Vendor Management Systems: Pros, Cons, 5 Notable Solutions, & What’s Next

Vendor management systems support the entire procurement lifecycle of a vendor from defining a project, distributing requirements to potential suppliers, approving payment milestones, and reporting spend and compliance. Vendor management includes activities such as selecting vendors, negotiating contracts, controlling costs, reducing vendor-related risks and ensuring service delivery.

VMS technology originated back in the early 2000’s. The intention of the software was to support procurement teams with controlling their costs and attaining compliance of contingent workers, which was mainly managed through professional agencies, staffing agencies or Managed Service Providers (MSPs).

As the freelance economy has evolved in recent years, a “new type” of external workforce has become increasingly common – the knowledge-based independent contractors who work directly with companies and not through service providers. VMS are able to support this process, but were not originally designed for this purpose, and many companies are instead turning to dedicated freelance management platforms.

This article is part of our guide on independent contractors’ management.

Vendor Management System Core Capabilities

Most VMS solutions are great at all the tasks that procurement traditionally took care of. VMSs will usually offer features such as:

Vendor sourcing: Finding non-payroll staff through sourcing platforms such as staffing agencies and MSPs.
Vetting and selection: Streamlining back and forth communication by limiting the pool of candidates by pre-set policies.
Contract negotiation: Supporting negotiation of terms, including knowledge of local expectations for global talent.
Onboarding: Administering security IDs and access to necessary systems. Ensuring background checks are completed compliantly.
Tracking performance: Using time sheets to manage the hours that contingent staff have worked.
Compliance: Maintaining vendor and contractor records and documentation, similar to the process for full-time employees.
Payments: Automatically generating pro-forma invoices based on time sheets, and viewing all details of payments.

While VMSs have evolved over time to offer a wider breadth and depth of services, including advanced analytics of spend and compliance and often enabling a flexible, cloud-based infrastructure, they are still heavily focused on the procurement point of view and typically do not serve the HR or the hiring managers functions.

Related content: Read our guide to vendor management system.

Related content: Read our guide to contractor management software.

Pros of Vendor Management Systems

Using a vendor management system offers the following benefits:

Centralized vendor database: Simplifies the management of vendor data across the organization. This database allows companies to keep all critical information about their vendors in one place, which is easily accessible to relevant departments.
Cost reduction: Enhances the ability to negotiate better terms with vendors by providing comprehensive data on vendor performance and procurement analytics. This information enables procurement teams to make informed decisions and leverage competitive pricing.
Reduced administrative overhead: A VMS automates routine tasks such as vendor onboarding, invoice processing, and contract management.
Improved efficiency: Improves precision and tracking for many of the tasks associated with vendor relations, such as tracking invoices, monitoring vendor performance, and managing contracts.
Central visibility: VMSs often feature dashboards and reporting tools that provide real-time insights into vendor activity, enabling companies to quickly adjust their strategies and respond to vendor-related challenges.

Cons of Vendor Management Systems

While vendor management systems are still useful, they have several disadvantages in a modern workforce environment:

Complex implementation: It usually takes more than 12 months to deploy a vendor management solution throughout the enterprise, and even then only after meticulous planning. Most vendors will charge separately for the implementation process due to its complexity and duration.
Consultants and knowledge workers: Companies now must rely on consultants and knowledge workers who don’t want to engage with MSPs or staffing agencies. They want to work directly with companies, forming long-term relationships and taking control over who they work for, the work they complete, and the money they make. VMS software typically does not cater for this scenario.
Suited to traditional procurement processes: VMS technologies might have modernized in terms of their use of the cloud or automation, but they haven’t fundamentally changed in terms of their processes or capabilities, or who they are intended to serve. A VMS is a tool for procurement teams, while in modern organizations, managing a contingent workforce is increasingly performed by HR, finance, and operations teams.
Does not support business agility: Today’s companies are taking a more holistic view over the management of non-payroll workers. They want to improve business agility with the support of a more diverse workforce, and need a solution that meets the needs of hiring managers, HR, IT and any other teams across the business.
Does not support relationships with contingent workers: Research has shown that a VMS doesn’t provide value to hiring managers, who regularly feel that these tools ruin the relationship between them and the worker, and “actually inhibit the attraction of top talent at a mid-senior level”. This leaves the hiring manager choosing between a quick hire and the quality of the worker that they receive.

