Flexing your IT staffing muscle

With contract staffing now a business mainstay, meeting people and price challenges requires its own set of skills.
Posted November 1, 1999

Lynn Haber

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In this article:
Lessons learned about contract labor
Help is on the way
The price you'll pay

Staff augmentation is part of today's business rhythm. The truth of the matter is, it's a trend, or perhaps, a new business model, and one that is expected to continue well into the future.

As companies across the board scramble to launch e-business initiatives, support critical business requirements, and marry information technology to business strategies, the IT staffing market has blossomed. With demand for IT skills outstripping supply--the Information Technology Association of America (ITAA) reports there are only 7.5 qualified candidates for every 10 IT jobs--IT managers are turning to staff augmentation to meet IT project deadlines. Using this strategy also provides better support for their customers and bolsters bottom-line revenue.

American Home Products

Company: A global pharmaceuticals and health care products company, American Home Products Corp., based in Madison, N.J., has $13.5 billion in 1998 revenues and an IT staff of 800.

IT staff augmentation: 20%

The resources: AHP's IT group uses both traditional consultants -- contract workers engaged in a project with a defined scope and deliverables -- and contractors -- hourly workers whose duties are dictated by a manager and who work on projects ad hoc. Recently, contracted skills include Oracle database administrators and database developers, and project managers.

American Home Products Corp. (AHP), a global pharmaceutical and health care products company, is typical of most large firms: Roughly 20% of the company's 800 IT staff members worldwide are contract employees. "As IT is relied upon more within the corporation, one of the requirements for IT is that the staff be flexible and agile," says Jon Carrow, associate director of global IT sourcing at the 73-year-old company in Madison, N.J.

And this trend is only going to grow. Dataquest Inc. analysts are predicting the IT worldwide services market will reach $600 billion by 2002, that's up from $301 billion in 1997. In the United States, the IT services market will almost double, to $252 billion, up from $129 billion in 1997, according to the San Jose, Calif., market research firm.

Along with the traditional reasons for tapping contract workers--staff and skills shortages--IT managers have the added consideration of often only needing highly skilled professionals for a short time. When managers don't want to create a new in-house position for a skill that will only be needed for a few months, such as a Web site architect, a contract employee is often the best solution. "As a global corporation in a competitive business climate, the pace is such we need a baseline IT staff as well as the ability to bring in expertise ad hoc," Carrow adds.

A significant issue companies face when bringing in temporary IT staff is keeping everybody happy when it comes to internal vs. contract pay scales.

While the reasons why staff augmentation has become part and parcel of doing business at most major corporations are clear, the challenge is making it work. By learning how to develop a good working relationship with the temporary talent, nourishing internal employees, building relationships with reputable staffing firms, and having the necessary management in place, contract workers can be the perfect compliment to your internal IT staff.

Guns for hire

The sources for contract talent are teeming, which is both good news and bad for companies in the market for temporary IT help. It's good news because it gives companies multiple sourcing options. It's bad news because when the going gets good, the shysters come out of the woodwork, according to Janet Ruhl, publisher of the Real Rate Survey (http://www.realrates.com), a report that analyzes work experience and salary data collected from IT consultants.

Ruhl began collecting data in Feb. 1995 as a resource for computer consultants, so she has seen the transformation of IT contracting first hand. "Ten years ago, IT recruiters were IT managers who brought with them IT shop knowledge," says Ruhl. "In the last five years we've seen warehouse staffing by companies with names that portray them as IT experts when all they're after is the quick buck." Warehouse staffing, according to Ruhl, is the storing of IT contractor names in a database by an agency with little attention paid to value-added services.

The price you’ll pay
Here’s a look at the hourly fees IT contractors commanded in July 1999:
the price you'll pay
Source: Janet Ruhl’s Real Rate Survey, "Real Consulting Rates Trends July 1999"

By contrast, better quality augmentation firms treat their talent like employees, providing benefits, vacation time, and training, according to John Bace, research director at the analyst firm Gartner Group Inc., of Stamford, Conn. "These businesses focus on providing more than just a warm body," he says, adding that they have a greater interest in reuse of invested intellectual capital.

At Ajilon Services Inc., for example, an IT employer with the names of 6,000 contract IT professionals in its database, the company's agenda is to help create career paths. "We're constantly evaluating the benefits, education, and training of our people," says Dennis Eppley, senior vice president at Ajilon, in Towson, Md. "We're a full-time employer. We're not looking for a quick hit," he adds.

Successful IT contracting relationships are due, in part, to the careful selection of IT agencies. "For the most part, contractors are a community that is in touch with each other, and word will quickly spread if an agency is perceived as a sweat shop," Ruhl says.

Industry watchers recommend IT managers select staff augmentation firms based on recommendations from colleagues. When screening agencies, ask how they treat their employees. For example, do they offer job benefits such as vacation time and skills training? Inquire as to how the agency helps customers manage the contract employees, and, in the case where issues of security within the enterprise arise, look at how the agency helps establish security boundaries.

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