MSP Vs. VMS: Which Is Better for Contingent Workforce Management?

By MBO Partners • April 21, 2025

4 MIN

Key points

In the modern hiring market, companies are expanding their usage of independent contractors and freelance workers.
A suite of supporting technologies has been developed that allow organizations to identify and recruit independent professionals.
Learn about the two most common contingent labor management solutions, Managed Service Providers (MSP) and Vendor Management Systems (VMS), and why businesses may use each one.

Many companies are turning to independent contractors, freelancers, and outside consultants 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 company that helps U.S. businesses find and manage independent contractors. They handle tasks like recruiting, hiring, and overseeing these workers, so you don’t have to manage all the administrative work yourself. MSPs are especially useful when managing large groups of contractors, but they might not be the best choice if you only need a few individual contributors.

While MSPs can simplify operations, managing your independent workforce in-house offers several clear advantages:

Direct control over your workforce: You can ensure that your team aligns closely with your company’s values and goals.
Stronger relationships with talent: Managing contractors directly allows for better communication and stronger connections.
Cost savings: By reducing reliance on third-party services, you can lower overhead costs.
Greater flexibility: Direct management lets you quickly adapt to market changes and project needs.
Better understanding of your team: Working closely with contractors helps you recognize their strengths and areas for growth.
Customized onboarding processes: You can tailor onboarding to fit your company’s specific needs and culture.

Learn More: The Advantages of an Internally Managed Contingent Workforce Program

What Is a Vendor Management System (VMS)?

For companies aiming to manage their independent workforce internally, a Vendor Management System (VMS) can be an effective solution. A VMS is a software platform that helps companies manage their temporary or contract workers. It brings all your data together, automates processes, and tracks important 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.

Key benefits of using a VMS include:

Improved visibility: A VMS provides real-time insights into vendor performance, costs, and other important details to help you make better decisions.
Better compliance: The system ensures that vendors follow legal and regulatory rules, reducing risks and simplifying audits.
Cost savings: A VMS can lower expenses by streamlining procurement processes and identifying inefficiencies.
Operational efficiency: Automated onboarding and invoicing free up time and resources for more strategic work.
Centralized vendor data: All vendor information is stored in one place, making management and reporting easier.
Scalability: A VMS allows you to easily adjust to changes in workforce size, supporting business growth or contraction without major system overhauls.

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.