Workday released a new vendor management system (VMS) tool Tuesday, taking aim at a multi-billion market designed to help employers manage external workers, including contractors and full-time employees of staffing agencies.
Workday VNDLY is the latest player in the $226 billion VMS market, which manages contingent workforce programs—an area increasingly overseen by HR leaders.
“Contingent workforce programs are now equally as likely to be led by HR as procurement, and it is possible that program ownership within an organization will drive whether a talent focus or spend management focus will be a deciding factor in assessing VMS fit and capability,” according to Staffing Industry Analysts’ report VMS Global Landscape & Differentiators 2022.
And in the coming years, companies with more than 1,000 employees are expected to increasingly use a VMS, according to the report. In 2009, slightly more than 50% of these companies adopted a VMS and in 2022 it jumped to 80%. This year it’s expected to climb another 17%, the report states.
That increase comes as external workers comprise a larger percentage of a company’s overall workforce, as some organizations evolve to more flexible staffing models, particularly in light of economic uncertainty.
On average, 36% of the workforce for Fortune 500 companies are non-employees and that figure is expected to rise to 50% by 2027, Shashank Saxena, co-general manager for Workday VNDLY, tells Human Resource Executive.
VMS landscape evolves
Workday VNDLY is part of an evolving VMS landscape, which includes SAP’s SAP Fieldglass, Smart ERP’s Smart Talent Procurement and companies whose product bears their name like Coupa and Ramco.
VMS software helps employers manage their non-employees by handling such tasks as keeping track of the work they are performing, pay, geographic location and other related data.
And while VMS software solutions initially focused on providing a system of record for external workers, they have evolved over the past decade to focus on supporting the process of managing external workers sourced through staffing agencies, as well as assisting those workers and also contractors the company has hired directly, according to the SIA report.
In some cases, employers are seeking to achieve cost savings through the use of a VMS solution; in other cases, they are part of a growing contingent interested in using VMS data analytics for greater efficiencies and insights into sourcing external workers, the report notes.
Workday VNDLY, Saxena says, is interested in helping employers answer these questions in 30 seconds or less: How many non-employees do they have working at the company? Do they know where they are located and in which office? Do they know the company systems and sites they have access to? What projects are they working on? Which department is covering the cost of their work?
Workday’s VMS will also allow employers to view and access information for both internal and external workers through one dashboard, or user interface, in a move to further the concept of total talent management.
For all employers—or not?
Although 60% of the money spent on VMS solutions is by companies that have 10,000 or more full-time employees, those with the largest number of VMS clients are companies with less than 2,000 full-time employees, standing at 43%, according to the SIA report.
Mariana Santiago, co-general manager of Workday VNDLY, warns against assuming companies with a certain percentage of external workers are most likely to use VMS solutions.
“Percentages are always tricky,” she says, noting Workday uses Workday VNDLY internally for its workforce of approximately 17,000. Of this group, less than 5% are contingent workers.
A company with 20 workers, of which 5% are external, may be less apt to use VMS solutions, depending on the salaries of those external workers.
If your company is composed of IT workers pulling in $150 per hour, it may be worth it to spend the money on VMS solutions versus if light industrial workers earning $15 per hour comprised the 5%.
Although industrial companies accounted for 58% of occupations using VMS solutions, companies with IT workers accounted for 41% of the spending on VMS tools, according to the SIA report.
And when it comes to industries that spend the most on VMS solutions, finance and insurance topped the list with 20%, while the IT and telecom industry ranked No. 2 with 14%, according to the SIA report.
Steps to avoid when implementing VMS
Rolling out a VMS solution takes more than a flick of the switch. It takes strategy.
“I would say 80%-90% of VMS implementations are not done the right way,” Saxena says. “They haven’t rolled it out enterprise-wide, and instead rolled it out to one or two departments. It’s an incomplete system then, and it won’t be a system of record.”
Workday’s Santiago expanded on that view with additional advice to avoid taking a siloed approach with your enterprise strategy.
She notes that procurement departments have always been more driven by the requirements of the different lines of business and need to take a broader view, rolling out the VMS solutions enterprise-wide versus just to specific business units or areas of business.
“Moving the contingent workforce programs under HR may signal some of the big changes needed at looking at the whole enterprise instead of just individual parts of the business,” says Santiago, noting HR tends to take a companywide view on matters. “I think we will probably see more of this moving to HR.”