What Is a Vendor Management System (VMS)? | Definition, Benefits & Costs

What does a Vendor Management System do?

A Vendor Management System centralizes every stage of contingent workforce management, from requisition to payment. Instead of managing vendors, workers, time, and invoices across multiple systems, a VMS brings everything together in a single platform.

With a VMS, organizations can:

• Create and approve job requisitions

• Source workers through staffing agencies or direct channels

• Onboard workers and track compliance documentation

• Capture time, expenses, and work shifts

• Automate invoicing and payments

• Monitor vendor performance and labor spend

• Generate real-time workforce analytics and reports

By standardizing and automating these processes, a VMS reduces administrative effort, improves data accuracy, and gives stakeholders clear visibility into their extended workforce.

How Does a Vendor Management System Work?

A Vendor Management System connects all participants in a contingent workforce program - hiring managers, staffing vendors, managed service providers (MSPs), finance teams, and workers - within a shared platform.

Here’s how a typical VMS workflow works:

• A hiring manager submits a job requisition through the VMS

• The requisition is approved based on predefined workflows

• Staffing vendors submit candidates directly in the system

• Workers are onboarded with automated compliance checks

• Time, expenses, or shifts are captured and approved

• Invoices are generated and processed automatically

• Real-time dashboards track spend, performance, and compliance

Because the VMS serves as the system of record, all data is captured in one place, enabling accurate reporting, stronger governance, and better workforce decision-making.

Why Is a Vendor Management System Important?

The contingent workforce now represents a significant and growing portion of the global labor market. Yet many organizations still rely on manual tools such as Excel, email, or SharePoint to manage this complex environment.

Without a VMS, organizations often face:

• Limited visibility into workforce spend

• Compliance and worker misclassification risks

• Inconsistent vendor performance

• Slower time-to-hire

• Higher labor and administrative costs

A Vendor Management System addresses these challenges by providing automation, transparency, and control, enabling HR, procurement, and finance teams to manage contingent labor strategically instead of reactively.

Key Features of a Vendor Management System

Most modern Vendor Management Systems include:

• Requisition and approval workflows

• Vendor and supplier management

• Worker onboarding and compliance tracking

• Time, expense, and shift-based tracking

• Invoicing and payment automation

• Cost controls and rate management

• Real-time analytics and reporting

• Integrations with HRIS, ERP, and payroll systems

Together, these features help organizations scale their contingent workforce programs efficiently while maintaining compliance and cost control.

Key Benefits of a Vendor Management System

A modern VMS delivers measurable ROI. Here’s how:

1. Improved Efficiency - Automation of onboarding, time entry, and approvals saves countless hours while reducing administrative overhead.

2. Full Visibility - All data lives in one platform, enabling clear insight into worker performance, vendor spend, and compliance.

3. Vendor Consolidation- Centralizing vendors enables better performance tracking and smarter sourcing decisions.

4. Cost Savings - By eliminating rogue spend, improving rate management, and optimizing vendor usage, companies can save up to 20% on contingent workforce costs.

5. Risk Reduction - A VMS ensures workers are classified correctly, credentials are up-to-date, and contracts meet compliance standards.

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. Yet, too many businesses remain stuck with Legacy VMS providers; platforms built decades ago, patched over time, and 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 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

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.

Choosing a VMS for a Mid-Market Contingent Workforce Program

For organizations managing a contingent workforce program with an annual spend under $70 million – selecting the right Vendor Management System (VMS) is critical.

• Your VMS should provide a scalable, efficient, and comprehensive solution without requiring multiple systems or extensive customization.
• Yet when it comes to companies transforming how they manage their contingent workforce program, many of the traditional legacy VMS providers have designed their software for large organizations with enterprise-level contingent workforce volumes. 

When choosing the best VMS for your mid-market program, ensure that it has been specifically designed and built to meet your needs, and provides you with the flexibility, affordability and customer care you need.  

For additional information, check out our Mid-Market Contingent Workforce Guide. 

Why Choose Conexis as your VMS Partner

Our software has been developed by  contingent workforce experts and was built from the ground up using the latest tech stack. This means we can do more for you at a lower cost, with more flexibility, provide better customer care, and deliver a better user experience. 

Conexis is an award-winning VMS tailored specifically for mid-market contingent workforce programs. Built on the latest tech stack, we are THE most modern, advanced and innovative VMS on the market today. We deliver the expertise, reliability, and security of an enterprise system, while offering the flexibility, user friendliness and tailored service you require. Essentially, Conexis delivers enterprise level software - without the enterprise level complexity and cost. 

Here's why you should choose Conexis as your VMS Partner. 

    Our Expertise

At Conexis, our Leadership Team brings extensive 'hands-on' experience in the Contingent Workforce Industry, particularly in Workforce Management, Consulting, Procurement and Talent Acquisition roles.

Industries: 

This expertise spans across various industries including Consulting, IT,  Manufacturing & Light Industrial, Consulting,   Government,  Pharma, Warehouse & Logistics and Healthcare.

Our Tailored Solutions:

We also bring a tailored solution for MSPs, Staffing Agencies, HR and Talent Acquisition, Procurement, and Contingent Workforce Management Professionals. 

With Conexis, you get dedicated senior leadership to help you succeed.

