When choosing a Vendor Management System (VMS) solution, one of the biggest factors in your decision will be pricing. In this article, we’ve listed everything you need to know about VMS solution pricing models and the potential hidden costs when selecting a VMS solution.
In today's world the contingent workforce continues to grow and will continue to do so for many years to come. Organizations are realizing that managing their extended workforce with spreadsheets and homegrown solutions is not the answer.
So, what’s the solution?
To better manage your staffing agencies and contingent workforce it’s crucial to consolidate your contingent workforce in one place using a Vendor Management System (VMS). A VMS will centralize your staffing agencies and contingent workers and automate the entire procure to pay process. A VMS also gives you critical data and reporting allowing you to measure your vendors’ performance, identify gaps and then close those gaps allowing for continuous improvement.
When choosing a VMS solution, one of the biggest factors in your decision will be pricing. Here's what you need to know about VMS solution pricing models:
Once implemented, VMS providers typically charge a percentage of every dollar that is processed through the Vendor Management System. Depending on spend levels the cost of a VMS could be as low as 35 basis points and go up as high as a full percentage point assessed on spend processed through the system.
Recently, some VMS providers have begun to offer a more traditional monthly license fee which is tied more to the data processing costs (which when you think about it aligns more with the VMS’ cost structure). These license fees start as low as a few hundred dollars and can go into the millions per year depending on the scale and complexity of the processing required.
In addition to the ongoing processing costs, many VMS providers charge for setup and implementation. Many of today's vendor management systems can be incredibly expensive to implement and take many months. Traditional VMS providers are built on old tech stacks so when they do a client implementation the setup is labor intensive - this means implementations can cost hundreds of thousands, if not millions of dollars, and go on for months.
Processing and implementation aside - there are many hidden costs that you might not be aware of. Here's a rundown of some potential hidden costs:
VMS solutions must integrate with existing systems such as HRIS, ERP, and procurement software. If the integration is complex, it can lead to significant costs in time and resources. Be sure to ask the VMS if they have an open or closed API. An open API will be more cost-effective and give you control over the integration.
Employee resistance to new systems can be costly. Effective change management requires training and possibly even shifts in company culture, which can be resource intensive. Find out from the VMS how they handle and support your change curve.
Off-the-shelf VMS solutions may not fit your company’s unique processes. Customizations can be expensive and time-consuming and may require ongoing maintenance. Find out from the VMS how they handle and charge for customization.
Transferring data from old systems to a new VMS can be a hidden cost, particularly if the data needs to be cleaned up or converted to a new format. Find out from the VMS if there are any costs for this.
Ensuring the VMS complies with labor laws, data privacy regulations, and industry-specific compliance standards can incur costs, particularly if you operate in multiple jurisdictions. Find out from the VMS what data privacy legislation they follow. GDPR is the gold standard.
Staff will need training on the new system. This training can be costly, especially if the VMS is complex or if there is high turnover in the staff using it. Find out from the VMS if they charge for training, if its included or if they can train the trainer so you can conduct your own training.
Monthly or annual subscriptions, support contracts, and updates for the VMS can add up over time. Find out from your VMS if they charge for updates or any other items as part of your subscription.
If the VMS is not interoperable with other systems or data formats, it may lead to vendor lock-in, which can be costly if you decide to switch providers in the future. Your VMS should provide an open API ensuring easy migrations.
If your contingent workforce grows, the VMS must scale accordingly. Some VMS providers charge more as you scale up, which can be a hidden cost. Find out from your VMS what their back-end architecture is. The most advanced today is a micro server architecture which scales instantly providing a fast user experience regardless of the load being put on the system.
Most VMS' have a set of standard reports and a way for you to generate your own reporting. However, some VMS' charge a cost to set up metrics and analytics to measure the performance of your contingent workforce through the VMS. Find out if there are any extra costs for the specific reporting and analytics that your business needs.
In summary, by carefully planning for these hidden costs and addressing them early in the VMS tender process, companies can ensure they are getting the most out of their investment and truly enhancing their management of contingent labor.
Budgets are tight, ROI is essential, and hidden costs can derail adoption. Fortunately, there are multiple ways to fund a VMS - and you don’t always have to pay entirely out of pocket. Understanding the benefits, trade-offs, and financial impact of each model is key to making the right choice for your organization.
The three main funding approaches are:
To learn more: See Vendor-Funded vs Client-Funded VMS: Which Model is Right for you
Modern VMS platforms, like Conexis VMS, support all three funding models - giving you the flexibility to choose or change your approach as your program evolves.
Download a copy of our free VMS Buyers Guide - it includes everything to know about a VMS and a checklist of all the questions you should ask a VMS provider; including the Top 10 Pricing questions.
Everything You Need to Know about VMS Cost Savings | Guide
VMS ROI: What Size of Operation Do You Need to Make a VMS Worthwhile?
What Size of Operation Do You Need to Make a VMS Worthwhile?
How to Save 20% on your Contingent Workforce Cost with a VMS
Driving Spend Under Management in a Contingent Workforce Program
4 Ways to use your VMS to Control Contingent Workforce Cost and Save Money
Why Spreadsheets may be costing you millions in Contingent Labor Spend
Case Study: How a Manufacturer Cut Costs by 27% and No Shows by 80% with Conexis VMS
Conexis is an award-winning Vendor Management System built for organizations that want the power of enterprise software without the complexity or cost.
Leveraging the latest technology, Conexis delivers the expertise, reliability and security of enterprise systems, while offering the flexibility, user friendliness and tailored, personal service you require. Learn more about our Company and why organizations Choose Conexis VMS.
Conexis VMS is purpose-built for organizations seeking to manage their contingent labor spend effectively. Here’s why we're the right choice:
Whether you are looking to switch your VMS, or just getting started, we are here to help. Contact Us for a Free No-Obligation Consultation, See how Easy Conexis is to use by taking a quick 2 minute Self-Guided Online Demo, or Book a Personal Demo Today!