Is an MSP / ITSP a Vendor



  • This is an odd one, but an important distinction that some of us were discussing today. First, what is defined as a vendor...

    vendor

    n.     One that sells or vends something.
    n.     One that provides products or services to a business for a fee.
    

    So here is the problem, every company is a vendor if we take that really loosely, as is every person. Here is the problem, employees "sell" their time and effort in exchange for money and/or provide their services (their time and effort) for a fee (salary.) MSPs / ITSPs work the same as employees - exchanging labour for money. If an MSP has too few clients, their staff are legally employees of the customer, in fact; and this can happen even if an individual employee is heavily tasked to a single client even when there are many clients in general.

    I think that we all agree that employees are not vendors, conceptually we pretty much see vendor as the alternative to employee. Employees are never considered vendors.

    Internal financial systems will normally record staffing or "advisory" agencies under vendors for reasons of making and managing payments. But just because it is handy to record them in that way does not indicate that they are truly a vendor. It is simply that labeling vendors and staff under a 1099 is more similar financially where you aren't the entity tracking the W2 forms.

    While obviously a grey area, this came up because of a question around "vendor regulatory requirements" where a company was being scrutinized as a vendor, while providing no service except provisioning people, which is identical to internal employment which was not under the same scrutiny.