Risk of Not Maintaining Approved Vendor List

The conversation

8 comments from 4 people, February 17 to February 19, 2016. Gloria replied 3 times.

1. February 17, 2016

   Terry Iorns

   I agree with Gloria's comments above and over the years, as an individual consultant, I have found it difficult to get on the lists. Some companies intentionally keep their list small so they can send more business to the approved vendors, and in this way they maintain some leverage over contract pricing for those vendors they let on the list.

   As an individual consultant, I have sometimes found it possible to subcontract my services through an approved vendor. This usually involves sharing the consulting fee in exchange for the vendor handling the costs of the insurance and billing process. Often requires trust on the part of the approved vendor because they are ultimately assuming responsibility for the quality of your work.

   1. Gloria MetrickAuthor

      Regarding what Terry just said about being small, I also find it's not that easy to subcontract from the preferred vendors. My goal is actually to find my own customers but I'm not necessarily opposed to subcontracting, once in a while, if it's a good fit.

      But along with what Terry mentioned, some of the larger companies want to keep a large margin because, in their mind, they're bearing all the costs. However, I'm not bearing any less costs, either. I can't pay my insurance or other costs on a project-by-project basis. Fixed costs are fixed - things like insurance are paid for a period of time, not per project. If your company takes a project from a larger company, your smaller company's costs don't go down because of that.

      Even beyond that, considering that everyone involved has to make their money to make the subcontracts worthwhile, subcontracting isn't necessarily a good idea for the customers. On some of these contracts where there are three and four levels of subcontracts, the actual hourly rate going to the consultant is so low compared to the hourly rate the customer is paying that, in 99% of those cases, that customer thinks they're paying for an experienced person and is probably paying for someone quite junior.

      With that, I'll admit that I think most of the subcontracting that goes on is a waste of time and money for consulting companies and for the customers. If your preferred vendor doesn't have the right people, let some other companies come in and provide people and don't spend most of the hourly rate you pay in what is just overhead and not quality of resourcing.

2. Lloyd

   Hi Gloria

   Nice article. Can you also address the other side of the fence, from the perspective of the vendor dealing with a customer who is not forthcoming when it comes to timely payment or for other reasons?

3. John H. Jones

   Gloria, I personally agree completely with your statement: "If your preferred vendor doesn’t have the right people, let some other companies come in and provide people and don’t spend most of the hourly rate you pay in what is just overhead and not quality of resourcing."

   I understand the preferred vendor list. It has some logic and value but what you observe is the reality of the situation and that reality puts the end client at risk. There is a better way to get the end clients and consultants/labor matched up and work within the preferred vendor list facility. We need a firm that will place labor without a placement fee and provide a transparent and open exchange.

   In healthcare, I have found hospitals coming together and forming staffing agencies (Coop) for exchange of healthcare professionals. It totally side steps the recruiter and consulting companies and lowers the labor costs for the hospitals without reducing pay for the workers. It does this by eliminating the broker/middle man that provide staffing and recruiting services. The recruiters working for the "Coop" are salaried (no commission) and the recruiting costs are shared within the Coop. This approach would match a consultant like you directly with the end client and the Coop becomes the Employer of Record for the Coop members. This can and does work in the real world in industries like healthcare. We need something like this for our industry. I am sure there must be an economic scale issue that has prevented this from happening to date in our industry or such a coop would have been formed.

4. Gloria MetrickAuthor

   A couple more thoughts from me:
   @Lloyd: You asked that I address the issue where customers don't pay their vendors, is what I understand to be the issue. That sounds like a new post. I will make a post that generally addresses this issue and, if I misunderstood the focus of what you're asking, you can add some comments to fill it out.

   @John: I can't get that excited about someone else being the employer of record for my company. My company is the employer of record with my customers. These customers get referrals from other customers of mine who can personally vouch for my services. In some cases, people read what I write and feel that my services are what they need. But to take out the business development aspect works only for those people who are looking for work. I'm not looking for work - I'm looking for customers. And when a services company gives away their ability to be the direct contact to the customer, that customer could just bring anyone in - any warm body - it kind of doesn't matter. If people need nothing special, they go to a database. If they need quality services and a personal commitment to what they're paying for, they go directly to someone who can provide it.

   Bottom line: The day I have to hand over my customers to someone else to manage is the day that I start some entirely different business where I can continue to develop and run my business (that's what businesses are for!) and make a living off of it. We'll all know when that day is here because this blog will disappear. I can't even imagine having to have some middle person doing my business deals for me rather than with the customer. That's the worst thing I can possibly think of. It's because my customers have done a deal with me that they understand what they get for their money - what I bring to the table. It's because they understand this that they keep using my company's services, because they truly can account for the money they spend and understand it all. It's like I tell every customer - manage your money yourself because no-one else cares for your money the way you do. If you hand that over to someone else, they'll never manage it as carefully as you will.

5. LiMS Journal (@LIMSjournal)

   I understand your point of view. Don't agree or disagree. The market for a coop approach for lab informatics is unlikely because of how small the market is. It does appear to work well in the healthcare industry from what I have observed.

   From what I observe about the labware ecosystem, maybe it will get harder and harder for the independent consultant to serve that market. There seems to be a lot of competition from labware itself, large consulting firms and staffing firms and of course all the other independent consultants, not to mention the direct hires that take place. Sounds like a pretty tuff business to be in but a bit of diversification should keep things going.

   1. February 18, 2016

      Gloria MetrickAuthor

      My real points are these:

      1. Consulting is a tough business. It always has been. It always will be. If you can't do business development then you don't really have a business. I can see that the occasional subcontract probably isn't the worst thing but it's never the same as getting direct end-customers of your own.

      2. LabWare has never wanted competition. Anyone out there who spouts the whole "competition is good for you - it pushes you to greater heights" mantra hasn't reached LabWare. They've never wanted anyone but their own people working on their product. Some software vendors feel this way, others don't. Thermo Fisher Scientific, for one example, seems to be more willing to incorporate those people in the industry working on their products into their community. I'm not saying one thought is better than the other, just saying that they're two different companies with two different ideas about how they want to run their business.

      3. (2) has nothing to do with your own services business. If you have something to sell and you have customers who need that service, you shouldn't care what the software vendor thinks about it. While I strongly encourage everyone to work together as a team once they're on the customer's project, that's not the same as shying away from the market just because that software vendor doesn't want other experienced people competing with theirs. If a software vendor comes to you and says something to the effect that "we really don't want you competing with us" and if you just walk away from business because they want you to, then I would say you're not meant to be in business if you would walk away from business for them. The bottom line is that we all have to pay the mortgage/rent, make a living, and all the other costs that go along with modern life. If they're not paying your bills then they have no say in the matter. That might sound harsh, but it burns me up that some of the software vendors feel they have to right to decide who eats and who doesn't in this industry. As for me, I plan myself and my family will eat.

6. February 19, 2016

   LiMS Journal (@LIMSjournal)

   Gloria, well put at every level. It is a free market and you have skills to sell that people need and no one has the right to block you in that endeavor. Go get 'em :)

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