Understanding external workforce and services software: A comprehensive guide

External workforce
contingent workforce

In today's rapidly evolving business landscape, managing a diverse and flexible workforce is more critical than ever. Companies are increasingly relying on a mix of permanent employees and external workers, including contractors, freelancers, temps, and outsourced service providers. To efficiently manage this dynamic workforce, businesses are turning to external workforce and services software. In this article, we will explore the key components of this software, including Vendor Management Systems (VMS), the nature of the external workforce, services procurement, and the role of Managed Services Providers (MSP).

What is external workforce and services software?

External workforce and services software centralizes the management of a company’s external workers, encompassing contractors, freelancers, temps, and outsourced services. A prominent example is the SAP Fieldglass Vendor Management System. This cloud-based solution addresses common challenges faced by global enterprises, such as finding, engaging, and managing a growing external workforce, which includes both contract and contingent labor and services providers.

What is a Vendor Management System (VMS)?

A Vendor Management System (VMS) is a cloud-based platform designed to procure and manage temporary, contract, or contingent workers. VMS applications often integrate seamlessly with other on-premise or cloud-based enterprise HR systems. They provide enterprises with clear insights into who is working for them, as well as details about where, why, when, and at what rates. This level of transparency is crucial for effective workforce management and cost control.

Understanding the external workforce

The term "external workforce" refers to various types of non-permanent workers, including contingent workers, consultants, contractors, gig workers, and more. These workers fall into two main categories:

  1. Contingent Workers: These are temporary workers hired for specific roles or projects.
  2. Services Procurement: This involves outsourcing and people-based services, often provided by consultancies, IT outsourcers, marketing agencies, law firms, facilities management companies, call center operators, and accounting firms.

Together, these categories form what is commonly referred to as the external workforce.

What is services procurement?

Services procurement involves contracting companies that deliver people-based services to an enterprise. These service providers can be consultancies, IT outsourcers, marketing agencies, law firms, facilities management companies, call center operators, and accounting firms. Typically, these providers are contracted to perform project-based work through a statement of work (SOW). Effective management of this "invisible workforce" is essential for an organization's success, as it ensures that outsourced tasks are completed efficiently and to the required standards.

Who is a contingent worker?

Contingent workers are individuals hired by a company to perform role- or project-based work without being traditional employees. This group includes independent contractors, consultants, freelancers, temps, and other outsourced labor, such as gig workers. These workers can be contracted through various channels, including suppliers, staffing agencies, freelance marketplaces, or a company’s HR or procurement department.

The role of managed services providers (MSP)

A Managed Services Provider (MSP) is an outsourced third-party company that assumes responsibility for the ongoing, day-to-day management, monitoring, and maintenance of a range of tasks and functions for another company, its customer. MSPs and their customers are typically bound by contracts with standardized service-level agreements that define the expectations and quality metrics of the services provided. Common MSP functions include IT, marketing, HR, external labor, and supply chain management.


As businesses continue to embrace flexible and dynamic workforce models, understanding and leveraging external workforce and services software becomes increasingly important. From vendor management systems to managed services providers, these tools and services help companies efficiently manage their external workforce, ensuring they can meet their operational goals and stay competitive in a rapidly changing marketplace.

By integrating these solutions, businesses can gain deeper insights into their workforce, optimize their operations, and ultimately drive success in today's complex business environment.

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