Notable Vendor Management Systems

1. SAP Fieldglass

SAP Fieldglass is a vendor management system that was established in 1999 and later became part of SAP in 2014. It aims to facilitate the management of flexible workforces, providing organizations with the tools to handle various aspects of workforce engagement, from contingent workforce management to services procurement and worker profile management.

Key features of SAP Fieldglass include:

Assignment management: Onboards and assigns multiple external workers, integrates assignments with the company’s ERP, and streamlines the creation of service entry sheets.
Contingent workforce management: Offers a solution for managing non-payroll workers, improving security, enhancing worker productivity, and mitigating risks through a cloud-based platform.
Services procurement: Tracks and manages global SOW-based projects with external service providers, optimizing productivity and savings.
Worker profile management: Maintains detailed profiles of external workers, facilitating better management and deployment across varied job orders and requirements.
Flexible integration and scalability: Enables businesses to scale up or down quickly, meeting changing demands while integrating smoothly with existing enterprise systems.

Source: SAP

2. Genuity

Genuity is designed to manage, optimize, and control technology expenditures across an organization. It offers a suite of features aimed at enhancing the efficiency and compliance of software usage, contracts, and vendor relationships. Genuity simplifies the management of software assets, contracts, and vendor expenses, providing an overview and control mechanisms to reduce costs and improve audit performance.

Key features of Genuity include:

SaaS and vendor management: Automates and controls costs associated with SaaS and other vendor services, helping businesses maximize their spend efficiency.
Contract management: Streamlines the handling of contracts, ensuring better terms and compliance, while also reducing procurement cycles.
Asset management: Identifies unused software and prevents redundant or unnecessary expenditures, enhancing overall budget management.
Telecom management: Offers specialized tools for managing telecommunications expenses and contracts, optimizing spend and vendor relations.
IT help desk: Integrates IT support within the management system, facilitating quicker resolutions and better user management.

Source: Genuity

3. Gatekeeper

Gatekeeper is a Vendor and Contract Lifecycle Management (VCLM) platform aimed at enhancing transparency, control, and compliance in contract and vendor management. It is designed to streamline the entire lifecycle of contracts and vendor relations from initiation through renewal, reducing the risk of missing important dates or opportunities for negotiation.

Key features of Gatekeeper include:

Contract management dashboard: Provides a comprehensive view of all contracts, with automated reminders for renewals, enabling proactive management of negotiations, consolidations, or cancellations.
Kanban workflow engine: Automates contract administration processes, reducing the time spent managing contracts and improving business resilience with compliant, scalable processes.
Market IQ: Offers integrated credit and risk profiling by pulling data from multiple financial and industry sources, enhancing third-party risk management capabilities.
Touchless contracts: Enables the generation of compliant, legally-binding contracts automatically, centralizing contract boilerplates for automated eSigned contracts or managed redline negotiations.
Contract and vendor repository: Centralizes all contract-related files and interactions in a secure repository with enterprise-standard audit trails, improving data management and access.
eSignature integration: Supports electronic signatures that are compliant with international standards (ESIGN, UETA, eIDAS), integrated into the contract management system.

Source: Gatekeeper

4. Precoro

Precoro is a vendor management system designed to simplify supplier management through automation and enhanced transparency. It minimizes manual processes and fosters effective supplier relationships. By integrating various functionalities, Precoro aims to support organizations in improving efficiency and productivity throughout their supply chain operations.

Key features of Precoro include:

Supplier onboarding and validation: Customizable forms and approval workflows simplify the onboarding process, ensuring suppliers meet the organization’s standards from the outset.
Centralized vendor information: Stores all vendor details, contracts, and catalogs in one location, creating a clear and manageable contract flow. This centralization helps in optimizing the procure-to-pay cycle and improves overall supply chain efficiency.
Performance tracking and reporting: Enables real-time monitoring of spending per vendor and compliance rates, which aids in identifying cost-saving opportunities and devising effective vendor risk management strategies.
Supplier portal: Provides an interface for direct communication with suppliers, allowing them to update and manage their item catalogs within Precoro.
Collaborative procurement tools: Facilitates collaboration on requests for proposals, purchase orders, and invoices in real time.

