Reducing Contingent Workforce Costs with a Vendor Management System

Why Contingent Workforce Costs Escalate

Many organizations overspend on contingent labor for the same reasons:

• Limited visibility into total contingent workforce spend

• Hiring outside approved suppliers and rate cards (rogue spend)

• Inconsistent or inflated staffing agency bill rates

• Manual, email‑driven processes that increase time‑to‑fill

• Low adoption of legacy workforce tools

Without a system of record, leaders lack the data needed to control costs or prove ROI.

How a Vendor Management System Drives Cost Savings

A modern VMS centralizes contingent workforce activity and enforces policy — creating immediate and long‑term savings across the program.

1. Increases Spend Under Management

One of the strongest indicators of VMS ROI is spend under management. When all contingent labor flows through a single platform, organizations gain control over:

• Requisitions and approvals

• Supplier usage

• Rate compliance

• Assignment duration and extensions

Greater visibility enables smarter decisions and exposes savings opportunities.

Related article: Driving Spend Under Management in a Contingent Workforce Program

2. Eliminates Rogue Spend

Rogue spend occurs when hiring managers bypass approved suppliers or negotiated terms. This often leads to higher costs and compliance risk.

A VMS reduces rogue spend by:

• Enforcing approval workflows

• Limiting access to approved suppliers

• Applying rate rules automatically

• Creating a complete audit trail

By making compliance easy, organizations recapture spend that would otherwise go unmanaged.

Related article: How to Manage Contingent Workforce Rogue Spend

3. Controls Staffing Agency Bill Rates

Without standardized rate governance, bill rates vary widely by department, location, or hiring manager.

A VMS enables:

• Standardized rate cards by role and geography
• Automated rate validation at submission
• Benchmarking and trend analysis across suppliers

This transparency supports renegotiation, supplier optimization, and consistent pricing.

Related article: Staffing Agency Bill Rate: What Is It?

4. Reduces Administrative and Operational Costs

Manual hiring processes increase both hard and soft costs. A VMS reduces operational costs by:

• Reducing time‑to‑fill
• Lowering HR and procurement workload through automation
• Reducing errors in time, expense, and invoicing

A modern VMS automates the end‑to‑end lifecycle - from requisition to invoicing - improving efficiency and reducing overhead.

5. Leverages Competitive Bidding

Most Vendor Management Systems come with a built-in feature for competitive bidding.

• This means businesses can invite multiple vendors to bid on an open job, ensuring they secure the most cost-effective result.

• The system can also track the performance and cost-effectiveness of each vendor, enabling businesses to make data-driven decisions when selecting vendors in the future.

6. Fosters Strategic Workforce Planning

The predictive analytics features of a VMS can forecast future workforce needs based on historical data, helping businesses plan their workforce strategies more effectively. This can prevent over-hiring or under-hiring of contingent labor, ensuring organizations have the right amount of labor at the right time, reducing both overstaffing and opportunity costs.'

7. Improving User Adoption to Maximize ROI

Even the best cost controls fail if users avoid the system.

Modern VMS platforms are designed for adoption, with:

• Intuitive, consumer‑grade UX

• Configurable workflows that reflect real hiring processes

• Open APIs that integrate with HR, ERP, and finance systems

Higher adoption directly increases spend under management and strengthens cost outcomes.

Understanding VMS Pricing

VMS pricing varies based on program size, complexity, and deployment model. Common factors include:

• Total contingent workforce spend

• Number of users and suppliers

• Required features and integrations

• Support and implementation approach

Common pricing models include percentage of spend, per‑worker pricing, and flat subscription fees.

Related articles:

• How Much Does a VMS Cost?

• A Quick Overview of Vendor Management System Pricing

When Does a VMS Become Worth the Investment?

A common myth is that only large enterprises benefit from a VMS. In reality, mid‑market organizations often see ROI faster because inefficiencies are more concentrated.

Organizations typically benefit when they:

• Use multiple staffing agencies

• Hire contingent workers on a recurring basis

• Lack centralized rate or supplier governance

• Need better reporting and cost transparency

Related article: VMS ROI: What Size of Operation Do You Need to Make a VMS Worthwhile?

Measuring ROI From a Vendor Management System

The true ROI of a Vendor Management System extends far beyond the cost of the software itself. Leading organizations measure VMS ROI using a combination of cost, efficiency, visibility, and risk-reduction metrics, including:

• Reduction in Average Bill Rates
  Improved rate management, standardized rate cards, and better vendor competition help drive down contingent labor costs.

• Vendor Consolidation
  Centralizing vendors enables performance tracking, improved accountability, and smarter sourcing decisions across the supply base.

• Direct Cost Savings
  Eliminating rogue spend, enforcing preferred suppliers, and optimizing vendor usage reduces overall contingent workforce spend.

• Increased Spend Under Management (SUM)
  A higher percentage of total contingent workforce spend becomes visible, governed, and controlled through standardized processes and a single system.

• Increased Efficiency & Time Savings
  Automation of requisitions, onboarding, time entry, approvals, and invoicing significantly reduces administrative effort for HR, procurement, and hiring managers.

• Full Workforce Visibility
  All contingent labor data lives in one platform, providing real-time insight into worker utilization, supplier performance, costs, and compliance.

