More businesses are relying on externally-sourced workers than ever, and many are adopting a direct sourcing strategy. This article explores what direct sourcing contingent labor entails, its benefits for your organization, and how a vendor management system (VMS) can support your direct sourcing strategy.
While a lot of businesses rely on staffing agencies to fill their contingent workforce needs, many organizations are now implementing direct sourcing strategies to augment the contingent workforce that they hire through vendors - and instead, build their very own talent pool using their own recruiting teams.
Direct sourcing contingent labor is a method of identifying and hiring suitable candidates for your open job vacancies by sourcing and building your own pool of talented freelance, contingent, consultant, and temporary talent.
This is different from the typical contingent workforce hiring model, which relies on staffing agencies placing externally-sourced workers into your organization.
With direct sourcing, the organization will completely source, manage, engage, onboard, offboard and re-engage all workers internally. Some companies even have their own recruiting teams focused on direct sourcing contract hires, in addition to their existing staffing agency program.
There are two primary differences between a direct sourcing strategy and hiring contingent workers through multiple staffing agencies.
While in traditional contingent workforce staffing companies engage staffing agencies to fulfill their contingent talent requirements, a direct sourcing strategy sees the employer build their own internal talent pool of contingent workers who can be engaged directly on an ongoing as-needed basis.
Rather than just leaning on staffing agencies to source contingent workers, a direct sourcing strategy uses the employers' brand as a value proposition to attract contingent workers for certain projects and jobs.
Direct sourcing generally just makes up one part of a company’s contingent workforce management program. Organizations still partner with staffing agencies to fill their workforce targets, but they augment that process with their own directly sourced talent pool.
To reduce the risk of worker misclassification or co-employment in a direct sourcing program, all workers should still be payrolled through a third-party employer or record employer instead of on the direct sourcing companies’ books.
Direct sourcing isn’t a complete solution for your contingent workforce program, it’s a way to augment the staffing agency services that you are already using. Here are just a few ways in which your business can benefit from a direct sourcing strategy:
With direct sourcing, companies aren’t relying on staffing agencies to source top talent. Instead, they already have an engaged talent pool to dip into. This talent pool, however, may take some time to build. Until you build a pool of talented workers who know your brand and want to work with you, direct sourcing is probably a slower hiring process.
Staffing agencies require markup on their services. You have to pay for their employees, the work they do, and the expertise they provide. By direct sourcing, you are cutting out your need to use staffing vendors in some instances. By sourcing contingent workers directly, you’ll be saving money on staffing agency fees. However, this is only true if the cost of recruiting and managing the candidates doesn’t outpace the agency fees. In many cases, companies end up spending more due to overheads and distractions that damage the success of the direct sourcing program.
The ability to attract and retain permanent employees has long been a talent management goal, but why hasn’t that translated to the contingent workforce? The ability to attract and repeatedly engage independent talent on nothing more than your own brand name, and without the help of staffing agencies, is surely a big win for organizations that want to build a more flexible and agile workforce.
With companies now creating their very own recruiting teams focused solely on direct sourcing contract hires, these businesses need a way of managing their directly sourced workers.
Traditionally, a vendor management system (also known as VMS, VMS software, and VMS solution) allows organizations to manage their entire externally-sourced workforce, as well as consolidate their staffing agencies, all on one centralized system. This gives businesses complete visibility and control over their contingent workforce management program.
To maintain that visibility, even when implementing a direct sourcing strategy, it’s crucial that your vendor management system supports direct sourcing. This will allow you to better manage both your contingent workers sourced through staffing agencies, as well as those sourced internally by your direct sourcing strategy.
Here’s how it amplifies the power of your direct sourcing program:
A VMS provides a single view of your entire contingent workforce: who’s working, where, for how long, and at what cost.
This transparency helps HR, Procurement, and Operations make data-driven decisions with confidence.
From requisitions and approvals to onboarding and payment, a VMS automates key steps in the hiring process - eliminating bottlenecks and freeing teams to focus on strategy.
A VMS standardizes documentation and compliance workflows, ensuring every worker - direct or vendor-sourced - meets corporate and legal requirements before starting work.
With built-in analytics dashboards, a VMS tracks key metrics like time-to-fill, spend, and performance - helping organizations measure and optimize ROI.
Modern VMS platforms like Conexis VMS integrate seamlessly with HRIS, ERP, and payroll systems - creating a connected, scalable workforce ecosystem.
Check out our Direct Sourcing Guide to learn more about Direct Sourcing, its benefits and how a Vendor Management System strengthens a Direct Sourcing Strategy: View Direct Sourcing Guide
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.
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