Vendor Management System (VMS) Solutions

What is VMS?

VMS is the de-facto technology solution for compliantly sourcing, managing, invoicing and payment external labor and services. Put another way, a VMS solution makes specifically orchestrated workflows and dataflows that govern external worker and services category activities and spend possible. 

VMS provides management and sourcing solutions primarily for temporary staffing workers, independent contractors (ICs), payrolled contract workers and, increasingly, workers deployed under contract by third-party services providers (statement-of-work-based workers of various kinds, including blue collar shift-based contractor workforces). 

Depending on the organization, the typical ‘owner’ of VMS selection, deployment and operation — i.e., the one responsible — is procurement or HR, and the scope of what a VMS needs to do will vary widely. Perhaps most often, a VMS will be used in the context of a contingent workforce management program (CWMP). However, VMS capabilities are often tapped to address other use cases. Some examples are managing external services providers, such as BPOs, or external workforces, such as shift-based, blue collar workers. 

VMS was first introduced before the turn of the century as a software application to specifically manage temporary staffing suppliers and their workers by automating an organization’s temporary staffing source-to-pay (S2P) lifecycle, from the requisitioning of a temp worker to the payment of the temporary staffing supplier. 

But, since its inception, VMS has evolved into a more comprehensive suite of various modules and capabilities that an organization’s employees and MSP partners can use to optimally source and manage most categories of external labor along with some contracted services: 

• Including independent contract workers (unaffiliated with staffing firms): statement-of-work-based engagements of consultancies; workers employed by other types of service providers; workers or services sourced from online platforms; etc.
• With modules and capabilities, such as the SOW (statement of work) module, resource/worker profile tracking module and those needed to manage the engagement of independent contract workers or shift-based blue collar contract workers deployed by a staffing or other service provider or integrations to private talent pools and external talent marketplaces. 

This expansion of use cases and capabilities and the evolution from specialized application to a broader suite or platform have made a single clear definition of VMS somewhat elusive. But what is very clear is that without some form of VMS, an organization’s spend on external workforce and services will be unmanaged or poorly managed, subjecting the organization to cost overruns, operational failures and major compliance risk exposure. 

How VMS solutions factor into procurement

VMS solutions digitize S2P lifecycle activities for contingent workforce and third-party services. These contingent workforce and services S2P lifecycles run parallel to and distinctly from the standard goods and materials procurement S2P life cycle, shown here:

Conceptually, much of the standard S2P lifecycle for goods and materials procurement carries over to contingent workforce and services procurement but only to an extent, because what is being procured — contingent workers and services — are much different from goods and materials. 

As we’ll see later in this document, procurement activities related to contingent workforce and SOW-based services can be divided into two main S2P lifecycles: one for different kinds of contingent workers and one for services. 

For Procurement, contingent labor and professional services spend is a significant category of indirect spend. The management of this spend is often referred to as ‘services procurement.’

Procurement can oversee a fuller breadth of services spend categories than just SOW-based professional services. Procurement often manages these service spend categories outside the confines of a formal CWMP. 

Some VMS solutions offer a range of different contract types, and some companies have used this functionality to manage other types of services. And various VMS solutions now offer purpose-built capabilities for managing shift-based blue collar workers deployed by third-party service providers.

But CWMPs have long been the primary focus of VMS deployment, and the discipline of contingent workforce management and the technology known as VMS have co-evolved over the last two to three decades. In CWMP maturity models today, a VMS is a requirement at a very low level of program maturity (usually level 1). In other words, a program cannot progress to higher maturity levels without a VMS.

Today, the ‘business responsibility’ for a CWMP and VMS technology may reside within either procurement or HR or — much less frequently — within another functional organization, e.g., finance or ops. 

Regardless of where the responsibility resides, the program and technology tend to be organized and isolated in a separate silo with little, if any, connection to the processes and systems that enable goods and materials procurement. By way of illustration, while VMS typically integrates with an ERP for financial processing, it would generally not integrate with other core procurement software, e.g., S2P or eProcurement, unless it is already an integrated part of a procurement suite, such as Coupa, SAP or Ivalua. 

When Procurement’s in-charge 

When Procurement is the owner of this area, it leads and manages the formal CWMP, including responsibility to establish and operate VMS and other technology.

Procurement owns CWMPs and VMS deployments at about 40% of organizations with CWMPs, according to the 2023 Staffing Industry Analysts, Workforce Solutions Buyer Survey. However, even among these organizations, ownership does not equal total control due to the cross-functional nature of contingent workforce and services management.

When Procurement owns the program, it can put its imprint on program design and control it to some extent from top to bottom, including the selection and deployment of VMS. 

Procurement ownership generally means managing the contingent workforce (with a procurement lens) as a spend category with the primary aims of minimizing cost, meeting stakeholder needs, enabling S2P throughput and controlling risk.