• Risk Reduction, Compliance & Audit Readiness
  A VMS helps ensure proper worker classification, up-to-date credentials, contract compliance, and consistent documentation—reducing legal and financial risk.

A modern VMS delivers real-time analytics and reporting, allowing organizations to continuously track ROI and identify new optimization opportunities over time.

Related article: Vendor Management Software: What’s the Cost & ROI?

Legacy VMS vs Modern VMS

For organizations managing a contingent workforce, the choice of Vendor Management System (VMS) can define how effectively they attract talent, control costs, and scale operations.

Many Legacy VMS providers; platforms were built decades ago, patched over time, and are unable to keep pace with today’s speed of work.

Modern VMS platforms, by contrast, are designed for flexibility, user experience, and rapid integration. The difference between a legacy provider and a modern solution isn’t just about technology, it’s about business outcomes.

If your organization is still operating on a legacy VMS, the consequences may go beyond clunky software - they directly impact your bottom line, workforce agility, and competitive edge.

Here’s how a Legacy VMS can impact you negatively: 

• Higher Costs: Legacy platforms often require ongoing customization, manual workarounds, and extra support fees that drive up your total cost of ownership.

• Slower Time-to-Hire: Outdated workflows and long approval chains delay the hiring process, leaving critical roles unfilled.

• Poor Visibility: Without real-time reporting, it’s harder to track spend, monitor supplier performance, or stay compliant with labor regulations.

• Frustrated Stakeholders: Hiring managers, suppliers, and workers all struggle with complex systems that reduce engagement and adoption.

• Missed Opportunities: While competitors leverage AI-driven insights and automation, legacy users risk falling behind in workforce strategy and cost control.

By contrast, a modern VMS empowers your business to:

• Scale faster with flexible, mobile-first workflows

• Control spend through automation and transparency

• Engage suppliers and workers with user-friendly tools

• Unlock strategic insights that drive smarter workforce planning

In other words: moving to a modern VMS isn’t just an IT upgrade - it’s a business decision that directly improves efficiency, cost savings, and agility

Related Articles: 

Legacy vs Modern VMS - What's the Difference?

MSPs: Is it time to upgrade your in-house VMS?

Is it time to Switch your VMS?

Can I change my VMS without changing my MSP?

Legacy VMS vs. Modern VMS: Quick Comparison

Vendor Management System Pricing and ROI

Historically, VMS platforms were designed for large enterprises and came with complex pricing.
Today, cloud-based VMS solutions like Conexis VMS offer powerful functionality for mid-market organizations at a fraction of the cost.

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: 

1- The Traditional VMS Pricing Model

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.

2 - Monthly License Fee

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.

Be Aware of Hidden Costs

Processing and implementation aside - there are many hidden costs that you might not be aware of. When evaluating VMS providers, be sure to ask these about these potential hidden costs. You can also find a list of specific questions to ask in our free VMS Buyer's Guide.

Here's a rundown of some potential hidden costs

1- Integration Complexity

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.

2 - Change Management

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.

3 - Customization

 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.

4 - Data Migration

 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. 

5 - Compliance and Security

 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.

6 - User Training

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.

7 - Ongoing Support and Maintenance

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.

8 - Vendor Lock-in

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.

9 - Scalability

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.

10 - Reporting and Analytics

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. 

How do I Choose the Right Vendor Management System

When choosing a VMS, consider your company’s specific requirements.

The right VMS helps you streamline vendor management, improve compliance, and reduce costs. But not all systems are created equal. Our free VMS Buyer’s Guide includes expert insights and a step-by-step checklist to help you find the right fit.

Here are just a few things to evaluate when choosing a VMS:

1. Scalability & Flexibility

Choose a solution that grows with your business. Modular, configurable systems allow you to scale features as your workforce needs evolve.

2. Integration Capabilities

Ensure your VMS integrates seamlessly with existing tools like your HRIS, payroll, ERP, or time-tracking systems for maximum efficiency.

3. Real-Time Reporting & Analytics

Look for platforms that offer customizable dashboards, workforce spend insights, and performance tracking to drive smarter decisions.

4. Supplier & Freelancer Management

Your VMS should make it easy to manage staffing agencies and independent contractors, offering automated workflows and communication tools.

5. MSP-Specific Features

If you work with a Managed Service Provider (MSP), look for functionality that supports program flexibility, regulatory compliance, and client success.

Vendor Management FAQs

Q: What is a Vendor Management System (VMS)?
A: A Vendor Management System is software that helps businesses manage staffing vendors, contingent workers, and associated processes like invoicing and compliance.

Q: How does a Vendor Management System work?
A: A VMS centralizes vendor data and automates processes like onboarding, time tracking, and payments to improve efficiency and compliance.

Q: What are the benefits of using a VMS?
A: Benefits include reduced costs, improved visibility, stronger compliance, and better vendor performance management.

Q: How much does a Vendor Management System cost?
A: Pricing varies by organization size and needs. Modern VMS platforms like Conexis offer flexible SaaS pricing that fits mid-market budgets.

Q: Why choose Conexis VMS?
A: Conexis offers modern design, fast implementation, and unmatched functionality for all worker categories—at a lower cost than legacy systems.