Types of Staffing Technology: What's the Difference? VMS, Direct Sourcing, FMS and HRIS

 A VMS, direct sourcing platform, freelancer management system and HRIS can all touch the contingent workforce, but they solve different problems. Here’s how to tell where each fits and which capabilities your program may need.

Organizations use several types of technology to recruit, engage and manage workers. The names can sound similar, and some platforms offer overlapping features. Understanding their primary purpose makes it easier to choose tools that support your contingent workforce program.

In short:

• A vendor management system (VMS) manages contingent workforce processes and staffing suppliers.

• Direct sourcing technology helps organizations find and reengage talent from their own pools.

• A freelancer management system (FMS) supports freelance engagements.

• A human resources information system (HRIS) primarily manages employee information.

• An enterprise resource planning system (ERP) manages broader business processes, including finance and purchasing.

VMS, Direct Sourcing, FMS, HRIS and ERP at a Glance

These categories are not mutually exclusive. Available features vary by provider, and organizations may connect several systems to support one workforce program.

What is a Vendor Management System?

A vendor management system (VMS) is software used to manage contingent workforce processes and the suppliers that provide workers. It gives HR, procurement, hiring managers and program leaders a shared place to manage activities such as requisitions, candidate submissions, onboarding, approvals, time and expense, and supplier performance.

A vendor management system (VMS) is the most robust piece of technology for contingent workforce management, ensuring organizations with contingent spend can gain complete visibility and control over their contingent workforce program performance and costs.

VMS is particularly useful when an organization works with multiple staffing agencies, needs consistent workflows across locations or wants clearer reporting on contingent workforce activity and spend. Depending on its capabilities and configuration, a VMS may also support independent contractors, freelancers and direct sourcing programs.

Essentially, a vendor management system acts as a centralized hub for a company’s entire contingent workforce management program, giving businesses complete insight and control over the contingent workers they hire and the staffing agencies they use to source those workers. 

What is Direct Sourcing Technology?

Direct sourcing is a strategy for finding contingent workers through an organization’s own talent pools, rather than relying solely on staffing agencies for every opening. Those pools may include former contractors, retirees, alumni, referrals and other people who have expressed interest in future opportunities.

Direct sourcing technology helps teams organize those pools, communicate with candidates and identify people for new assignments. The strategy can work alongside staffing agencies: an organization might first look at its talent pool and then release an unfilled request to suppliers.

A direct sourcing platform and a VMS can also work together.

The sourcing tool helps identify and engage talent, while the VMS can support the downstream program workflows. The exact division of work depends on the platforms and how the program is designed. For a closer look, read our guide: How a VMS Strengthens a Direct Sourcing Strategyto direct sourcing.

What is a Freelancer Management System?

A freelancer management system (FMS) helps organizations manage people who provide services on a freelance basis. Depending on the platform, it may support freelancer profiles, project assignments, contracts, onboarding, invoices and payments.

An FMS can be useful when a business engages freelancers across departments and needs a more consistent way to track that work.

Its focus is generally narrower than a VMS that manages staffing suppliers and a wider range of contingent workforce processes. If your organization uses both freelancers and staffing agencies, compare the platforms’ actual capabilities before deciding whether an FMS, a VMS or both are needed. For additional reading see: What's the Difference between a VMS and FMS?

Freelancer management systems are used by HR professionals to manage the lifecycle of freelancers, from onboard freelancers, tracking their progress, storing contracts, and managing invoices and payments. 

This type of technology is often used by companies that don’t have any really contingent workforce volume, and only freelance a relatively small amount of tasks to freelancers.

Typically, companies that use a freelance management system are generally looking to source less mainstream hot skills in the creative industry - like graphic designers or copy writers.

How are HRIS and ERP Systems Different?

Rather than investing in contingent workforce-specific technologies, some organizations are using traditional HR platforms such as Human Resource Information Systems (HRIS) and Enterprise Resource Planning Systems (ERPS) to recruit, track and manage contingent workers. 

• HRIS is primarily built to manage employee records and HR processes.

• An ERP connects broader business functions, often including finance and purchasing.

For example, a company might use its VMS to manage a contractor requisition, supplier submissions and assignment approvals; its HRIS to maintain appropriate worker or organizational data; and its ERP to support purchasing and financial reporting. The systems can exchange data through integrations where needed.

Using an HRIS or ERP does not, by itself, create a compliance problem. The practical question is whether your organization has the right workflows, records, access controls and oversight for each type of worker.

These platforms are historically designed to manage data connected to full-time permanent employees, and often don’t have the contingent workforce functionalities that are required to truly gain control of your contingent workforce program. 

The management of staffing agencies and contingent workforce compliance can often become risky when the contingent workforce is managed through a core HR platform. The contingent workforce should be managed separately to your employees to avoid worker compliance issues. 

Which Technology Does Your Organization Need?

Start with the work you need the system to perform:

• Managing multiple staffing agencies and contingent assignments? Evaluate a VMS.
• Building a pool of known contingent talent to reengage? Evaluate direct sourcing capabilities and how they connect to your VMS.
• Managing freelance projects, contracts and payments? Evaluate FMS capabilities alongside your wider workforce needs.
• Managing employee records and HR processes? Use an HRIS suited to those requirements.
• Connecting workforce activity to purchasing and finance? Determine what your ERP should handle and what information it needs from other systems.

If several needs apply, ask providers to demonstrate how information moves between their platforms. Pay particular attention to requisition status, worker records, onboarding steps, approvals, time and expense, supplier data and reporting.

Frequently Asked Questions

Can a VMS support direct sourcing?

Yes. Some VMS platforms support talent pools and direct sourcing workflows, while others connect with dedicated direct sourcing tools. Ask providers to demonstrate the capabilities you need and how candidates move from the talent pool into an approved assignment.

Is an FMS the same as a VMS?

No. An FMS generally focuses on freelance talent and engagements. A VMS typically covers a broader contingent workforce program, including staffing suppliers, requisitions, approvals and reporting. Features vary by product, so compare specific workflows.

Can an HRIS replace a VMS?

An HRIS may store some contingent worker information, but it may not provide the supplier management, requisition, assignment and program reporting workflows an organization needs. The answer depends on your HRIS capabilities and the complexity of your contingent workforce program.

Do these systems need to integrate?

They do when information must pass between them. Common examples include organizational data, worker records, purchasing information, time data and financial reporting. Define which system owns each record before planning an integration.

Additional Reading

VMS Solutions For Talent Acquisition | Managing Staffing Agencies

• What is a Vendor Management System?
• What is Direct Sourcing?
• FMS vs VMS: What's the Difference?

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