How to Spot, and Avoid, Vendor Management System Red Flags

This blog was originally posted on vndly.com in February 2023. 

When it comes to managing and scaling the modern contingent workforce, you need a flexible vendor management system (VMS) that can grow with your business. Many VMS solutions are positioned as innovative and easy to use, but are actually traditional, onsite systems with limited ability to configure, update, and scale. This can make it hard to cut through the noise to find the right VMS that suits the needs of your extended workforce. 

Understanding where the VMS space started and where the industry is today can help you avoid problems when you’re looking to bring on or find a new VMS. Once you have a view of the industry, filtering out truly innovative technology from the repackaged legacy systems becomes easy. 

Vendor Management Systems: Past and Present

VMS solutions were created out of necessity as the contingent workforce grew in the 1990s. With companies bringing on more contractors, managers needed a way to track workers, manage spend, and maintain compliance. Early VMS platforms provided basic worker tracking to fill this need. But today, they’re often robust solutions that can handle all aspects of managing your extended workforce.

Whether it’s talent pools, provisioning support, process automation, invoicing, or compliance tracking, the features in newer VMS platforms are designed to manage the entire lifecycle of extended workers from sourcing through offboarding. Many modern VMS platforms also offer seamless connections with other systems used to manage the workforce, such as human capital management (HCM) and financial management software.

However, many of the earliest VMS platforms, which remain on the market today, still use traditional technology to provide their service. With these older systems comes out-of-date processes, rigid structures, and change management difficulties, which can complicate the management of your extended workforce. 

Innovative VMS Platforms for Modern Problems

In the Workday-sponsored study “Closing the Acceleration Gap: Toward Sustainable Digital Transformation,” 55% of respondents said their digital strategy is often outpaced by the demands of their business. If your company is looking to transform the way you manage your workforce, you need technology with the power to adapt to the current and future needs of your organization. While technology can help fill the gap between your organization’s digital strategy and the realities of what’s needed to run a business in the current market, bringing on outdated technology will only set your company back. 

To truly set your business apart from the competition, your technology and processes need to align with a rapidly changing market. This is where a truly innovative VMS can provide the agility and scalability needed to successfully leverage the extended workforce, while also taking your total workforce management to the next level. 

Identifying the Pain Points of Legacy VMS Platforms

Many of the pain points which come with legacy VMS platforms are obscured in the sales process, or are only obvious once users begin to use the system daily. If your new VMS can’t scale with your contingent workforce program, requires the VMS provider to make even simple configuration changes, or is unable to easily integrate with other systems, you’re likely going to feel the impact almost immediately. This can extend time-to-fill, reduce user adoption, and even increase manual processes—all of which can be exacerbated if you’re locked into a long contract. 

In addition to the problems the management team will likely face, trying to resolve these issues will often fall on the chief information officer (CIO) and the IT team, who are usually brought in to try to fill gaps in the technology. Ultimately, outdated technology wastes precious IT resources, and slows down your team.

The inability to scale and adapt is another common pain point of legacy VMS systems. In “Closing the Acceleration Gap: Toward Sustainable Digital Transformation,” 30% of the leaders surveyed cited the need to quickly reorganize their workforce around new initiatives. With significant hiring demands and increasing needs for workers with niche skills, being able to efficiently acquire talent is more difficult than ever. In fact, in a recent Deloitte survey, “Creating Value and Impact through the Alternative Workforce,” 45% of employers worldwide said that they are having trouble filling open positions. These are both problems that tapping into the contingent workforce can help to solve, but not having the right VMS in place can make it challenging to do so. 

Legacy VMS platforms are often unable to scale appropriately due to the limitations of the technology they’re run on, or the way the software was built. These systems also frequently require any changes to go through the VMS provider, and do not allow your team to self-serve when configuration changes are needed. All of this can culminate in the perfect storm that prevents your business from being able to pivot when necessary.  

How to Avoid a Legacy VMS Disguised as Innovative Technology

Some legacy VMS platforms try to pass off minor updates as true innovation during the sales process. If you are in the market for a VMS, knowing how to identify these bad actors is a good place to start. Even if there isn’t an obvious lack of functionality, there are ways to help your team sort through the noise of the VMS industry to find an innovative VMS solution that suits your business needs. 

In the sales process, some common red flags are: 

• Running software in the cloud that was originally built for local servers
• Using secure file transfer protocol (SFTP) for integrations
• Lacking integrations entirely 
• Outdated architecture and significant technical debt as a result
• Limited automation of data entry tasks
• Providing no testing environment before go-live

These red flags are warning signs of larger issues which can cause significant difficulties in managing not only your contingent workforce, but your total workforce. Many of these limit visibility into things like worker location, total workforce spend, workforce compliance, and more. 

To get the most out of your investment, here’s what to ask to help identify these problems before you sign: 

• Was your system born in the cloud or migrated to the cloud? 
• Are you using application programming interfaces (APIs) or SFTPs to integrate with other systems? 
• How many integrations does your VMS provide? What systems does your VMS integrate with?
• How often are you updating the software? When was the last time a large update was made to the VMS? 
• What automation does the VMS support? Can data be sent to or from another system? 
• Will there be a testing environment? What data will the testing environment include? 

While these are not an exhaustive list of red flags or important questions to ask during the VMS sales process, they are a good start to understanding if a VMS is as innovative as the provider claims. These questions will also help to guide your organization toward a VMS platform which not only suits your needs, but is truly innovative. There are solutions on the market that are using API integrations, providing self-service configuration, and allowing data to flow seamlessly from one system to another to increase data efficacy and decrease manual entry. 

As your team searches for the right VMS for your business, having a better understanding of the industry as a whole will make the process simpler. Just say “no” to outdated technology and find an innovative VMS that can improve your total workforce management and satisfy your technology needs.