How Many IT Staffing Companies Should You Have on Your Vendor List?

Recruiting and managing software and IT professionals through vendor partnerships is designed to alleviate the burdens of pre-screening and hiring processes. Yet, if not managed correctly, it can create more problems than it solves. Companies often face the challenge of determining the ideal number of staffing vendors to include on their preferred vendor list. The common dilemma faced is whether to choose one vendor or ten. In the realm of IT staff augmentation , the answer is commonly a simple yet frustrating “it depends”.

If you've ever been part of a team that crafted and evaluated a sizable RFP, RFI, or RFQ, then you know it's common to include a dozen staffing agencies on your vendor list. At first glance, this appears as a swift and effective solution to your IT staffing requirements. Just like “nobody ever got fired for hiring IBM”, you almost feel obliged to select too many vendors just in case. This strategy may initially appear commendable. However, the reality often unfolds differently, as you might soon find many of these vendors becoming unresponsive, transforming into nothing more than dead weight on your list.

You may be curious about the reasons behind this. It's tempting to assume, "The problem isn't with me; it's with them." At times, this may indeed be the case. Yet, in many instances, the root of the problem actually lies with you!

Consider the complexity of your business when choosing IT staffing vendors. For extremely complex organizations like ASML or Boeing, which manage hundreds of suppliers, multiple vendors are essential to handle the intricacy and share risks. On the other hand, businesses with less complexity may find that fewer vendors suffice.

Imagine a scenario where your goal is to hire 10 machine learning engineers over the course of a year. You've enlisted the help of 10 staffing vendors and tasked each of them with filling all your open positions. Let's assume that all these vendors are equally competent, dedicated, and perform satisfactorily. In such a case, each vendor would only secure one placement annually for their efforts, amounting to a mere 10% share of the total opportunities despite putting in 100% effort. While this method might seem equitable on the surface, it creates a major issue: the reward for each vendor is disproportionately low.

In other words, for each vendor to successfully place a single candidate on your team, they must address all 10 of your job openings. Typically, this involves presenting at least three thoroughly pre-vetted candidates for each role. Consequently, they would need to evaluate between 7 to 9 candidates per position, resulting in a total of 70-90 screenings – all this effort just to fill one position on your team. This disproportionate workload, coupled with the limited reward, often results in a decline in their commitment: vendors naturally gravitate towards clients who provide greater value. Isn't that an unexpected outcome?

Understanding that an extensive list of vendors may not offer the best value to your staffing partners doesn't require deep industry knowledge. Consider it from this angle: if your business doesn't provide sufficient opportunities to your 10 vendors, you're seen as a client with limited potential. You end up accounting for only a small fraction of their total business. Essentially, this relegates you to the status of a peripheral, rather than a key client.

However, another problem arises with having an excessive number of staffing vendors – each one will demand your time and attention as a return for their services. Consider the vast number of resumes to sift through, the multiple interviews to arrange, the technical assignments to evaluate, and the necessary feedback to be provided. This is far from a trivial issue. It becomes a time-consuming vortex for your technical team, diverting attention from your business's primary objectives. The hidden cost of overseeing too many vendors is often overlooked, yet it significantly detracts from your team's efficiency and productivity.

What is the right number of staffing vendors?

Rather than overextending your resources, it's wise to concentrate your efforts on a handful of carefully chosen vendors. For most businesses engaged in IT staff augmentation, working efficiently with just 2-3 vendors is feasible, aiming eventually towards an exclusive partnership.

Adjust that pie chart above just slightly for a markedly different outcome. Visualize reducing it from ten slices, one for each vendor, to only two. These two slices represent a couple of large, committed, and driven vendors, prepared to meet your recruitment needs promptly. This shift significantly alters the dynamics for the staffing agencies involved. Now, each has a more substantial portion and a genuine incentive to invest effort into understanding your business and strategize for long-term success.

The ideal count of vendors varies and primarily hinges on the specific requirements and scale of your company. You're the most qualified to decide the exact number that suits your needs. We recommend beginning with a smaller group of vendors and expanding if required. Starting with too many and then reducing the list due to insufficient opportunities can harm your standing both with vendors and potential candidates.

Exclusivity: Should you ever have only one IT staffing vendor?

Absolutely, the answer is definitively "yes" in certain scenarios. First, opt for an exclusive vendor when your objective is to assemble an entire team under the management of a single partner . This is particularly true for nearshore staff augmentation. Utilizing engineers from multiple vendors is impractical, as the process involves more than just identifying and managing talent. It encompasses vetting, testing for adaptability to North American work culture, and fostering unit cohesion - goals difficult to achieve with multiple vendors.

Secondly, opting for a single vendor is advisable if you're collaborating with a trusted partner known for their effective track record, especially when your staffing demands make up a considerable portion of their business. For instance, if your needs account for more than 5% of their total business, this often guarantees preferential attention from the vendor. Such a partnership thrives on personal rapport, mutual trust, and an in-depth understanding of successful past collaborations, including the types of tech professionals who are a perfect fit for your team's environment. Additionally, understanding your team's evolving requirements is vital. These invaluable aspects are what you can expect when you engage with the ideal partner.

The adage “money makes the world go round” holds true in the context of IT staff augmentation. A single, dedicated vendor, driven by the incentive of exclusive business, is likely to offer you their utmost attention and service. This focus can translate into a more tailored and efficient staffing process. However, it's crucial to balance exclusivity with vigilance. Without the presence of competition, you risk facing lower quality services and inflated prices.

To mitigate the downsides of a sole-vendor arrangement, it’s advisable to establish a bespoke and transparent relationship. Request full transparency around pay rates, bill rates, and agreed-upon margins. This ensures that all parties, including IT contractors and employees, derive maximum value from the arrangement. It's a two-way street; expect to share vital information about your team, real challenges, future strategies, and potential risks. This level of openness fosters a more productive and mutually beneficial partnership.

To summarize:

Selecting the appropriate number of IT staffing vendors is a strategic choice, not a uniform solution that fits all scenarios. It’s crucial to take into account your unique requirements, the scale of your company, and the degree of exclusivity you seek. Begin with a smaller set of vendors, foster significant relationships, be ready to adjust as needed, and bear in mind: often, having fewer can indeed be more beneficial.