What It Means to Be An IT Contractor

Datamation columnist Eric Spiegel takes a look at what it really means to be an IT contractor -- the ups and the downs.
Posted October 31, 2005
By

Eric Spiegel

Eric Spiegel


If I were to offer you an opportunity where you could double your pay, would you be intrigued?

Even if there were many drawbacks to the offer, doubling your pay is nothing to sneeze at. A senior IT professional's compensation might be something like $90,000 in a major market. If the opportunity I'm offering (hypothetically -- no emails, please) would be $100 per hour, that would translate to approximately $200,000 annually. Notice I used the word ''opportunity,'' which is your first red flag.

No, I'm not talking about a hot real estate opportunity -- this is a real potential money-making scheme called independent contracting. Some of you may have dabbled in it and know where I'm going with this. The goal here is to enlighten those of you who may come across an opportunity (there is that word again) so you can make an informed decision.

The word ''opportunity'' best translates into the word ''potential.'' This is because, as a contractor, you have the potential at $100 per hour to make $200,000 annually.

This is not a job. There are no guarantees.

To find out more about the reality of this potential, I spoke with Jon Byrd, a principal with The Seva Group, a Baltimore, Md.-based technology consulting firm. His firm is forming a new entity, Eximer Technology Solutions, that brokers deals exclusively for contractors in the supplemental staffing market.

Byrd agreed there is great potential in being a contractor.

''As a contractor, you can selectively put arrows in your quiver, expanding your skill set in key areas as you choose,'' says Byrd. ''You have more control to select the projects you want to work on and focus your expertise.''

But by taking more control, that also means taking responsibility for finding work and staying trained. There will no longer be a big company to guarantee your next paycheck or provide training and career growth options. I know there is some cackling right now about any guarantees in the corporate world, but having a full-time job does allow you to be more passive.

As a contractor, you either have to find a broker (who will take a small cut of your rate) or use your network and find work on your own.

Byrd agrees that training also can be an issue.

''If you aren't disciplined to train yourself during your off times, you can find your skill set getting out-dated. And it can be a hard pill to swallow to pay thousands of dollars for a training class and taking a week unpaid to complete the class,'' says Byrd.

It is true there is no such thing as paid vacation for a contractor. It will be up to you to set aside money to cover the hours you aren't working. And there will almost always be gaps between projects. It is difficult to time the end of one project with the start of another. So the annual salary comparison to an hourly job is overrated at best.

However, there certainly can be more perks.

Adding Up the Perks

You don't have to worry about the (sometimes petty) internal squabbles that take place on projects or the innate bureaucracy in larger firms. ''You can focus on the job at hand,'' says Byrd, ''and not get bogged down in the inevitable company politics.''

Byrd says he actually lived through this experience. He left Andersen Consulting and came back to work as a contractor on the same project.

''It was a liberating and gratifying experience and I got more done, more efficiently than I ever did as an employee. I was no longer worried about becoming an associate partner and could just worry about getting my job done.''

Other niceties Byrd mentioned include being paid for every hour worked, including overtime. There also is less chance of getting pulled in many different directions or ineffectively wearing many hats.

The drawback here is that you may get pigeon-holed as a one-trick pony. Just be aware that if you are becoming an expert in something, you may be stuck there for a while. However, if you love what you are focusing on and there is no sign of a cooling off in your area of expertise, then it is less of a problem.

For those of us who have worked in big companies, we know deep resources and in-house expertise can make your job so much easier. This is especially true if you are stuck on a bug or a design decision, where someone who has been down the same path could help you out very quickly.

As a contractor, you don't have access to this expertise. You may think you can just inquire within your customer's internal network, but won't you feel funny being the highly paid expert who has to ask for help? You shouldn't feel that way if the hitch is legit, but it certainly is understandable.

One way around this lack of nearby knowledge is the Web. There are many free knowledge bases and message boards on just about any technical, methodology or management topic that can act as an effective substitute.

Byrd had some other good points about the impact on your career.

''Another benefit to a large organization is there are usually ample opportunities to forge relationships with mentors who can help guide your career. You need to reach out and actively look for mentors who are not readily available at your customers site,'' says Byrd. ''In addition, if you are a contractor for a few years, it may be harder to return to a full-time IT position.''

Byrd adds, ''This is because recruiters and hiring managers may question your commitment to and ability to handle the structure of a full-time employee after so many years fending for yourself. One or two jaunts can't hurt, but be aware of this risk of being labeled a job hopper if you contract for a long period of time.''

Think Through the Money

There are other financial implications to consider before taking this leap.

Make sure you understand the tax situation, whether you are compensated as a W-2 or 1099 person to corporation or what is know as corp to corp, where you are incorporated yourself. Byrd says, ''As a 1099, you get money and that is it. You have to figure the rest out yourself. With a W-2, the customer takes care of taxes.''

There are many other considerations, so do the research first.

Finally, you will be responsible for your family's health care benefits. If your spouse works and is covered, you are in a much better position to take this risk. But if you have to pay benefits yourself, that projected annual salary conversion just got a heck of a lot smaller. It can be eye opening to realize how much your employer actually pays for health care. Be prepared to write a check for $1,000 per month for limited family coverage.

Once again, it rests on your shoulders to research these options.

So are you willing to roll the dice? Does the reward still sound appealing? The last piece of advice Byrd has it to take your financial position into consideration, including the length of the contract. ''It truly depends where you are in life with family and your risk tolerance,'' he adds.

If you like knowing where your desk is every day and can't live with uncertainty, keep your day job. If you are willing to roll the dice and the potential reward is still enticing, then take this opportunity and run with it. Or you could try your hand at real estate.






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