VMS, MSP & Direct Sourcing: Managing Contingent Talent
Managing a few freelancers is one thing — managing hundreds of contingent workers requires structure, tools, and clear governance. Here's how to do it right.
Why Contingent Talent Needs Dedicated Infrastructure
Once your organization grows beyond a handful of contractors or freelancers, manual tracking no longer works. Spreadsheets and siloed requests lead to:
- Lack of visibility into spend and usage
- Compliance risks and missed onboarding steps
- Vendor overlap and duplicated costs
- Inconsistent worker experiences
To manage contingent labor at scale, organizations rely on a mix of VMS tools, Managed Service Providers (MSPs), and increasingly, direct sourcing models.
Let’s explore each.
What Is a Vendor Management System (VMS)?
is a software platform used to manage the entire lifecycle of contingent workers — from requisition to invoicing — across multiple vendors.
It helps with:
- Requisition approval workflows
- Rate card management
- Time tracking and invoicing
- Performance tracking
- Compliance documentation
Popular tools include SAP Fieldglass, Beeline, and Workday VNDLY.
Benefits:
- Centralized control
- Standardized contracts and rates
- Automated workflows and reporting
Limitations:
- Requires integration with HRIS/ERP systems
- Can be complex and expensive for small orgs
What Is an MSP (Managed Service Provider)?
is a third-party company that handles sourcing, onboarding, compliance, and performance tracking for your contingent workforce — typically using a VMS tool.
Think of them as outsourced contingent workforce management partners.
They provide:
- Access to pre-vetted suppliers
- SLA and compliance monitoring
- Centralized invoicing and reporting
- On-site coordinators in large programs
Pros:
- Scalable support across regions
- Dedicated expertise in sourcing and compliance
- Frees up HR and procurement resources
Cons:
- May reduce direct control over talent quality
- Can lock you into vendor-specific ecosystems
- Less agility for niche or fast-changing roles
What Is Direct Sourcing?
refers to hiring contingent workers from your own talent pool or employer brand — without third-party agencies. Technology platforms can automate matching and onboarding.
Think of it as “in-house headhunting” for non-employees.
This approach leverages:
- Your careers site and employer brand
- Referrals, alumni networks, silver medalists
- AI-matching tools (e.g., TalentNet, LiveHire)
Benefits:
- Lower cost (no agency markup)
- Better culture fit
- Greater control over candidate experience
Risks:
- Requires internal capacity and sourcing skills
- May create internal competition with FTE roles
- Needs robust compliance controls
When to Use What?
| Situation | Recommended Model |
|---|---|
| Rapid global expansion | MSP with regional reach |
| Frequent roles with known profiles | Direct sourcing |
| Large supplier ecosystem | VMS for visibility |
| Limited internal HR or legal support | MSP for compliance |
| Strong employer brand + sourcing team | Direct sourcing |
Integration with HR & Procurement
Regardless of the model, integration is key.
- Sync VMS data with HRIS to track tenure, location, and system access
- Align MSP reporting with finance KPIs
- Use direct sourcing data to inform talent pipelining
Make sure Legal and IT are involved from the beginning, especially when contingent workers need access to sensitive systems or customer data.
Common Mistakes to Avoid
Final Thought
Managing contingent labor at scale is not just about tools — it’s about strategy, integration, and accountability. VMS, MSPs, and direct sourcing each serve different needs, and often, the best programs use all three in tandem.
In the next chapter, we’ll explore compliance risks and legal frameworks for managing non-employees across jurisdictions.