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Vendor fees or no vendor fees?

When it comes to choosing a software platform for public sector procurement, the topic of vendor fees has been an ongoing debate for years.

It’s a simple model that many are familiar with: costs are charged to potential suppliers by the platform provider, who positions these fees as a means of reducing or eliminating the cost of the software for the buying organization.

The market has seen a number of procurement software providers adopt the vendor-fee supported business model over the years. Not all public sector organizations choose to use these platforms for the same reasons but generally speaking, the financial implications can appear attractive at first glance.

With the lightning-fast pace of technology innovation and the increasing need for smarter platforms, the debate over vendor fees is coming back to the forefront – and the true impact of the vendor-fee model is becoming better understood.  

The emerging reality is that these sourcing platforms are neither as simple nor as ‘free’ as they may seem.  

Your platform choice has long-term and far-reaching ramifications for your team and sourcing performance. If you’re in the public sector and your organization is considering using a vendor-fee supported platform, you need to know what you’re getting into.

In Bonfire’s eBook ‘The Risks of Vendor Fees in Sourcing Software’, we conduct an in-depth examination of the vendor fee model and unpack the negative impact it can have on public sector sourcing teams.

Below is a brief overview of three of the many aspects the eBook explores – aspects you need to know if you’re considering adopting a vendor-fee supported platform:

Strained supplier relationships – It’s not uncommon for suppliers to feel unfairly penalized by the fees you force them to pay.  Suppliers are left unhappy and frustrated, damaging what should be a positive and collaborative relationship.

Costs end up returning to the buyer – At first glance, vendor fees can seem like one less cost to worry about.  However, suppliers are not naive.  The reality is that vendor fees often find their way back to the buyers in the form of higher supplier prices.

Limits your ability to get the best value – There is a clear positive relationship between your number of bidding suppliers and your price spread – the more competition you have, the greater the opportunity to drive savings.  Based on our data analysis (read the eBook for more detail on this), these savings would represent a material financial impact on your performance.

There are several other important factors to you should be aware of, including stagnated functionality and innovation, minimal technical support for your team, diminished competitive supplier pools, and the loss of innovative ideas and solutions.

Bonfire is the leading next-generation competitive bidding, sourcing and RFx platform. 

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