However, as suggested above, contingent workforce and services management tends to be cross-functional to a significant extent, and one can expect that, in addition to Procurement, other functions, such as Legal and Finance, will at least have some presence at the table. For example, the IT function will have a significant role in the technology selection and deployment processes of a VMS, and HR and Legal may be involved in establishing compliance requirements and processes or template contracts and T&Cs respectively.

When Procurement owns the program, it will have responsibility (along with IT) for management of the VMS solution lifecycle, from selecting and deploying a new VMS to ensuring its ongoing configuration and technical maintenance.

When Procurement’s not in-charge  

When Procurement does not own contingent workforce and services management and VMS, it still almost always plays a role, most typically in these operational areas: 

• Vendor management: Managing relationships with staffing agencies, freelance platforms and other suppliers of contingent labor and/or services providers.
• Contract negotiation: Negotiating contracts and terms of service with suppliers to ensure favorable terms and compliance with company policies. Contracts can be associated with staffing suppliers, SOW-based professional services providers, blue-collar contracts and others (technology providers, compliance services providers, etc.).
• Compliance/risk management: Ensuring compliance with current legal and regulatory statutes and regulations. This includes preventing worker misclassification and co-employment problems, ensuring supplier authenticity and validity and, in some cases, tracking external worker training and certifications.
• Spend management: Monitoring and controlling the costs associated with hiring and managing contingent workers, services, shift-based workers, independent workers and other external workers using different suppliers or sourcing channels.

Moreover, Procurement frequently takes the lead on and responsibility for management of categories of external workforce and spend outside of a traditional CWMP (in particular, multiple categories of third-party services providers and external shift based blue collar workforce). 

The bottom line for Procurement and VMS  

Procurement should always be a part of the vendor selection team when a new VMS is being considered and contracted for. In many cases, Procurement will be invited into the process, and it needs to be prepared to represent its unique, procurement-specific objectives and requirements. If not invited, procurement must be ready to assert itself and claim its rightful position in the vendor selection, contracting and implementation processes.

When Procurement is in charge of a company’s CWM program, procurement will lead the acquisition, deployment and support of VMS. When Procurement is not in charge, it will likely have a role, on a continuum from being a VMS user to providing major procurement support (as it might for other software solutions).

Why VMS solutions are important 

The purpose of a VMS is to enable an organization to compliantly manage various aspects of its contingent labor and SOW-based services. This typically means to execute a CWMP with VMS as the fundamental technology platform/enabler. But, as noted previously, procurement may also use a VMS to manage services outside of a conventional CWMP, such as different instances of SOW-based workforce, including shift-based blue collar workforces.

In 2024 and for the foreseeable future, VMS solutions will evolve and continue to be the core technology platform for organizations formally sourcing and managing contingent labor and SOW-based services within CWMPs and for other use cases outside of CWMPs. They may continue to evolve, and new innovators will enter the market, but these VMS solutions will remain essential.

Everest Group, VMS Products PEAK Assessment 2024

Vendor Management Systems (VMSs) continue to be an important technology solution as more enterprises leverage contingent workers as part of their workforce and require a capable technology solution for Contingent Workforce Management (CWM). In recent years, VMSs have not only enhanced features and functionalities related to traditional staff augmentation but also expanded services to include other areas within CWM, such as services procurement, independent contractors, and direct sourcing. The VMS technology landscape is evolving, with many technology providers building capabilities to serve specialized client needs across geographies and industries. Providers are investing in increasing the breadth and depth of their functionalities/offerings, enhancing the User Interface / User Experience (UI/UX) of the solution, and providing a mobile-enabled solution for their clients. Additionally, they are enhancing integration capabilities to create end-to-end ecosystems and investing in next-generation technologies such as automation and generative AI.”

According to Staffing Industry Analysts, the global B2B contingent workforce/gig economy in 2022 was estimated at $3.8 trillion. And both the share of external workers and their importance as a part of an enterprise’s total workforce are increasing. And that is happening at a time when organizations not only need to plug temporary holes in the employee workforce or ‘augment’ it for a limited period of time (traditional use cases), but, increasingly, contingent workforce is regarded as a strategic capability to achieve organizational agility and access specifically-skilled talent in a flexible way (contemporary use cases).  

Now more than ever, organizations need a modern VMS solution. Most fundamentally, without a VMS Solution, a company’s spend, contracting, compliance, etc. will effectively be unmanaged, opening the organization to inflated costs, inefficiencies and inadequate sourcing performance and, last but not least, exposure to legal and regulatory risk and liability.

How do I know my organization is ready for a VMS solution?

Even small organizations are ready for a VMS when their external workforce numbers grow beyond a point when spreadsheets and other offline records no longer provide a viable, efficient, error-free way of managing these workers and their payments. (Note: For example, there are organizations with less than $10M in contingent workforce spend that are using a VMS.)

