Buyers Guide: FMS or VMS

Understanding the difference between Freelancer Management Systems and Vendor Management Systems

HR managers in large organisations are already comfortable using Vendor Management Systems (VMS) to handle the processes of onboarding and working with third party contractors, sourced through agencies. However, using a VMS to manage freelancers creates friction.

This guide explores the differences between a VMS and an FMS and why it is become increasingly important for an organisation to use a dedicated FMS for managing its freelance and contingent workforce.

In this guide:

  • The issue of shoehorning freelancers into a VMS
  • Managing freelancers with a VMS causes friction
  • Engaging people not vendors
  • Freelancers deserve an FMS
  • Integrating an FMS with an VMS

The issue of shoehorning freelancers into a VMS

The VMS was the answer to managing a large number of resourcing and recruitment partners (agencies). Their key features are geared toward organising and controlling the spend of multiple vendors.

Typically a vendor is a recruitment agency or partner, approved onto a preferred suppliers list, or at least a relatively short list of vendors.

By the very nature of the relationship with these 'preferred' vendors, the VMS is designed to support long-term, 'engage once, use multiple times' arrangements - usually requiring detailed setup and approval of each vendor.

Unlike vendor relationships, an organisation can have several thousand freelancer relationships at any one time. The active engagements can also be extremely short, intermittent and in a lot of cases, one-offs.

This requirement to onboard freelancers at speed coupled with the need to capture very different data, makes it extremely difficult to use a VMS to manage a freelancer workforce.

Managing freelancers with a VMS causes friction

When a tool doesn't quite meet the requirements to handle a process, it causes friction with its users. Users who experience friction with a system look for shortcuts and other 'easier' alternatives.
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Friction causes users to bypassing important processes

Most often, in the case of freelancers, this results in freelancer details being stored and saved in an Excel Spreadsheet - and the inevitable chaos that ensues when there's no visibility of spend, risk or utilisation.

Engaging people not vendors

VMS are good at managing vendors. Freelancers, however, are people. Ultimately, a system designed to engage and manage a vendor organisation is not necessarily the right tool to engage, onboard and manage individuals.

Freelancer Management Systems are designed to specifically address the challenges with working with a large number of individual, independent professionals.

  • Onboarding, with NDAs and contracts
  • Project resourcing, with briefing, selection and hiring
  • Messaging and collaboration
  • Invoicing and payments

Engagement happens at an individual level
The fast, fluid process of hiring a freelancer happens at an individual level. The hirer deals directly with the freelancer. This individual level engagement doesn't fit with the standard VMS, which is designed for all hiring activity to go through a central department, like HR.
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Using a VMS to manage freelancers, is an example of how shoe-horning a process into a VMS rather than using a dedicated FMS could create friction for both freelancers and the hirer.

In contrast, the FMS is designed to provide simplicity for the hiring manager, as well as reporting clarity for HR
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Freelancers deserve an FMS

Some industries depend on freelancers. Media companies, publishers, construction firms, software development houses, and marketing agencies would find it difficult to remain competitive without being able to access skills on-demand and at short notice.

To compound the issue, in most of the industries where the use of freelancers is prevalent, there is also a skills shortage and organisations are competing to attract - and more importantly - retain the best people.

So, where this is an abundance of projects, freelancers can be selective about who they choose to work with. Given the choice, freelancers will prefer to work with an employer who is easy to do business with and has a system that's freelancer friendly.

As organisations start developing Freelance Value Propositions, one of the key foundations should be to engage freelancers through a flexible, bespoke freelancer management system.

Integrating an FMS with an VMS

Running two separate systems when managing a workforce that contains both permanent employees and freelancers might not be ideal.

However, it is possible to integrate the two for complete end-to-end visibility of an entire workforce. The diagram below shows the minimum required integration points to effectively share freelancer engagement information with a VMS.

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Integrating FMS with VMS: Cloud-based platforms make integration simpler.

Summary: The 5 must haves for your Freelancer Management System RFI

To shortlist the right vendors in your RFI process, you should look for the following must haves:

  • Seamless onboarding that's freelancer-friendly and meets all of your organisation's compliance requirements
  • The ability to support freelancers engaged directly or through an agency
  • A configurable taxonomy, tags and facets to improve the accuracy of searching and matching
  • Real-time, bespoke reporting that provides management information relevant to your organisation's goals
  • Integration options to enable your organisation to include freelancers in its overall talent strategy

Useful resources

When do you need a freelancer management system?

Managing your freelancer workforce can be as simple as recording names and phone numbers in your phone book. But there's a point when you need to get serious about managing your freelance and contingent workers.

Scaling a direct sourcing programme

How to scale a direct sourcing programme using on-demand workforce software.

The Importance of Brand in Direct Sourcing Software

Using your brand to attract the best freelance and contract talent makes a direct sourcing strategy an attractive proposition for large organisations.