Jon Osborne's Blog

VMS Just Got Upgraded to Frenemy

Most staffing executives see VMS as the spawn of the devil, a technological gorgon that rose from the depths to drive margins to the wall and squeeze the little guy.  And that’s the clean version.  The explicit version, sometimes overheard at our staffing conference evening receptions after the bar opens up, would peel the paint off the wall. 

As evidence, in one of our 2013 surveys, staffing executives rated VMS about equal in annoyance to procurement departments, not quite in the same league as the loathing saved for government regulation, SUTA, and in all probability terrorism, but up there.

However, based on some new survey results from our buyer survey I must say, possibly at the risk of having my car keyed, that I think executives may be selling VMS short. While a serious challenge in many respects, it may also have been the greatest driver of increased contingent usage over the last decade. 

In particular, the net proportion of buyers saying VMS was a positive factor encouraging their use of contingent labor rose from 13% in 2004 to 38% in 2014.  In a likely not unrelated event, organizational culture at these large firms went from a net negative of -21% in 2004--i.e., more buyers saying their organizational culture discouraged than encouraged the use of contingent labor—to a net positive 18% saying that their organizational culture encouraged the use of contingent labor in 2014.  All that happened in the context of the great VMS/MSP expansion.  It can’t be a coincidence that all these moved together.  VMS made buying contingent labor cheaper and easier, so buyers bought more, and their once-skeptical organizations learned its value.

Pause to think about that—large company management once opposed contingent labor, now it’s in favor.  That’s a watershed change.

I’m not diminishing the margin squeeze associated with VMS, or the loss of communication between hiring managers and staffing firms, or the commoditization of staffing.  VMS has been a tough road.  But contingent labor has seen sharply increased penetration at large firms over the last decade, and it probably never would have happened without VMS, which not only controlled costs but perhaps equally important--identified success and steered business to the firms that comprise the industry today, those lean and responsive enough to survive the thinning of the herd.

Maybe for once someone really did make it up on volume.

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