Other signs are:

• When the number of workforce, service and/or contractor suppliers becomes unwieldy and difficult to track, evaluate and manage.
• When an organization’s compliance with labor laws and regulations is found to be insufficient. When an organization is manually tracking and managing service entry sheets and invoicing (e.g., emailing pdfs or having phone call verifications). Here, an adopted VMS may speed up payment cycles and provide more visibility into external services being provided.
• If an organization has complex management processes around the acquisition and management of shift-based workers, such as those in asset-intensive industries or ICs, where there may be a higher degree of misclassification risk.

What a VMS does: Key features of VMS technology

Functionally, most mainstream VMS solutions today will — at their core — support/enable two fundamental value streams/S2P lifecycles: one for sourcing and managing traditional contingent workers (agency temps and non-agency contractors) and one for sourcing and managing (mostly SOW-based) services.

Contingent Workers 

The following diagram illustrates the sourcing and management of individual contingent workers (whether sourced through a temporary staffing firm, by referral, direct sourcing, etc.). It is also representative of the typical independent contractor workstream.

[1] Supplier Management only pertains to temporary/staff augmentation suppliers. This functionality starts with supplier contracting and onboarding, and it continues with extensive vendor management enablement (e.g., establish rate cards, determine supplier tiering to receive job requisitions, supplier performance and risk management), inclusive of financial settlements with the suppliers (e.g., processing invoices and payments at negotiated intervals, such as once a week or month).

[2] Requisitioning/Sourcing of contingent workers primarily occurs with the help of temporary staffing firms. Referrals can also represent a common source of candidates, while direct sourcing and curated talent pools are increasing. In principle, a VMS solution should be able to address candidates from different sources by inserting candidates into downstream processes [3] and [4]. For example, a candidate that has been sourced through a referral or direct sourcing process, will be onboarded into the VMS in [4] and the worker engagement or assignment will be managed/administered through off-boarding.

[3] Evaluate and Engage contingent workers is aligned only with sourcing through staffing suppliers, which ‘submit’ (upload) their candidates to the VMS. Most VMS solutions apply matching algorithms to elevate best candidates to the top of the list, and human-based screening is used to compile a shortlist. Hiring managers will review the shortlist candidates in the VMS and, as appropriate, schedule interviews in the system. Hiring managers can also select a chosen candidate to be hired, triggering a notification to the staffing supplier. 

[4] Manage/Administer Assignments of contingent workers begins with onboarding (background checks/testing, legal documentation, etc). Once onboarded, staffing temps will be required to report their time in the VMS time tracking capability, have their time and expenses reviewed and approved, submit and manage invoices and receive payment. Staffing temps can also complete offboarding from their assignments.

Services

This diagram illustrates the sourcing and management of services sourced from certain service providers that typically are contracted under an SOW.

[1] Service Provider Management encompasses the sourcing and management of services providers including consulting firms covering various domains (managerial, technology, operations), software development firms and other forms of service-for-labor substitution. The processes can include ‘sourcing events’ when new suppliers are needed (including RFxs); establishing contracts and writing SOWs; vendor management and risk management; performance tracking and management; and invoicing and payment processing.

[2] Requisition Project/Source Provider refers to when a business user opens a requisition for a desired SOW-based service project. If this does not require a sourcing event to find a new supplier (see [1] above), then procurement will match an appropriate provider from the existing provider base.

[3] Establish/Execute SOW refers to contracting with the known provider and authoring and approving a detailed SOW which covers items like project scope, activities and milestones; worker roles (and sometimes) workers, performance measurement criteria, metrics, activities, billing and payment terms and so on. ‘Executing’ the SOW means sign-off by the organization and the service provider.

[4] Manage/Administer SOW Engagement means managing/administering the activities and requirements specified in the SOW. This starts with onboarding the service providers’ workers into their roles, worker time tracking, tracking work progress and cost, monitoring the service provider’s performance, resolving problems and managing change requests, ensuring compliance and wrapping up project and off-boarding workers.    

Other VMS features  

While the previous two value streams are fundamental enough to warrant such emphasis, one should also know two other sets of features VMSs support:  Resource/Worker Profile Tracking and Shift-based Work Management.

Resource/Headcount Tracking

The following diagram illustrates the activities supported by the Resource/Worker Profile Tracking module of a VMS, which can be deployed on a separate basis. This module helps with the onboarding, offboarding and tracking of any external workers, without the extensive functionality and cost of a full VMS; it is a good solution for international programs where countries have a spend too small for a full VMS.

[1] Onboard Workers encompasses all the steps to activate an external worker in the system. Worker profiles can be entered manually or uploaded from a spreadsheet file. Worker onboarding is an opportunity to ensure various types of compliance that happen in most onboarding processes, such as background checks, license and insurance. The tracking system can be integrated with facilities access and other security control systems. 

