Generally speaking, a business will leverage a wide range of different resources in order to effectively manage its contingent workforce. This is especially true of those organizations that are in the process of rapid expansion, reorganization, or restructuring of third-party talent.
If your business is in this position, you may have seen two terms regularly used in your research: MSP and VMS. But what are the differences between an MSP vs VMS, and how do they both ultimately contribute to the same larger whole? The answers to those questions require you to keep a number of important things in mind.
What Is an MSP?
Also commonly referred to as a Managed Service Provider, an MSP is a term used to describe a team of people who are singularly dedicated to managing all facets of the contingent workforce program on behalf of a business. This includes essential functions such as supporting the sourcing of suppliers, shortlisting resumes, onboarding of contingent workers, and rate card market analysis – essentially helping to manage the entire req to check lifecycle for a company’s contingent labor workforce program.
Note that in some situations, an MSP may be an internal team of people that is self-managed by the business. More commonly, however, this is an independent, third-party organization performing tasks like those outlined above.
The responsibilities of an MSP will vary and are indeed typically tailored to meet the unique needs of a business. Having said that, examples can include but are not limited to things like:
- Program management.
- Reporting and tracking.
- Supplier selection.
- Negotiations and management.
- The day-to-day management of requisition processes.
- Managing invoices.
- Payment reconciliation.
- Rate benchmarking.
- Business intelligence.
- Regulatory guidance and compliance.
- And more.
Note that an MSP will also act as a kind of “command center” for all third party talent within an organization.
There are many benefits that an MSP will bring with it, chief among them being reduced costs. In many situations it may be easier to hire someone else who specializes in these aforementioned functions than it would be to tackle them yourself. An MSP allows you to bring in true experts and leaders in the field without the costs of building that knowledge in house. Another benefit of an MSP is increasing compliance and decreasing risk. This is primarily done through MSP management of the onboarding and offboarding process, as well as frequent audits. This expertise also helps to significantly streamline processes, which improves productivity across the board.
Enlisting the services of an MSP can also help with the implementation of management strategies, along with making meaningful changes to the ones that are already there. MSPs can assist with program maturity models, the visibility of contingent workforce metrics, they can help consolidate the invoicing process, and more. They can also help make sure that all contingent workers are in compliance with all relevant policies, procedures, and laws.
Note that regardless of the unique needs that an MSP is filling, their performance will still be measured based on the same core metrics. Those are the quality of the work that they’re performing, the amount of time it takes them to reach a desired outcome, and the cost of their services relative to the amount of money they are ultimately saving the business.
What Is a VMS?
A Vendor Management System (also commonly referred to as a VMS for short), on the other hand, is a term that refers to the technology that supports the daily operations of a workforce program. It also involves the data that travels throughout a business’ essential processes, all based on an SaaS (software-as-a-service) model.
The responsibilities of a VMS include but are not limited to capturing day-to-day action in a contingent workforce lifecycle. This might involve tracking the process of identifying a need and/or request, assistance with the overall hiring process, managing the onboarding and offboarding processes, invoicing, assisting with payment processes and more.
One of the major benefits of investing in a VMS includes creating a higher level of visibility into mission-critical data, which in turn brings with it robust reporting capabilities. Organizational leaders will no longer have to wonder about the who, what, and where questions as they pertain to a contingent workforce pool. They will know, beyond the shadow of a doubt. This almost immediately brings with it the opportunity to identify areas for cost savings and efficiency improvements that would have likely otherwise gone undiscovered. After a period of time, it allows for forecasting and trends to be easily spotted, giving the user the ability to front run any problems that might be coming. It also helps to avoid compliance and risk-related issues, too.
How Do MSP and VMS Differ?
While a Managed Service Provider and a Vendor Management System are both invaluable parts of a contingent workforce program, they’re two totally separate ideas and should be treated as such. An MSP refers to the team of people, while a VMS is the technology they use. For a very simplistic example, an MSP would be the contractor you hire and the VMS would be the tools he or she uses to build a house. Both have the same goal – building the house – but they’re totally separate in the larger scheme of things. Often, an MSP is brought on as a consultant to help pick the VMS; much like the contractor would recommend what building materials to use to build the house.
To that end, an MSP and a VMS work together in partnership to create a smooth, simple connection between the user (like the hiring manager, for example) and the suppliers and/or vendors that they’re working with.
Companies can use both an MSP and a VSM to manage their contingent workforce. Or, they can self-manage with only a VMS by their side. Which of these two options is the most appropriate will ultimately come down to the organization and the unique needs that it is trying to accomplish.
Founded in 2003, Monument Consulting is built on a commitment to our clients and our shared values. Through our genuine passion for delivery, relentless pursuit of perfection, and bold decision making, we are creating a more agile contingent workforce so businesses can dream bigger, receive the benefits they need, and achieve more. Our expertise is proven, and we’ve worked with a suite of Fortune 500 companies to help implement innovation that lasts. Our agile model allows us to pick the best tool(s) based on the flows and gestures that will truly meet our client’s needs and bring them the best outcomes.
If you’d like to find out more information about what the major differences are between a Managed Service Provider and a Vendor Management System, or if you just want to speak to a professional about your own needs in a bit more specificity, contact us.