What’s the difference between a VMS and MSP?

The shift towards greater use of contingent – or external – workforces has gained momentum over recent years. The global pandemic has certainly fast-tracked this evolution as ‘flexible’ becomes the new norm. With streamlining costs increasingly important in an uncertain economic environment, many organisations are facing the same staffing challenges.

Most now recognise that the external workforce can provide real value for money for their business. However, many now need guidance on how to best manage their contingent workforce.

Procurement leaders and human resources teams face an array of options, from insourcing, to moving to a master vendor model, to outsourcing fully to an MSP and of course utilising technology. However, we often find there is some confusion as to what you can get from an VMS and an MSP.

What’s the difference between a VMS and MSP?

A Managed Service Provider (MSP) and a Vendor Management System (VMS) both have benefits when it comes to managing your contingent workforce. However, there’s often an element of confusion surrounding exactly what level of support you get with each and how they can actually work together to improve your contingent workforce management solutions.

So, what is the difference between the two and what will work best for your business?

A Vendor Management System (VMS)

A VMS is essentially a software system that can facilitate the procurement and management of contingent workers. The main features of a VMS include:

• Supplier management
• Order distribution
• Consolidated billing
• Risk mitigation
• Headcount tracking
• Significant enhancements in reporting capability over manual systems and processes

It’s often cloud-based and acts as a mechanism for businesses to manage staffing services and third-party suppliers. These systems will collect an array of data, automate transactions and aid on-boarding. 

A VMS will store a wealth of metrics including payroll or invoicing data, finance tracking and candidate information. This is all designed to provide employers with the information they need to assess and manage vendor performance. All combined, this is often referred to as providing a company ‘visibility’ into their external - or contingent - workforce.

A Managed Service Provider (MSP)

A Managed Service Provider is an outsourced provider that manages either all or part of the temporary worker recruitment for an organisation. They will be responsible for the full end-to-end management of the contingent workforce – from supplier engagement to strategic workforce planning and offboarding. Other services an MSP can provide include payroll, candidate marketing and talent pooling, amongst others.

It’s important to note that an MSP will have the knowledge and experience in-house to navigate technology platforms on-behalf of your business.

Discover more about MSP

The key difference between an MSP and a VMS is that the managed service provider is managed by people, but supported by technology. In comparison, the vendor management system is the software you can use as a business, but without the expert human support.

The benefits of combining VMS and MSP

Often a mix between a VMS and managed service provider is that balance required to deliver significant value. That’s where the right MSP can really be beneficial to your business. A managed service provider will often have developed a basic and cost-effective VMS themselves that can be built into your HR systems, or they can use the software that already exists in your organisation, or support with the selection and migration to a new partnership with one of the more advanced VMS technology providers.

This means that for HR teams facing a growing external workforce that needs to be managed, an MSP can provide you with complete support. This includes access to the appropriate VMS that will work for your staffing needs and the full guidance to help you attract the right talent in a competitive market.

Expertise + technology

The combination of software and expert knowledge means that they can ensure you are streamlining costs, making the best use of available data to identify where vendor management can be improved and, perhaps more importantly, have access to a constant stream of contingent workers to keep your company operating smoothly.
For any business that already has a vendor management system in place, it’s likely that there will soon be a need to make better use of the tools to reduce costs. A managed service provider can work with the technology you already have in place and use the expert knowledge of the team to help you make the data work harder for you.

Supply chain management

A truly strategic MSP program can streamline an organisation’s contingent supply chain. This will ensure that you are making the most of the contingent staff and skills that are available to your business, while also using the right technology solutions to source and manage the external workforce. And where multiple staffing agencies are working with your company, a managed service provider can drive vendor neutrality and align multiple suppliers to ensure your business is strategic, efficient and consistent as it recruits candidates across the globe.

That’s why working with an MSP is, in most cases, one of the most effective, cost-efficient ways for a business to source and manage its contingent workforce.

To find out more about the benefits of a first-generation MSP and to help you understand if it's the right solution for you, download our MSP handbook.