Worksome's Recap: SIA's VMS Global Landscape Summary 2023

Read Worksome's recap of SIA's 2023 VMS Report.

June 19, 2024

Staffing Industry Analysts (SIA) is a global advisor on staffing and workforce solutions, renowned for its in-depth research and analysis in the field. Their latest report, "VMS Global Landscape & Differentiators 2023," offers a comprehensive overview of the Vendor Management System (VMS) industry. This insightful report delves into the evolving dynamics of the VMS market, examining key trends, technological advancements, and competitive differentiators. It serves as an invaluable resource for understanding the current state and future prospects of VMS solutions, providing detailed analyses on market growth, adoption rates, and the strategic role of VMS in managing contingent workforces across various industries. Here is a brief overview of the report:

The global adoption of VMS, especially in companies with over 1000 employees, has significantly increased from 50% in 2009 to 79% in 2023. The evolution of VMS has been driven by factors such as better-informed decision makers, HR’s strategic interest in contingent workforce, evolving technology, skills shortages, and the need for positive user experiences at scale. Several factors have fueled this expansion and evolution of the VMS market:

  • Better-Informed Decision Makers: Workforce leaders have more access to information and are armed with more knowledge of the capabilities and advantages of different VMS platforms – enabling them to make more nuanced and beneficial decisions.
  • HR's Strategic Interest: Human Resources departments are increasingly viewing the contingent workforce as a strategic component of the overall workforce. 
  • Evolving Technology: The tech landscape of VMS solutions has seen rapid advancement, along with a few new players entering among tenured providers. 
  • Skills Shortages: The growing global skills gap, particularly in specialized fields, has made the efficient management of contingent labor more critical than ever. 
  • Positive User Experience at Scale: As organizations grow and their workforce becomes more complex, the need for VMS platforms that can deliver a positive user experience at scale becomes paramount.

VMS Market Overview

The global VMS market size reached approximately $276 billion in 2022, a 22% increase from the previous year. The market continues to grow, driven by the expansion into new markets and deeper penetration into mid-market clients. The Americas region remains dominant, accounting for 65% of the global VMS spend.

VMS Provider Landscape

The VMS market is split into three main areas: 

  • Providers owned or affiliated with human capital-focused service providers or software companies
  • Providers owned by or affiliated with enterprise spend management software companies 
  • Standalone providers with partnership ecosystems

Mergers and acquisitions have been a significant trend, with several large deals reshaping the landscape.

Work Arrangements and Geographical Scope

A significant focus remains on managing Statement of Work (SOW). Despite a high penetration rate in North America, many organizations are still seeking VMS solutions for the first time. The market is diversified, with single-country contracts representing the largest share by geographical scope.

Pricing and Funding Models

The prevalent pricing method for VMS in North America 92% and globally 73% is based on the percentage of spend through the program, typically funded by the supplier. However, there's a growing interest in alternative pricing models, including fixed monthly subscriptions and combinations of fee types.

Industries and Occupational Mix

The largest consumer of VMS services is the Finance/Insurance industry, followed by Technology/Telecom and Business/Professional Services. 

By volume of workers, IT and healthcare are the largest occupational categories managed through VMS platforms.

Service Delivery Model

About 68% of providers deliver VMS services either in conjunction with a third-party MSP or bundled with an MSP offered by their own or a parent company. The remaining services are provided to internally client-managed programs.

Client Size and Program Size

Organizations with more than 7500 employees represent the majority of the market. However, VMS is widely adopted across companies of all sizes, indicating strong adoption across diverse organizational sizes.

VMS Partnership Length

The median length of partnerships between VMSs and organizations was 5 years, with variations based on the primary industry, size of the organization, and primary skill used.

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