[2] Track Workers encompasses tracking external workers from initial onboarding to eventual offboarding. This allows an organization to have a more complete view of its external workforce (that is not tracked in a VMS or elsewhere) in aggregate and down to the level of individual workers. Organizations can know what projects workers are assigned to and where they are located geographically and where in the organization. Organizations can also monitor their external workers for tenure terms.   

[3] Off Board Workers encompasses following an off-boarding checklist, which could include return of equipment, handing in a security badge, etc. In this process, workers’ security access can be deactivated if there is integration with the organization’s access systems.  

Shift-based Work Management

This diagram illustrates the activities supported by the Shift-based Work Management module of a VMS. Managing shift-based work entails significant requirements that are not addressed in core Contingent Workforce or Services Management modules. For example, the module can link multiple work orders and skill/job codes to a single worker for a set period of time (versus a 1:1 linkage between a work order/job code and a single worker). Depending on the organization’s configuration, the Shift-based module may or may not interface with the Contingent or Service modules of the VMS provider. 

[1] Estimate Costs encompasses a set of capabilities not supported in other VMS modules that enable managers to estimate projected costs and budgets prior to going to the market for quotes. Managers can assign one or more work orders to a single project, whereas the VMS can help manage the overall budgets associated with a grouping of work orders. The Shift-based module often relies on other separate systems, such as a Work Request system and Supplier Service Catalogs, to generate work orders and estimate item costs.  

[2] Source Work From Suppliers encompasses capabilities to address the part of the process where the organization requests and receives information (including quotes) from suppliers about how they will provide the requested work and the associated costs. The organization is supported in quotation management, awarding bids and negotiations and contract development. Awarded responses can be converted into SOWs or other contract types.

[3] Onboard Workers includes a crucial step that links shift-based workers to their associated skill codes and assigned work orders. A single worker may be assigned to multiple work orders and support an array of linked skill codes. In blue collar use cases, this can also include the linkage and management of assets that accompany the worker, e.g.,  diggers, scaffolds or specialty tools. This process typically concludes with the workers being assigned a badge and provided with gate access to work sites.

[4] Manage Work encompasses capabilities for managing timecards and associated exceptions and/or changes. Managers can approve time and service entry sheets for completed work steps while seeing the high-level view of the combined work (in the blue collar use case, this is typically done on a daily basis). Capabilities also encompassed are time-exception management, managing multiple assignments/work orders linked to a single worker, tracking deliverables, managing assets utilized, submitting and managing change orders.

[5] Manage Billing starts with the conversion of approved time entry sheets and service entry sheets into billable supplier invoices. The converted invoices can be submitted for a single worker or consolidated for billing. Payments can be allocated to corresponding suppliers, and payment and remittance details are often viewable in real-time in the VMS.

Other capabilities of a VMS

Beyond all the above, VMS solutions offer other native capabilities required/desired by the customer organization:

• All VMS solutions provide access to data via reporting capabilities and online dashboards and some support advanced analytics. 
• Most VMS solutions can integrate with various contingent workforce-related point solutions, such as direct sourcing, talent pooling, rate/market intelligence and EOR payrolling, and they can increasingly integrate with HR solutions.

