“Free” vendor management from Vendormate

Wednesday 12 March 2008 @ 10:39 am

This has nothing to do with Crystal Reports directly but I think it is important for my customers and other consultants to be aware of. Before you give your next fixed price quote to a large organization, ask them what paperwork and fees (if any) are involved in becoming a new vendor. Normally a w-9 tax form is all I am asked for. Some customers require an insurance certificate and a few have a special form to fill out.

But some companies are starting to have all of their vendors managed through a new and rapidly growing company called Vendormate. Vendormate promises to handle all of an organization’s vendor management paperwork, including verifying that they are in compliance with all regulatory requirements, at “no charge” to the buyer. It is hard to argue with “Free”, especially in heavily regulated environments like hospitals. Vendormate is free to the buyer but generates their revenue by charging a fee to each Vendor and making the vendor do most of the work. So even though I may have done years of business with a customer, I now have to fill out a 6 page form to enroll. And, I have to pay an annual fee that ranges from $25 to $250. This fee is charged every year I want to do business with this customer. After 2 weeks of asking I have been unable to find out what the annual fee would be for my business. The middle tier is $100 per year.

And then there is my favorite part of their business model. If I have multiple customers that all join Vendormate, I must pay the annual fee for each customer – possibly dozens of times – even though Vendormate only needs to manage one database record for my business. What a clever way to leverage that information. And further if your company does business under more than one tax ID, you pay the fee for each tax entity.

What the buyers don’t realize is that they pay for this “free” service in the form of higher prices. It may not be noticeable on the largest contracts. But, if your organization takes advantage of many small and low overhead vendors (like me) then the added costs for paperwork time and annual fees are going to show up in your prices (if they don’t simply drive the vendors away). Assume that your vendors, on average, fall into the middle tier of $100 per year. How many vendors do you have in a year? Multiply that by $100 and figure that this amount is coming back to your organization in higher prices. This is the price of Vendormate. And this doesn’t count the vendor’s costs of processing paperwork, or the buyer’s cost of replacing low overhead vendors who bail out.

Two other interesting parts of signing up as a vendor:
1)You are immediately told to have them “white listed” in your SPAM filter. Their terms of service allow them to send you marketing Emails.

2) Web registration is the only option and yet you are told that you do so at your own risk. The paperwork explicitly states that they can’t ensure the security of your business information. You can draw your own conclusions on these.

Added 3/26:

I recently spoke with the compliance officer at my Vendormate Customer and learned a few things:

1) Contrary to the Vendormate-hosted info page, not all vendors are even required to register. Only those with direct patient contact or those supplying medical products (drugs, devices, etc) need to register.

2) They have asked Vendormate to modify their customer specific web pages to clarify this point and Vendormate says that those pages are not customizable.

3) There is an entire credentialing industry and Vendormate has several competitors with varying business models. There is a lively debate in health care regarding how to best manage vendor credentialling.

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