Vendor management software helps organizations manage the outside parties that provide them with goods, services, or labor. These include suppliers, service providers, software vendors, contingent workers, and staffing agencies. These tools store vendor records, contracts, and documents in one place. They support the vendor lifecycle, in whole or in part: sourcing and selecting vendors, onboarding and qualifying them, tracking contracts and renewals, monitoring performance and compliance, purchasing, and handling invoices and payments.
Many tools also work as a vendor management system (VMS) for the external workforce. Companies sometimes bring in contingent workers through third parties such as staffing agencies, and a VMS gives them one place to run that process. The software handles onboarding and compliance checks, tracks time and expenses, and automates invoicing and payment to suppliers through offboarding. This gives organizations visibility into their total contingent labor spend and helps them enforce hiring and worker classification policies. Vendor management software is not primarily a procurement, accounts payable, or third-party risk tool, though it often connects to them.
Procurement, finance, legal, compliance, IT, and HR teams use vendor management software to control spend and improve supplier performance. So do managed service providers (MSP) that run contingent workforce programs for clients. Vendor management software often integrates with core HR software, applicant tracking systems, payroll software, and procurement software.
To qualify for inclusion in the Vendor Management category, a product must:
- Keep a central record of vendors of the organization
- Store vendor contracts, agreements, or related documents
- Support at least one stage of the vendor relationship, such as sourcing, onboarding, engagement, or payment
- Track vendor activity, spend, performance, or compliance monitoring, or obligations over time