VMS use cases

Use case	Explanation
Full lifecycle, temporary staffing sourcing and management	The core, traditional use case for a VMS, it is the oldest and most established means of sourcing contingent workers. A VMS can enable the end-to-end sourcing and management lifecycle from requisition to staffing supplier’s invoice generation and payment
Independent contract worker management	Though not as well known as temporary workers, many independent contract workers are engaged by client organizations, usually in conjunction with a third-party EOR/payroller. Typically these workers are sourced by referrals, and they are tracked in the VMS from onboarding to offboarding. Integration with the EOR/payroller is enabled through the VMS.
IC management	Organizations often use their VMS solutions to track and manage their ICs, which present more compliance requirements than independent contract workers. By identifying and tracking ICs in the VMS, organizations can ensure the ICs are being engaged compliantly. An AOR may be used to manage the compliance and payment of an IC, in which case the VMS can support AOR integration.
SOW-based services sourcing and management	Many organizations’ contingent workforce programs source and manage SOW-based professional services from req-to-check. See section above on the S2P life cycle for Services.
Alternative sourcing (e.g., direct sourcing)	Many organizations actively source and recruit contingent workers without the use of a staffing supplier. They perform, in other words, ‘direct sourcing.’ Increasingly organizations are turning to purpose-built, third-party direct sourcing software to enable, automate and optimize these sourcing processes. Typically a VMS supports a direct sourcing channel by integrating with the third-party software.
Headcount/profile tracking	Organizations sometimes wish to maintain visibility into their deployed contingent workers or entire external workforce without using the full functionality of a VMS. Most VMS solution providers offer these organizations a stand alone set of limited capabilities which allows the organization to simply onboard and track workers, worker types and their profile information from onboarding to offboarding.
Other services procurement	Procurement may use the VMS’ service procurement capabilities to source and manage a range of different services that are not managed within the CWMP (e.g., IT outsourcing or facilities management). Some VMS solutions offer capabilities for sourcing and managing a range of different services and contract types.
Shift-based blue collar workers deployed by a third party	It is often left to procurement to manage this kind of work, which usually is not managed within a CWMP. This is not as simple as, say, light industrial staffing, but it tends to fall under substantial contracts with third-party service providers (often in asset-intensive industries). The difference is that there is a complex contractual relationship between the organization and the third party.
Workers in multiple countries, currencies, languages, regulations	Organizations can require enablement to source and manage external workers in multiple countries, in which case they can rely on VMS capabilities to support multiple currencies, languages and, last but not least, regulations. A VMS with these capabilities provides what is needed to compliantly operate in different parts of the world.
Operations/workforce analytics	Visibility is one of the top reasons organizations use a VMS (visibility into operational and workforce data), as it can provide detailed information into external labor engagements in a single source of truth. The VMS itself may rely on an adjacent database or data lake which can process more data differently and in more sophisticated ways.
Total talent management	Organizations are increasingly looking to have their VMS and HR solutions talk to one another in order to have a holistic view of internal and external labor at an operational level and for workforce planning. Some VMSs are establishing robust integrations with HR systems, and some are creating their own repositories of total workforce data in response to customer requirements.

CWMP: MSP or IMP?

This is effectively the question of whether or not your organization will engage a managed service provider (MSP) to manage, operate and even possibly select a VMS as the technology platform to enable your contingent workforce management program. An MSP provides program management services for contingent labor and service buyer companies, effectively acting as the middle-man between the buyer and their labor or service suppliers. MSPs will typically manage the suppliers, assist with opening and managing job requisitions, oversee management of time and deliverables and coordinate payments.

If an organization decides to use an MSP to manage its program, there are different possibilities for how a VMS is selected, contracted for and operated. Some organizations may choose to use an MSP and the MSP’s own proprietary VMS solution, while some organizations may choose to use an MSP but use a pure-play technology provider’s VMS. Most MSPs are ‘VMS neutral,’ and they will willingly use a client’s preferred VMS. But MSPs often have partnerships with top VMS providers and may recommend them as choices. That said, the client organization almost always has the final choice. MSPs will tend to favor and push for the ‘supplier-funded’ pricing model, where contractually suppliers are funding the VMS as a percent of the spend each of them is servicing.

The advantages for some organizations to take the MSP Path is to avoid a great deal of the detailed work of sourcing, configuring and managing the VMS  solution (even managing the vendor relationship with the VMS if it is structured under contract to work that way). 

An MSP relationship is not for all companies, however, and many will decide to self-manage their programs in an effort to save costs going to a middle-man or to have greater control over their branding as they source external talent.

If the organization chooses to pursue an IMP (Internally Managed Program) instead, then the organization will typically select, contract for and operate a third-party VMS, usually with an internal Talent Acquisition team to support the sourcing as well. In this case, the organization will have the full responsibility for managing its contingent workforce management program, including sourcing, configuring and managing the VMS  solution. When not using an MSP, an organization may still work with an independent consulting firm to provide some or all that VMS support. In this scenario, the organization will need to manage the VMS contracting and pricing options (supplier/client/hybrid funded/).

The advantages for some organizations that opt to pursue their contingent workforce management programs without an MSP is the ability to have more control over process and technology, theoretically, to achieve higher levels of customization to specific business needs.  

How technology supports VMS —
Top 5 Capabilities

Visibility

Gaining visibility into an organization’s contingent workforce and SOW-based services is one of the top capabilities a VMS offers. For organizations, unless a manual method or spreadsheet is used, a VMS is the only way to capture data that pertains to the sourcing and management of contingent workers and SOW-based services in a timely manner. This includes sourcing and tracking workers and SOWs, tracking attendant costs and following all the steps in the S2P process. A VMS also provides a digital way to track and manage temporary staffing and service suppliers, including their rates/mark-ups and their operational performance.  

Visibility can come through standard and customized dashboards and reporting, querying capabilities, traditional AI and — going forward — generative AI. With access to data and these tools, organizations can move from visibility to actionable insights and optimized outcomes.

Vendor/supplier management

As noted above, a VMS offers purpose-built capabilities to manage the supplier lifecycles for temporary staffing suppliers and for SOW-based professional services providers. Master contracts are not created within a VMS, but their obligations can be executed and managed using VMS functionality.

