IT Staffing Firms May be the Right Corporate Rx: Page 2

Posted January 30, 2004

Dan Cobb

Dan Cobb

(Page 2 of 2)

Traditionally, IT consulting firms have highlighted the strength of their full-time staff as a key asset when pursuing large-scale project engagements, particularly their ability to provide highly skilled personnel at a moment's notice.

However, as IT spending resumes, many are finding that this particular model is no longer as successful as it once was.

During the 1980s and 1990s, highly skilled technical personnel were scarce, and larger consulting firms grabbed up and zealously protected whatever talent they could identify. Many smaller consulting firms, on the other hand, built their businesses around a single individual with strong talent. In both cases, when there were no billable assignments, these individuals were placed on ''the bench'' where they could be quickly called into action when their unique skill sets were required.

While the IT market was booming, this strategy was successful for everyone. The most talented consultants stayed with their firms since they were treated well and had job security. Firms benefited because they were able to react quickly to client requirements. When the market turned, however, these retained consultants quickly became a liability.

With IT spending declining rapidly, more consultants were spending significant time on the bench where, in addition to not generating revenue, their salaries and benefits made them a financial burden. As a result, many consulting firms were forced to reduce internal functions -- such as resource management -- close offices and release all but their most highly skilled consultants.

By the third quarter of 2000, technology services was one of the top industries to announce layoffs, and consultants at major firms found themselves caught up in a stream of pink slips. For example, IBM Global Services cut 1,000 specialists and Ernst & Young reduced its consulting staff by 5 percent in mid-2000. PricewaterhouseCoopers followed suit early in 2001 when it released 1,000 U.S. consultants, about the same time that Cambridge Technology Partners Inc. wrapped up three months of layoffs that resulted in 680 consultants on the streets.

Unfortunately, this left many consulting firms ill suited for the types of engagements that are now seeing a resurgence in the IT space, including infrastructure ''nuts and bolts'' projects, such as desktop and server hardware migrations, operating system and application upgrades, LAN/WAN modifications and security updates. Further, because many of the companies that are now spending their IT dollars took advantage of the glut of consultants on the market, they no longer need to tap consulting firms for the high-level design and architecture talent.

Instead, what these companies do need are mid- to low-level technicians to assist with enterprise-wide implementations -- skill levels that were among the first to go when consulting firms began reducing their headcounts.

A Changed Landscape Brings a New Model

Enter the professional staffing firm.

During the IT heyday, staffing firms were often viewed as ''body shops'' where only untrained or ill-prepared personnel could be found. They certainly weren't a consideration when a client was in need of a large-scale implementation project.

But that opinion has changed over the past several years. Today's IT staffing organizations are high-tech client- and consultant-centric business operations with some unique advantages over traditional consulting firms.

First off, they are specifically designed to identify and provide quality personnel within a defined niche, and are therefore are not limited by their current ''inventory''. They also do not suffer from the liability of ''benched'' personnel because each contractor is utilized for a specific engagement. And because they have an unlimited hiring potential, they can accommodate large volumes, even for short periods or ''spikes'' in client requests.

Some of the more aggressive, flexible staffing firms have rightfully recognized that, thanks to theses benefits, they actually have a competitive advantage in the large-scale project space. To capitalize on that, they have devoted time and resources to create divisions within their organization that specialize in the management and delivery of project engagements.

These new ''project'' divisions enable staffing companies to provide highly trained, well-managed and sharply-focused IT teams at competitive prices. Couple that with a large geographic footprint and quick response times, and it's understandable why staffing companies are making headway into an area once dominated by traditional consulting firms.

Consider Kforce Inc.'s own National Infrastructure Operations Center (NIOC), which we launched about a year ago to provide PMI certified project managers, project specific recruiters, resource managers, and administration teams to undertake large-scale, full lifecycle projects from start to finish.

Recently, NIOC was called in by Kforce's IT office in Dallas when it was contacted by a client that needed systems upgrades in more 400 sites nationwide. Due to problems with a previous vendor, the upgrades had to be completed within 10 days of the initial call. Because of NIOC's project managers and recruiters, and Kforce's national presence in the IT staffing arena, we were able to ramp up immediately and complete the project within the specified deadline.

So while there will always be the need for traditional consulting firms, particularly for highly specialized projects, staffing firms that focus on project engagements offer an attractive alternative for a large section of the IT work in process today.

Dan Cobb is vice president of Kforce Inc.'s National Infrastructure Operations Center. Based in Tampa, Kforce (NASDAQ: KFRC) is a full-service professional staffing firm providing flexible and permanent staffing solutions in more than 40 North American markets, as well as through online services.

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