Today, Workday announced that VNDLY, a Workday company, will now be known as Workday VNDLY, an extended workforce and vendor management system (VMS) that’s part of Workday’s suite of products.

In this blog, I cover:

• Why contingent workers are especially important today
• What VNDLY is and how it addresses this need
• What the VNDLY acquisition tells us about Workday and its strategy

Why contingent workers are especially important today

With the rise in volatility and uncertainty, leaders are increasingly looking to structure their organizations to be responsive to change. For example, in our study on responsive organizations, we found that 95% of high-responsivity organizations were likely to meet their business goals, compared to just 21% of low-responsivity organizations.

One approach organizations can take to be more responsive is by using contingent workers (contractors, freelancers, temporary workers, project-based workers, 1099’ers, etc.), which allows organizations to more quickly adjust the size and skills of their workforce, given business needs. The use of contingent workers is prevalent, with some large companies estimating that as many as 30% of their workers today are contingent.

The idea of using contingent workers isn’t a new concept. For example, when I was at Deloitte in 2017, we wrote about the rise of “off-balance-sheet workers,” which is yet another term for these workers.

What is new, though, is the extent of the need for these types of workers. This is being driven by a few factors:

• Market volatility. We all know the last few years have been highly volatile and uncertain, and we can reasonably expect at least some degree of this to continue. That volatility is driving varied customer needs and, thus, organizations need different skills to respond. Contingent workers can help organizations adjust quickly.
• The skills gap. As technology accelerates change, organizations require different skills from workers. Current employees can only upskill, and organizations can only hire, so fast. Therefore, accessing contingent talent from outside the existing workforce can help organizations fill the gap in the short term.
• Demographics. Today, there are 9.9 million job openings in the U.S., but only 5.8 million unemployed workers. This mismatch between available talent and job openings is projected to continue, with the BLS expecting the economy to add 8.3 million jobs but only 7.7 million workers between 2021 and 2031. The result will be organizations scrambling for talent to fill gaps.

As a result, organizations will likely increasingly turn to contingent workers to augment their existing “core” employee workforce.

Yet, there are a host of challenges in using contingent workers, such as:

• Legal and regulatory challenges: Organizations can be accused of misclassifying workers or co-employment, which can result in legal action, fines, and other challenges.
• Competitive risk. Due to the more temporary nature of their work, contingent workers may have different confidentiality requirements, potentially exposing organizations to the risk of loss of trade secrets, intellectual property, and organizational knowledge.
• Ownership and accountability. Historically, contingent labor has been managed by procurement rather than HR. As a result, it can be unclear to managers how to get access to contingent workers and how to manage them.
• Clarity around talent available. Given the different status of contingent workers, and the fact that they are usually managed in a different technology system, leaders may not understand the contingent labor force and how to access it effectively in times of need.

As a result of these challenges, many organizations use a VMS (vendor management system), potentially in combination with an MSP (managed service provider) to help them manage their contingent workforce. According to Workday, approximately 70% of organizations leveraging a VMS also use a MSP.

These systems typically are separate from human capital management (HCM) systems and are run by procurement. That said, they have many similarities to HCM systems, such as the ability to source, engage, manage, and pay contingent workers. However, the nuances around what is required to do each of those things is different. For example, with sourcing, there isn’t a direct outreach from the hiring organization, but rather a hiring manager can look at the talent available and then have the MSP reach out directly to that person. Examples of the range of capabilities offered by a VMS are shown in Figure 1 and Figure 2.

 

Figure 1: Workday VNDLY as an example of a vendor management system (1/2) | Source: Workday, 2023.

 

Figure 2: Workday VNDLY as an example of a vendor management system (2/2) | Source: Workday, 2023.

While a VMS and/or MSP can help with the first two bullets outlined in the list of challenges above, it typically does not help with the second two, around ownership and accountability and clarity around the talent available. This is why it makes sense to combine the insights of a VMS and an HCM system.

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