Temporary staffing suppliers are not sourced using VMS technology. But they are onboarded, tracked and analyzed for performance and risk on an ongoing basis. This allows for clear identification and optimization of the supply base. Supplier scorecards provide crucial tools for managing supplier performance and compliance. 

Once SOW-based professional services providers are onboarded and they are obligated under an SOW, their performance can be tracked and analyzed. SOW-based suppliers can be sourced using VMS technology, which is typically done through the quotation process for a project.

Sourcing and management of contingent workers

A VMS provides the capabilities to source and manage the three different types of contingent workers: temporary workers sourced through a staffing supplier, independent contract workers (payrolled through an EOR) and ICs (invoices paid directly). The latter two are sourced through a referral, a direct sourcing tool or an organization’s private talent pool. 

Once selected for assignment/engagement, the workers are tracked and managed within the VMS. Temp workers are required to fill out timesheets which are the basis for calculating the eventual payments to the staffing suppliers. Independent contract workers will either be paid based on a fixed fee or a reported number of hours or days through a third-party EOR/payroller. ICs will submit invoices for work completed which an organization will pay (this can also occur through an AOR).

Sourcing and management of SOW-based professional services 

A VMS provides the capabilities to source and manage SOW-based professional services. SOW spend under management within the VMS has been growing steadily. Some VMSs support contract and engagement types, e.g., time and materials or continuous services. 

The SOW S2P lifecycle can be broken down into two major phases, source-to-SOW and SOW-to-Pay (these SOW solutions do not enable creation of a master agreement, but some integrate with a CLM). Most SOW solutions can handle an Rfx process and provide SOW authoring and approval processes. Beyond the SOW, the solutions enable SOW execution and management across the SOW engagement, including milestone reporting and tracking.

Compliance/risk mitigation

A VMS enables organizations to manage compliance and risk of non-compliance. Generally speaking, this begins with visibility into the right information/data that is fundamental to what a VMS does. It also means using the software logic and workflow management tools to maintain compliance.

By enabling digitization of data and workflows, a VMS solution can help with compliance in relation to:

• External laws/regulations (e.g., Fair Labor & Standards Act and Worker Classification regulations).
• Standard company contract terms (e.g., creating SOWs that are in harmony with terms and conditions of a Master Agreement).
• Corporate policies and best practices (e.g., ensuring that these are encoded into workflows).
• Data security and privacy laws/regulations (e.g., GDPR).

Core solution capabilities to consider

When assessing VMS solutions for your organization, there are various considerations in play. One is the size and complexity of your CWMP and how fast it may be expected to expand/evolve. Another could be whether the deployment is intended for an application outside the CWMP (e.g., SOW-based professional services that are not, roughly speaking, a substitute for conventional staff).   

Spend Matters research and analysis of vendors has revealed that functionality to support temporary staffing is largely commodified with, of course, some variations. That said, when it comes to considering distinctive capabilities, strengths and weaknesses of VMS solutions, it may be important to focus more on platform-level capabilities and on functionality outside of temporary staffing and conventional contingent workforce management.  

In any case, VMS solution assessments should include an exploration of the following:

• Ease/speed of deployment
• Customer experience, including application ease of use, level of user guidance
• Configurability (e.g., displays, data, workflows, role-based)
• Visibility into data and workflows
• Cross platform integration (unified, services-based architecture)
• External integrations (e.g., outside data sources, third-party applications, AI foundation models)
• Support of professional staffing and/or commercial or industrial staffing
• Capabilities for compliantly sourcing and managing independent contract workers not sourced through staffing suppliers
• SOW-based services capabilities/functionality
• Capabilities for shift-based work
• Solutions for geographies outside of the US, including language and rate models
• Enablement of collaboration across functional partner stakeholders and suppliers
• Automated alerts and notification capabilities
• The ability to communicate through the solution with users and stakeholders

Why selecting VMS technology can be difficult

VMS technology can be complex for buyers because every organization’s requirements are different, perhaps more so than the requirements of organizations in the goods and materials areas of procurement. These are some of the variables buyers should keep in mind.

1. Program maturity — VMS requirements will depend upon the maturity of the program. Stage 1 programs will typically be more limited in scope and less complex than more mature programs. Organizations starting from scratch will need to forecast the development/expansion/evolution of the program over time. It may be that an organization can do well with a simpler VMS than can be swapped out perhaps 5 years later as requirements evolve and expand.
2. Organization type — VMS requirements will vary in many cases based on the type or part of the organization. For example, is the workforce mainly white collar or blue collar or both? Is it a healthcare or other type of organization with very specific types of requirements? Is it an organization, such as some midsized tech firms, that engage mainly independent contract workers vs. temps from staffing suppliers?  
3. Technological environment —  A VMS may be selected or rejected based on its underlying technology and the extent to which that fits with the organization’s existing enterprise technology platform. Several ERPs and HR software providers have partnerships with VMS solutions that may make it easier to integrate into your company’s software landscape.
4. Geographic distribution — VMS solutions are not all equal in the geographical footprint they serve and to what extent in each location.  Some VMS solutions serve limited regional areas, others serve a near global footprint and the extent of services can vary also. Organizations must match their geographical footprint with that of their VMS provider. 
5. Funding model — VMS solution funding models (“who bears the cost and how”) can take different forms (supplier, client, hybrid funded) and different VMS solutions may be more or less flexible in what models they will support. MSPs are typically fixated on a supplier-based, percentage of spend model and will often hold the contract with a third-party VMS provider. Organizations contracting directly with a third-party VMS may encounter multiple funding model options.

