How to Avoid High Vendor Overhead Costs on Your Next IT Project

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By Kashif Aftab

The US market for healthcare IT is expected to grow 24 percent annually from 2012 to 2014, according to a study from RNCOS, a global market research and information analysis company. As hospitals struggle to implement e-health systems and keep up with HITECH reform, selecting the proper vendor is crucial not only to the financial stability of the hospital, but also to avoid future penalties and loss of reimbursements for Medicare and Medicaid patients.

Many vendors selecting IT services do not hold the bench strength required to complete large and complex healthcare IT projects. As a result, these vendors race to sub-contract projects and prices can skyrocket for the client. This is a concept called ‘stacking. Vendors focus so much on signing the deal that identifying the resources need for fulfillment becomes a last-minute effort. The result is layered sub-vendors, which can drive prices up and bring down the quality of the project team.

The cost of subcontractors is always built into the project as overhead. But consider what that means for the client: a consultant earning $70 per hour joins a project through four sub-vendors could be billed for $175-$200 per hour or more. Finding a vendor that has direct access to the IT professionals required could save you hundreds of thousands of dollars in overhead alone.

When evaluating a firm, take a look at the strength of their bench. Do they have an entire team ready or are they going to supply a Project Manager and fill the rest of the team through sub-vendors? Your partners should be able to quickly respond to your needs and deliver results without spending critical time and money searching for talent.

Consider the following four items when evaluating a vendor for your next project:

  • Bench strength. Does the vendor have access every IT professional needed for the project?
  • Team strength. Are the resources trained employees of the vendor or loosely-vetted contract workers?
  • Scalability. Can the vendor scale their team as required to keep up with very large or highly complex projects?
  • Pricing. Are you paying a premium for top IT talent or are you paying a premium for bloated overhead costs?

Even if you have already engaged an outsourcing partner, thoroughly evaluate where your money is being spent. You’ll be spending a lot on IT services in the coming years, but there is no reason to overspend covering for your vendor’s shortcomings.

IQ Tech Pros’ Founder and CEO, Kashif Aftab, has grown the company from its start-up days and helped transform the organization from a simple consulting company into the world’s largest full-service IT integration network, offering IT services globally. For more information, visit www.iqtechpros.com.