    Our Advanced Technology

We have the most modern and advanced VMS tech stack available today. It starts with the latest codebase and extends to our lightning-fast AWS microservice infrastructure. Add to that our Open API and Software Development Kit (SDK), making Conexis the lights-out leader in VMS technology. Our open APIs and flexible data solutions also allow our customers to create fast, easy, and cost-effective integrations, that can be done in under a week, compared to the legacy systems, which have to custom code each one. 

   Our Flexible Pricing

We offer flexible pricing with no set up costs. We offer a range of pay-as-you-go pricing models. In addition, some highlights of our pricing include: Flexible Percentage of Spend or Licence Fee Pricing, free setup and implementation, no cost standard customization and configuration included, no Cost API, and no cost for a dedicated account team. You can save money, not only at set up, but on an ongoing basis with our affordable monthly pricing. 

    Our Work-Shifts, Worker Scheduling & Credentialling

We are one of the only VMS' in the market with functionality designed specifically to support high-volume fluid workforce environments. With our market-leading work shift scheduling, advanced timekeeping, and worker credentialing capabilities, Conexis is the only VMS that can handle all skill categories without clunky third-party add-ons.

  We're Easy to Use

The Conexis user interface was created using system design science. Our goal was to create an intuitive, easy-to-use, and easy-to-navigate interface. And we have succeeded. Our system is easy-to-use and easy-to-navigate. Our customers also report much higher levels of adoption due to our user interface and easy-to-use flows.

Our Clients Highly Recommend Us

According to SIA's 2025 Workforce Solution Buyers Survey, the Net Promoter Score (NPS) for the VMS Industry in 2025 is -28. Yes. That's negative 28, not positive 28. Comparatively, among current users, we report a higher-than-industry NPS score of +71. This means that our clients would highly recommend our system to others.

    Our Unbeatable Customer Care

"91.7% of all user inquiries are resolved within three hours". We are so proud of this statistic. Conexis puts a premium on Customer Care. We are on a mission is to make every customer feel like our number one customer because they are! Our Customer reviews are authentic and market leading. Each customer is supported by a dedicated and highly experienced "We Care" team that meets rigorous SLA levels to ensure the client's questions are addressed immediately.

   Our Advanced Analytics and AI

Our advanced reporting and analytics module gives customers valuable insights into their program’s performance and contingent workforce population. This critical information enables improved decision-making to improve quality, speed, compliance and cost. Combine this data with our impressive set of AI-driven tools, like candidate matching, to put your program into high gear.

    Our Fast Implementation 

No longer does it take 4-6 months to implement a VMS. Conexis is built on the latest tech stack and we can have you up and running within a few weeks. With turnkey solutions, modular design, and streamlined integration capabilities, VMS implementation can now be completed in weeks instead of months.

    Our “Easy Switch” Program

It’s easy to switch your VMS to Conexis with the Conexis “Easy Switch” program. Conexis makes switching your VMS easy. Our dedicated "Easy Switch" Team will take care of every detail for you, ensuring a seamless transition with minimal disruption. We handle all the complexities, so you can focus on your core business activities without any interruptions and be fully operational in just a few weeks.

     Our White Label Partner Program

Because we are built on the very latest tech stack, we  can provide you with a fully White Labeled VMS your own unique URL, for a very affordable rate. The benefit of a white label VMS is that it enhances your product offering and provides a seamless experience for your clients.

    Our Mid-Market Focus

Leveraging the latest technology, Conexis delivers the expertise, reliability and security of enterprise systems, while offering the flexibility, user friendliness and tailored service you require. Conexis delivers enterprise level software - without the enterprise level complexity and cost for Mid-Market Contingent Workforce Programs.

    Our Client Testimonials

At Conexis, we believe that the true measure of our success lies in the voices of those we serve. Our clients' feedback is invaluable, offering genuine insights into the transformative impact our solutions have on their businesses. By reading our Conexis Client testimonials, you will discover firsthand accounts of how Conexis has revolutionized their operations, enhanced efficiency, and delivered exceptional value. These stories are a testament to our commitment to excellence and our dedication to helping our clients achieve their goals. Dive into their experiences and see why Conexis is the trusted partner for so many.

    Our Native Shift Based Worker Functionality

Unlike other VMS platforms that offer shift scheduling as an afterthought, Conexis was designed with native shift-based workforce management at its core. This means you can manage all scheduling, pay rates, and compliance in one system, reduce payroll and invoicing errors, have real-time workforce visibility with instant access to who is working, who is available, and where gaps exist; and scalability - so you can easily manage shift-based workforces across multiple locations and job types.

   Our Open API

Our VMS has Open APIs which gives you the ability to access raw data and create custom reporting suites tailored to your needs, which enhances the quality of service and drives operational efficiencies and scalability.  

By harnessing the power of Open APIs, you can transform your reporting capabilities, providing users and clients with the insights they need to manage their contingent workforce effectively. 

   Our Nexi AI Support Agent

Artificial Intelligence (AI) is reshaping the future of Vendor Management Systems (VMS) - and Conexis is leading the charge. We've launched Nexi AI, our AI Support Agent built to transform the way users interact with the platform, access support, and manage their contingent workforce programs.

 Our Partnership

At Conexis, our priority is on building partnerships and helping you succeed and grow. We offer many Conexis partner programs, so if you are a Staffing Agency, MSP, Contingent Workforce Consultant or HR Technology Provider looking for a VMS Partner who wants to help you grow your business, contact us!

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.