VMS started to emerge, as the name implies, as an on-premise vendor management software solution in the late 1990s. Since then, it has evolved as the central technology solution for supplier, spend and compliance management in formal, enterprise contingent workforce management programs. VMS has been evolving in a number of ways, including depth and breadth of functionality, modernization of technology architecture and the role the solution plays in enterprise workforce management. Today, that evolution is continuing, as demonstrated by solution developments of several select VMS providers.
For these reasons, as well as the continuing increase in the use of the contingent workforce and services under SOW, VMS is becoming more important than ever.
Scope & Depth of Functionality
VMS functionality has been undergoing ongoing expansion — both in terms of depth and scope — adding value to enterprises. This expansion can be found in the following areas:
- Contingent Workforce Management: This is typically the area of VMS with the greatest depth and breadth of functionality, but even here some VMS providers continue to invest. For example, some VMS providers are shifting focus to enhancing and simplifying hiring manager functionality that can improve time to fill (through streamlining the talent request process) and support program and policy compliance (through guided buying and more data capture).
- SOW/Services Management: Compared with Contingent Workforce Management, this a relatively new area of extension for VMS solutions. However, some VMS providers continue to rapidly broaden and deepen their capabilities to provide enterprise clients with functionality to manage SOW/Services suppliers and spend.
- Direct Sourcing/Independent Workforce Management: What has been a very limited area of functionality in VMS is now being rapidly expanded by some VMS players, in line with the increasing imperative for enterprises to source and engage freelance and contract talent (not provided through staffing suppliers).
- Analytics: While historically VMS solutions have supported reporting, operational dashboards and user-driven business intelligence, some VMS providers are investing heavily in “analytics” technology and analytical applications. Analytics, as such, represents the next wave of technology to drive process efficiency, speed and, of course, much heightened visibility into workforce sourcing and management.
Technology Architecture Modernization
Going hand in hand with the ongoing expansion of functionality, the modernization of technology architecture has been a part of the VMS story. Most importantly, state-of the art technology architecture is not just a nice to have, it is the foundation that enables the increase in capabilities and value that can be delivered to enterprises. Not all VMS solution providers have invested in all of the stages of technology architecture modernization, which are:
- On-Premise: This was the technology architecture of the pre-internet period, and it has long since been abandoned
- SaaS: This was technology architecture that emerged post-internet — essentially hosted-off-premise, software online (software as a service). Some VMS provider solutions are still based on this architecture (whether as “single tenant” or “multi-tenant”).
- Cloud: This technology architecture has become more and more prominent over the past 10 years. In its most basic form, it consists of efficient and performance enhancing virtual or elastic infrastructure, so-called infrastructure as a service (IaaS), on top of which runs a SaaS software layer. Virtualization is the basis for a “multi-instance cloud” architecture. Some VMS providers’ technology architecture is at this stage of development.
- Platform: A platform technology architecture is state of the art. It is achieved through additional layers of the cloud stack, specifically platform as a service (PaaS) and integration platform as a service (iPaaS). Platform architecture vastly increases the potential for new value-added functionality and additional value-add through open integration (via APIs) with other systems and services (ecosystems). Only a very limited number of VMS providers are at or working toward this stage.
The New Role of VMS in the Enterprise
At the current stage of development, VMS goes far beyond a way to manage traditional vendors, a transactional tool for managing spend and compliance or as simply a way to gain visibility into costs and processes. As a platform, a VMS solution brings a range of advantages and benefits, including:
- The capability to enable rapid and efficient development of new functionality and solution extensions (e.g., capabilities to engage freelance/independent workforce and SOW/services management)
- The capability to quickly establish high levels of integration with other systems (ERP, HCM, ATS, etc.), other solution providers (compliance, contract management, project management, private talent pools, sourcing) and even emerging work intermediation platform (WIP) sources of talent (e.g., online freelancer marketplaces)
- The ability, based on the above, to create and support digitally-enabled ecosystems of complementary partners that provide clients with integrated value-added services that cannot be, or should not be, left to one provider (e.g., background checks, compliance, payrolling, video, etc.)
- As a platform that supports and spans a broad range of processes, internal and external to the enterprise, the potential for big data and analytics applications and value add increases significantly.
In effect, a platform-architected VMS can continue to perform its foundational management functions, but now and in the future it can do more, acting as a controlling hub for the procurement and management of all (even directly, digitally provisioned) talent sources (even “perm” employee) and potentially a range of other services. As such, it creates a “future proof” solution for enterprise clients, ensuring that in addition to meeting the already established and necessary requirements for supplier, spend and compliance management, it also meets new requirements and opportunities that are now arising in a time when talent is both critically in-demand and how talent is sourced and engaged changing.
The value of a modern, state-of-the-art VMS platform lies not only in capabilities established to date but also in the next set of capabilities that will allow enterprises to navigate and succeed in the now rapidly-evolving talent sourcing and workforce management environment and all that lies ahead.
It should be clear that VMS, at least as concerns some providers, is not a historical artifact, a solution that has seen its day. Rather, it is contingent workforce and services technology solution that is even more relevant and necessary today than it was yesterday. Accordingly, enterprises that have not adopted VMS already will continue to do so at their own peril. Now is the time to calculate the ROI of VMS with the future in mind and take action.