What is a
Vendor Management System or VMS?

The label and acronym may be misnomers, but the results are clear.

Vendor management software can yield significant benefits for finding and managing external workers.

A VMS gives acute visibility into the external workforce

With an increasingly complex and multi-channelled global workforce, enterprises must gain clear insight into who is working for them, where, why, when, and at which rates.

With answers to these questions, Procurement and HR leaders will be better equipped to gain competitive advantage and not get left behind.

A VMS, or Vendor Management System, is a cloud-based software platform that solves a common problem for many global enterprises - how to find, engage, and manage its external workforce - both contract or contingent labor and services providers. 

With 65% of executives reporting that they use external labor for critical business functions and 91% expecting the use of the external workforce to grow over the next three years1, a VMS is more necessary today than ever before.

1SAP Fieldglass, in collaboration with Oxford Economics, conducted a global research study examining how the external workforce is reshaping how work gets done.  View the report here


Increased globalization, a more competitive marketplace, and the need to fill specialized roles are just a few reasons why companies are increasingly reliant on the external workforce - contractors, temporary and seasonal workers, and services firms managed under Statements of Work (SOW) - to augment and supplement their total talent base. With today’s digitally-based, remote, and global talent, companies can hire individuals and services around the world with flexibility and agility, securing in-demand talent, scaling up or down, increasing speed to value, and – ultimately – edging out the less nimble competition. 

Finding and managing the right mix of labor, however, can be challenging. There are financial, legal, compliance, security, and cost implications to consider, particularly when it comes to employing a flexible, geographically-distributed workforce. Companies that self-administer their extended workforce internally without a VMS can find themselves with administrative and managerial challenges. Workers and labor contractors may be spread across countries or continents with varying compliance and labor laws or spread across company departments with varying internal processes and technologies. With many parties and geographies involved in the talent sourcing, hiring, and on-boarding/off-boarding process, there is vast potential for miscommunication, inefficiency, untracked processes, and little visibility.

A major resource in need of illumination

Research conducted by SAP Fieldglass, in collaboration with Oxford Economics, found that only half of executives consider themselves well informed about the labor rates charged for their contingent workforce. Only 40-47% of executives consider themselves highly informed about compliance, contingent workers’ responsibilities, tenure, quality of work, headcount, and access to facilities. 

A similar pattern emerges for services procurement. Just 53% are “highly informed” regarding the responsibilities of the service providers, and even fewer know the duration of work, access to facilities, systems, and confidential information, work quality, progress against milestones and/or deliverables, and compliance with licenses and certifications.

I can see clearly now: key features of a robust VMS

Not all vendor management solutions in the marketplace are created equal. Every business needs to look for the features and value propositions of a robust VMS. 

Here are the six most important qualities of top vendor management systems:

Total workforce visibility

Total workforce visibility

With vendor management software, a business can take a more organized and systematic approach to managing their flexible workforce. A VMS makes it easy for organizations to achieve total workforce visibility, maximize cost savings, improve worker quality and efficiencies, and enforce compliance.

Comprehensive Reporting

Comprehensive reporting

Vendor management software allows users to accurately evaluate time, cost, compliance, quality and quantity by generating data-driven comprehensive reports, then comparing the evaluation to the industry as a whole.

Efficient Processes and Compliance

Efficient processes and compliance

Organizations can leverage a VMS to implement procedures that are consistent across the entire organization, including different departments, geographic locations, brands or divisions even if the programs are managed independently of one another. This not only helps with organizational efficiencies, but also to ensure compliance with local governmental and internal policies.

Applicant Tracking

Applicant tracking

A VMS has powerful applicant tracking functionality that helps organizations acquire the best talent and services, while creating a more efficient hiring process. From the moment a resource is requested to the time workers are on-boarded, the application takes automated actions that eliminate tedious administrative tasks. Hiring managers have access from anywhere to instantly approve or reject items, enabling the respective workflow to progress without delay.

Data Analysis

Data analysis

The data analytics capabilities of vendor management software can enable better enterprise-wide decision-making. A VMS provides direct access to an organization’s full contingent workforce program to gauge successes, make necessary adjustments, and continuously produce positive results.

In addition to the key features of a VMS, there are also many excellent benefits that allow enterprises to gain a competitive advantage.

Learn more in our featured library article What are the Benefits of a Vendor Management System (VMS)?