Source: Precoro

5. Beeline

Beeline aims to offer a streamlined and efficient approach to managing mid-size contingent workforce programs. Designed specifically for companies that require a simpler vendor management system (VMS), Beeline simplifies the management of contingent labor, avoiding traditional inefficiencies associated with manual methods such as spreadsheets and email communications.

Key features of Beeline include:

Rapid deployment: Features pre-configured templates, workflows, and reports that enable quick implementation, allowing organizations to realize value from their VMS within weeks.
Comprehensive visibility: Provides complete visibility into all aspects of the extended workforce, including processes, workers, suppliers, and spending, ensuring better management and control.
Automated approvals: Automates the approval processes for budget, headcount, time, expenses, and invoices, streamlining administration and reducing the potential for errors.
Error reduction and negotiation power: Helps eliminate overbilling and misbilling mistakes, thereby enhancing the company’s negotiation leverage with suppliers.
Extended workforce platform: Manages every phase of the workforce lifecycle, from sourcing and onboarding to offboarding and reassignment, within a centralized cloud-based system.

Key Considerations When Choosing a Vendor Management System

When evaluating different VMS offerings, organizations should consider the following elements.

Scalability

The VMS should be able to handle increased workloads and adapt to the growing needs of the business without performance degradation. A scalable VMS accommodates fluctuations in the volume of vendors and transactions, supporting business expansion seamlessly.

Customization

A customizable VMS allows companies to tailor features such as workflows, user interfaces, and data fields to align with their specific operational needs. Customization ensures that the VMS integrates smoothly with existing processes, thereby enhancing user adoption and minimizing disruption. It enables the VMS to adapt to specific industry standards or regulatory requirements.

Integration Capabilities

A robust VMS should seamlessly integrate with other enterprise systems such as Enterprise Resource Planning (ERP), Human Resources Information System (HRIS), and accounting software. Integration capabilities ensure that data flows smoothly across systems, improving data accuracy and minimizing manual data entry.

Reporting and Analytics

A VMS with advanced reporting capabilities allows companies to generate real-time, customizable reports that can help in making informed decisions. Analytics can reveal patterns and trends in vendor management, identify cost-saving opportunities, and improve vendor performance tracking. Organizations should look for VMS solutions that provide a range of analytical tools and dashboards to support strategic vendor management.

Support and Training

Adequate training ensures that users are proficient in using the system and can leverage its full capabilities. Ongoing support, including help desks, user manuals, and regular updates, helps resolve any operational issues quickly. Companies should consider vendors offering training programs and support services to ensure smooth system operation and user satisfaction.

Vendor Management Software vs Freelance Management Systems

There’s a huge difference between Vendor Management Systems and Freelance Management Systems (FMSs).

VMSs are a legacy technology used by Procurement departments to automate their own internal processes, and not to simplify the processes for the entire organization. FMSs are designed to provide a wide range of employees the collaborative tools and the autonomy they need in order to leverage the freelance economy productively, adding visibility, flexibility, and control.

With an FMS, hiring managers can work directly with independent contractors as the freelance revolution grows, engaging with top experts in their field who aren’t turned off at the presence of staffing agencies or middle-people between them and your company.

Look for a next-gen FMS that offers:

A smart talent directory: A catalog of vetted vendors and contractors with cross-organizational reviews, to shorten time to fill.
Background checks and screening: Verify data such as business reports, financial and credit risk data, KYC/AML and background checks.
Workforce classification: Misclassification regulations vary globally, and come with heavy penalties and fines. Correctly classify a contingent workforce with ease.
Easy vendor onboarding: Register all non-payroll workers, including their equipment, system and data access.
Contractor self service: Reduce manual effort by allowing non-payroll workers to self-serve, updating their information and tracking payments.
Simple budgeting: Organized, dynamic budgeting, with in-built policies, advanced approvals, and budgets organized by team or persona.
One-click payments: Consolidate all of your payments into a single invoice that can be paid on your contractors’ terms.

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