Why Do You Need a VMS to Manage Your Outsourced Projects? | DCR Workforce Blog

Why Do You Need a VMS to Manage Your Outsourced Projects?

VMS to Manage Your Outsourced ProjectsIn a recent client meeting, my colleague and I were enthusiastically describing how our Vendor Management System (VMS) provides extraordinary functionality in handling outsourced projects when we were brought up short by the client’s confused question. Simply put, the client wanted to understand why a VMS, which traditionally manages contingent labor, would also be an effective solution to Statement-of-Work (SOW) projects offered by third parties.

So, we have an explanation here for all those who wondered about this, but never actually asked anyone or received a satisfactory explanation about it, even if they asked. Simply put, whenever your business depends on the efforts of non-employees, you need to put in place an effective management program. Outsourced projects working under a Statement of Work are a variation on the use of temporary, outside workers.

Let us look at the differences first:

  • In traditional temporary labor services, a staffing agency provides personnel whose activities will be directly supervised by a member of your staff. Payment is based on the level of effort, measured in hours worked. In outsourced projects, the vendor provides and directly supervises its employees. Payment may be structured as ‘time and materials’ or a fixed price agreement, but payment is almost always based on completion of a project.
  • The agreement between client and staffing agency is a job order that specifies tasks to be performed; outsourced projects utilize a Statement of Work that focuses on the deliverables to be provided.

Among the similarities, we could list:

  • The business objectives remain the same in both cases – increase overall effectiveness and operational efficiency through the use of third party resources.
  • Defined roles and responsibilities are required for both temporary workers and SOW service providers.
  • Both establish work relationships for a short term assignment. Workers are not employees of the company that retains their services..
  • Both have a set process, a pre-determined supply base, and pre-negotiated rates.
  • To protect the interests of your company, all third party resources require on-boarding and off-boarding, with the attendant paper work and documentation requirements.
  • In all cases, the client will increase program control, cost savings and visibility into the program’s performance through the use of technology. For a company which sees a big chunk of its spend going into services spend, not managing it through the VMS will prove counterproductive.

One misconception that applies to the use of VMS systems when managing contract workers or outsourced project teams is that the primary mission of a VMS is to manage spend. The real value achieved through the use of a strong VMS system is the elimination of complexity, which drives operational effectiveness in all areas, not just cost savings. How does a VMS do this when dealing with outsourced projects?

  • The VMS provides guidance into the right type of third-party resource to be used, and the best contractual structure to represent the agreement between all parties.
  • The VMS organizes and automates the process of vendor selection. This includes proposal solicitation, vendor evaluation, contract negotiation SOW creation and vendor onboarding.
  • The system offers data and insight needed to ensure that the project is proceeding as plans. It provides objective evaluations of the performance of each vendor against the established service level agreements.
  • Outsourced projects can be difficult to track from a financial perspective. The VMS will establish budgets for all project elements, will track spending, and will issue alerts and preventive actions when thresholds are approaching or charge codes are no longer active.

Of course, in this post, we are only talking about the reason why people trust in a VMS to help them manage their SOW projects. Each VMS has its own standards and parameters in the support it offers to this end. Read my other post, to know more about the kind of support a really capable VMS can offer to the management of a SOW project.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.