How Spend Matters can help you select VMS technology

Spend Matters specializes in procurement technology intelligence and due-diligence. In addition to projects and advisory, Spend Matters offers Insider, the only membership community and technology comparison tool of its kind: access to Spend Matters SolutionMap vendor rankings dataset combined with independent, zero pay-to-play, brutally honest coverage of solution providers, market developments and trends affecting procurement, finance and supply chain. 

We can help you find a solution that can:

• Handle the most sophisticated deployments for mature programs or the simplest ones for early stage programs.
• Meet specific requirements based on differentiated strengths.

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The following list identifies key VMS providers. Bear in mind that there are over 30 VMS providers globally, most of which are headquartered in North America. But the industry is highly concentrated, with only a handful of providers accounting for well over half of aggregate spend under management (SUM). SAP Fieldglass and Beeline are the largest VMS providers in terms of SUM. VNDLY, Coupa and Magnit are also sizable providers. Ivalua is a very recent entry into the VMS market, while HireArt is a young provider that competes against VMS solutions in mid-sized organizations.

Solution Provider	Summary
Beeline Extended Workforce Platform	Beeline offers one of the most complete and sophisticated VMS platforms for temp staffing, SOW and independent contractors. Resource/Worker Profile Tracking is available. Private equity owned, Beeline is distinguished by its broad ‘extended workforce’ and ‘total talent’ capabilities. It also has one of the most extensive international capabilities and offers a complete solution for the blue collar shift-based workforce.
Coupa Contingent Workforce	Acquired by Coupa in 2018 (previously DCR Workforce), now Coupa Contingent Workforce (CCW) is a full-featured VMS solution addressing temp staffing, SOW and independent contractors. CCW also supports Resource/Worker Profile Tracking and offers a special application for handling simple SOWs (Services Maestro). CCW is perhaps most notable for its incorporation into Coupa’s Business Spend Management platform for indirect spend, providing seamless requisitioning and total indirect spend visibility.
HireArt	Competing with VMS providers in the mid-market (especially tech companies), HireArt provides an alternative approach to contingent workforce management emphasizing independent contract workers that are engaged through HireArt’s EOR/payroller services. HireArt’s approach includes customer and worker-centric technology. It is extending its functionality for temporary staffing supplier management.
Ivalua External Workforce	Ivalua External Workforce was launched during the writing of this guide. As such, Spend Matters has not had the opportunity to review this solution. We have included it here because it provides another example of a VMS solution that is owned by and integrated into the suite of an S2P provider.
Magnit VMS	Magnit VMS evolved over time as the VMS offering of the MSP business (formerly PRO Unlimited). But investment over recent years — in the VMS solution and around it (e.g., superior data analytics) — have resulted in a solution sold as an independent software solution offering. Magnit is known for its functional parity with other top VMSs, its flexibility, its intuitive AI and its broad and robust analytics capabilities.
SAP Fieldglass	A part of SAP, Fieldglass offers one of the most complete and sophisticated VMS platforms for temp staffing, SOW and independent contractors. Resource/Worker Profile Tracking is available. Fieldglass is distinguished by its integration with SAP’s procurement modules. It also has one of the most extensive international capabilities and offers a solution for blue collar workers and asset intensive industries, e.g., oil & gas.
VNDLY (Workday)	Founded in 2017 and acquired by Workday in 2021, VNDLY is a relatively new, full-featured VMS solution, which is well known for its high configurability, user friendly design and modern technology architecture. Like other VMS providers, VNDLY offers robust capabilities for temp staffing, SOW and independent contractors as well as capabilities to enable Total Talent Acquisition. Close integration with Workday HCM is a notable feature (especially for Workday HCM customers).
Zivio	Not a VMS as defined for contingent workforce, Zivio is a purpose-built, end-to-end service procurement/S2P solution for SOW-based services. Zivio covers the whole S2P lifecycle from sourcing and engaging new vendors to paying vendors, tracking project workers, etc.

