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Multiple Vendors Multiple Prices

By: Dan Morrill

Interesting conversation with people over hiring practices, and the problems when too many vendors are chasing too few job positions...

...and what happens when clients get mixed messages. The hottest job in Seattle right now is an SDET, or Software development tester with web experience. Many clients have job openings for this position, and I can literally count about 50 that I know of that are going open right now, from startups to full blown multi-billion dollar companies. Everyone is trying to fill the positions, meaning a shallow talent pool is being represented by three to six different companies.

The interesting part is that this gives the vendor the opportunity to compete, and it gives the client the ability to pick and choose amongst various pricing plans that the different vendors will be presenting. The spread for the same candidate amongst the various vendors can be as high as 15 dollars an hour. So the client gets to pick which vendor they want to go with when there is a price spread like that.

The problem comes along with the vendors who are busy undercutting each other at the expense of the soon to be employee. While the employee might be flexible, when dealing with various vendors, the employee has to be crystal clear what the minimum pay rate they will accept is. The same employee from three different vendors, selling that employee for 65, 72 or 80 dollars an hour makes for an interesting conversation with a client from the vendor viewpoint.

Most of this is going to start with the potential job candidate, what are you willing to work for, especially in a hot job where the employee can basically ask their own rate. Vendor markups also differ company to company depending on the depth, and how many hands that employee has to go through. More than two holding companies, the employee gets more expensive as people tack on their minimum markup just like any retail.

This is akin to going to purchase an IPod, three different retailers, 199, 225, and 250 for the same device. The customer is going to go with the lowest price. Employees need to be clear on what they want they want as a minimum wage. Then the vendors need to figure out how best to manage the markup and what is acceptable to the client.

The other reality to this is that the vendor then needs to also figure out what the market is doing, if one vendor can come in a 65, can you match, meet or beat? Can you get into a bidding war without compromising the necessary markup to handle all the other things that go along with being an employer. There are a lot of things that employers need to take into consideration, health care, taxes, social security, overhead, management, support, and a whole host of other things that employers need to cover. If a vendor has streamlined those operations, then the other vendors need to do the same thing as well. It is a numbers game, where lowest overall cost will win.

The bad part is that this makes the employee the brunt of cost savings; they may have to pay their entire health care so that the vendor can remain competitive in the market. When the employee talks about their minimum wage level, they need to take into consideration the cost savings that vendors have put into the program. If you have to pay 600 dollars a month for family health care , then the employee needs to ask for that extra $3.46 an hour if it is important. It all starts with the employee, and what they are willing to work for, that drives the market, that the vendors bid on, that present employees to the company, whom the company eventually hires. Nothing wrong with starting out with what is the minimum you will work for.



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About the Author:
Dan Morrill has been in the information security field for 18 years, both civilian and military, and is currently working on his Doctor of Management. Dan shares his insights on the important security issues of today through his blog, Managing Intellectual Property & IT Security, and is an active participant in the ITtoolbox blogging community.

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