm Great article! As usual, I’m in agreement with your points. This is one reason that we are pushing clients to take a VMS first approach, we believe that the VMS should be at the core of a company’s non-employee workforce strategy and that they need to have a well thought out plan to capture the vast majority of their spend. Reply Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.