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APPENDIX – VMS Market Profile

• Currently, there are over 30 providers of VMS solutions globally, with a total spend under management on the order of $300B. Over half of that spend is accounted for by the top 3 VMS providers by spend volume (SAP Fieldglass, Beeline, and Magnit).  
• Two types of providers develop and offer VMS technology solutions to organizations:
  • (1) Pure-play technology providers (such as Beeline, SAP Fieldglass, etc.) 
  • (2) Managed Services Providers or MSPs, with proprietary technology (such as Agile One, Magnit, etc.)
• It can be estimated that there are on the order of five thousand VMS solutions deployed globally at organizations ranging from giant global enterprises (with over $1B in external workforce and services spend) to SMEs (with as little as $10 million in spend).
• In 2024, net new deployments continue and spend under management continue to grow year-over-year, with most of the new (vs. replacement) deployments occurring in small to mid-sized companies/programs or outside of North America.

GLOSSARY

Term	Definition as Used in This Guide
AOR (agent of record)	A third-party service provider that works with ICs to help businesses ensure compliance with labor laws and other legal requirements.
Contingent workforce (workers)	Contingent workforce is a term used somewhat ambiguously in the industry. It is sometimes used in a way that is synonymous with all external (or extended) workforce.  Alternatively, for some, the term has a narrower meaning that only includes staffing temporaries, independent contractors and contract workers payrolled through an EOR. In this Guide, the latter definition is used.
Contingent workforce management program (CWMP)	A CWMP is a formal approach to managing a company’s non-employees. The workforce footprint of such a program is typically the ‘conventional contingent workforce.’ The goal of such a program is to effectively oversee the engagement, administration and optimization of these workers to meet the organization’s operational needs. CWMPs are typically run by HR, Procurement or a combination of both. Some modern interpretations of CWMP are inclusive of the broader external workforce, including freelance, gig, third-party service workers, etc. Programs with this broader scope are often referred to as Total Talent Management Programs.
Direct sourcing	Direct sourcing is a way of sourcing contingent workers without a traditional intermediary (that usually means without a staffing supplier). Direct sourcing is distinguished from referrals insofar as it is an active talent acquisition, while referrals is a relatively passive one. Also, today, direct sourcing usually assumes the use of a purpose-built direct sourcing technology solution. Direct sourcing functionality is usually a separate third-party solution technology which can be integrated to a VMS. Candidates are sourced through the direct sourcing solution but are then engaged and managed through the VMS.
EOR (employer of record)/payroller	A third-party service provider which serves as the legal employer of record and W2 payroll provider for Independent Contract workers. Note that the counterpart for ICs is an AOR.
External (or extended) workforce	A broad concept that includes any external non-employee worker, no matter the category or the source. As such, this would include ‘conventional contingent workers’ and workers deployed at organizations by any third-party service providers under a contract/SOW (including shift-based external workers).
Independent contractor (IC)	A legal classification which assumes the worker does not work in ways that would otherwise result in the classification of the worker as an employee of an organization. ICs work like they are their own business working under a contract with their customer organization. An IC is also a specific business taxation entity. ICs are engaged directly by a customer organization and not through a supplier intermediary, e.g., a staffing firm or a consulting firm.
Independent contract workers	A conceptual term that refers to any worker who performs work individually under an agreement with a customer organization. All ICs are independent workers, but not all independent workers are ICs (if they do not meet the IC classification).  Independent workers are often labeled freelancers, contractors,  etc. or misnomered as ICs.  ICs are engaged directly by a customer organization and not through a supplier intermediary, although they may be administered by an AOR.
Resource/worker profile tracking	A module offered by most VMS providers to give organizations limited capabilities to onboard and track their external workforce, without the complex sourcing and management capabilities and the cost of a full VMS. This capability is often also used by companies as a first step to identify their external workforce engagement types and how often each is engaged before formalizing a workforce program.
Services	A broad, diverse set of spend categories predicated on a contractual relationship between a buying organization and a third-party business that provides services. Services are deliverables that consist of activities the third-party service provider performs as specified by a contract or an SOW. Contractual arrangements between organizations (defining services, delivery, finance) can take a variety of forms.  ee one such form, SOW-based Professional Services/Workforce, below.
SOW-based professional services/workforce	Specialized, third-party-delivered, human-based services (e.g., management consulting, software development, IT consulting) contracted for under a project SOW agreement with highly specified deliverables. Can be either milestone-based, fixed-price or T&M based.
Temporary staffing supplier (or staffing firm or staffing agency)	A third party that sources contingent workforce candidates, acts as EOR and performs as a payroller,
Temporary staffing	The sourcing model based on engaging temporary workers from a temporary staffing supplier
Temporary worker (or agency worker)	A non-permanent worker who is recruited, legally employed and payrolled by a staffing firm and placed on assignment with the staffing firm’s customer organization. The staffing firm bills its customer organization for the temporary worker’s billable time plus a mark-up for other businesses expenses and a profit margin. Temporary workers are synonymous with contingent workers.