You’ve decided your organization needs a Vendor Management System (VMS). That’s a major step toward streamlining your contingent workforce program. But now comes one of the most critical decisions: how will you pay for it? In this article, we look at the difference between Vendor (Supplier)-Funded and Client-Funded VMS Programs.
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:
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.
Vendor-funded VMS (also referred to as Supplier-Funded) means the staffing suppliers pay the software fee, typically as a percentage of labor spend billed to the client. Costs are often embedded in supplier bill rates, so the organization may not see a direct software invoice.
Tip: Vendor-funded doesn’t mean free - it just shifts who pays, not whether someone pays.
Client-funded VMS is a subscription-based model where your organization pays the software fee directly.
Hybrid-funded VMS combines elements of both vendor-funded and client-funded approaches. Part of the fee is paid by suppliers, and part is paid directly by the client.
|
Feature / Consideration |
Vendor-Funded |
Client-Funded |
Hybrid-Funded |
|
Who pays |
Staffing suppliers |
Your organization |
Both client & suppliers |
|
Typical fee |
.5%–1% of labor spend *The pricing approach is the same, its just who pays that differs. |
.5% - 1% of labor spend *The pricing approach is the same, its just who pays that differs. |
Combination of both |
|
Upfront cost |
In some cases, the VMS requires you to pay a marketplace participation fee |
Yes |
Low to moderate |
|
Transparency |
Limited |
High |
Medium to high |
|
Flexibility to switch suppliers/MSPs |
Limited |
High |
Medium |
|
Internal approval complexity |
Low |
Moderate to high |
Moderate |
|
Common use case |
MSP-managed programs; Buyers implementing VMS programs
|
Procurement-led programs, Buyers implementing VMS Programs, mid-market & enterprise
|
Programs balancing cost and control |
While Vendor-funded programs are the most prevalent, there has been an increase in the number of Client-funded programs. Client funded VMS adoption is growing as organizations prioritized cost control, transparency and ROI.
|
Model |
Estimated % of Programs North America |
Estimated % of Programs Globally |
|
Vendor-Funded |
90% (2023) 76% (2024) |
76% (2023) 74% (2024) |
|
Client-Funded |
8% (2023) 23% (2024) |
13% (2023) 14% (2024) |
|
Hybrid-Funded |
2% (2023) 1% (2024) |
11% (2023) 12% (2024) |
Sources: SIA Global Landscape Report 2024, 2025.
The best funding model depends on your program priorities:
Giving your program freedom and flexibility to choose the best approach - or shift models as your needs evolve.
|
Model |
Pros |
Cons |
|
Vendor-Funded |
Low upfront cost, fast adoption, minimal internal approval |
Less transparent, limited flexibility, supplier margin pressure |
|
Client-Funded |
Full cost visibility, greater program control, easier vendor changes |
Requires budget approval, higher upfront investment |
|
Hybrid-Funded |
Balanced cost, improved transparency, reduced supplier pushback |
More complex contracts, requires coordination |
Choosing a VMS isn’t just about cost - it’s about avoiding rigid funding constraints. A platform that supports vendor-funded, client-funded, and hybrid models provides:
If you would like to explore your VMS funding options, contact us. We can:
Contact us to explore your VMS funding options today
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Conexis VMS is purpose-built for organizations seeking to manage their contingent labor spend effectively. Here’s why we're the right choice:
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