VMS: An Overlooked Opportunity for Staffing Firms in 2020?
VMS (Vendor Management System) business is one of the most divisive—and possibly misunderstood—topics in the recruitment industry. Is VMS an actual growth opportunity for staffing firms or is it just a necessary evil of doing business with large clients? And can it actually be profitable for businesses? In many cases, the data contradicts the common perceptions. Read on for a deep dive into some of the core questions surrounding the ever-controversial topic.
Who’s Using VMS?
Only large recruitment agencies use VMS, right? Think again.
Two out of five small firms use VMS on at least an occasional basis, and more than half of mid-sized agencies use VMS world-wide. If you’ve dismissed VMS as a viable opportunity because of the size of your agency, it might be worth reexamining.
Large agencies are indeed the most likely to use VMS, and the adoption rate is especially high among the largest and most profitable agencies. A recent survey of some of the largest recruitment agencies in the world found that 100 percent of agencies with revenue over $100 Million USD did at least some business through a VMS.
While VMS adoption is 48 percent for businesses globally, North American agencies are significantly more likely to deliver job orders through VMS systems. North American agencies are also the most optimistic about using VMS going forward, with 34 percent of agencies expecting an increase in VMS business in 2020.
Barriers to VMS Success
Why aren’t more agencies using VMS? And what are the top barriers to pursuing VMS jobs? VMS has a historically negative reputation among recruitment professionals, and in some circles, the term has become synonymous with low margins. It may be something of a surprise then, that the top barrier for agencies today is not low margins. Instead, recruiting leaders cite the lack of contact with hiring managers as their biggest obstacle.
Low margins and an unavailable candidate pool come in second and third, respectively. Although a lack of contact with hiring managers is likely to remain a challenge, leveraging the right tools will allow your agency to improve the barriers that you can control.
Unlocking the Potential of VMS Through Automation
Technology can help move you a fair amount of the way toward getting the most out of your VMS business. Streamlining your internal processes through automation is a great way to boost efficiency—and there’s a lot of room to do it.
Just 19 percent reported automating VMS integration, even though the majority of recruitment businesses that automated have noted a higher fill rate as a result. How much can automation actually boost your VMS business? The jury’s still out. Most agencies are undecided on the true impact of automation on their VMS success, likely because reporting remains fairly minimal.
What metrics do recruitment agencies track when it comes to VMS? For many recruitment businesses, the answer is that they don’t report on any metrics at all. A full two out of five agencies don’t track gross margin or the number of requisitions per month.
Hires-per-month is the most reported metric, followed by gross margin. Given how little is known about the real potential of VMS profitability, tracking your base metrics is a good way to measure the true value of VMS business for your agency.
The VMS Opportunity
Should you decide that VMS is a major part of your business plan in 2020, you may benefit from reduced competition. Just three percent of respondents said expanding VMS is a priority for 2020.
Although recruitment professionals are largely expecting to increase investments in technology, placements, and their operating budget, just a third of respondents plan to increase VMS business in 2020—making it the lowest priority of all surveyed options.
The steady supply of available VMS business combined with the reduced interest in pursuing it from the recruitment industry could create a major opportunity for agencies equipped to handle it. VMS business may not make sense for all recruitment agencies, but agencies that leverage automation and reporting tools could be primed to have a huge year in 2020.
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