MSP vs VMS: Which Is Better for Contingent Workforce Management?

Many companies are turning to independent contractors, freelancers, and gig workers to meet their goals, creating a flexible workforce that mixes full-time employees with independent talent.

By 2024, there were about 72.4 million independent workers in the U.S., according to MBO’s State of Independence report. This number is growing faster than traditional employment, showing just how important independent professionals have become in the modern workplace.

This shift toward independent talent aligns with broader business priorities. A PwC Pulse Survey found that 77% of executives consider hiring and retaining talent as their most critical growth driver. Independent professionals support these goals by providing specialized skills, expert knowledge, and adaptability.

That said, managing independent contractors can be challenging, especially when a comprehensive solution is needed to address every aspect of the working relationship.

Two of the most popular methods that companies use today are Managed Service Providers (MSPs) and Vendor Management Systems (VMSs).

What Is a Managed Service Provider (MSP)?

A Managed Service Provider (MSP) is a third-party service—like a staffing agency or online marketplace—that helps companies find independent contractors. They take care of recruiting, hiring, and managing these workers so you don’t have to handle all the admin work. MSPs work best when managing large groups of contractors, though they might not be the right fit if you just need a few individual contributors.

Even though MSPs can simplify things, managing your independent workforce in-house has some clear advantages:

• Direct oversight of your workforce: You get to directly control how your workforce supports your company’s values and goals.
• Stronger relationships with talent: When you manage independent contractors directly, you can build better communication and stronger bonds with them.
• Cost savings: By cutting down on extra overhead costs, you can get more bang for your buck.
• Greater flexibility: Direct control lets you quickly adjust to changes in the market and project requirements.

What Is a Vendor Management System (VMS)?

A Vendor Management System (VMS) is a software platform that helps companies manage their contingent workers. VMS solutions bring all your data together, automate processes, and track key details like spending, candidate information, and payroll. Companies can use a VMS on their own or through an MSP to make managing contingent workers easier.

Some key benefits of working with a VMS include:

• Enhanced visibility: A VMS gives you real-time insights into vendor performance, costs, and other important details to help you make better decisions.
• Improved compliance: The system also makes sure that vendors follow legal and regulatory rules, which lowers risks and makes audits simpler.
• Cost savings: A VMS can cut costs by making the procurement process simpler and spotting any inefficiencies.
• Operational efficiency: With automated onboarding and invoicing, you can free up time and resources for more strategic work.

MBO Partners Offers a Variety of Contingent Workforce Solutions

Partnering with a workforce solutions provider like MBO can save time, reduce costs, and help you find and manage the right talent more efficiently. This ensures independent professionals are matched with the right projects, spending and compliance stay under control, and your company remains agile in a competitive market.

For more details about MBO’s contingent workforce solutions, including our Employer of Record (EOR) services and Agent of Record (AOR) services, get in touch with our team today.

If you’re looking for additional support attracting top talent to your organization, MBO Partners offers a wealth of tools and resources to help. We cover a wide range of topics, including workforce compliance, AI technology, and more.