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||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 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.
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:
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.
It is also wise to investigate the contracting firm to make sure they will be able to meet all of your specific staffing needs. While many IT employment agencies cater to providing a broad range of skills, such as Ajilon which has acquired more than half-a-dozen companies over the past few years, there is a separate category of agency that caters to highly-skilled individuals. These firms are known as boutique agencies. Advanced Technology Staffing (ATS), of Redwood Shores, Calif., for example, transformed itself from a general IT services provider into an Internet specialties agency a few years ago.
When Manage.com, an e-management firm for companies doing business over the Internet, needed to jump-start its Management Portal project earlier this year, it turned to ATS for staff augmentation. While the 60-person company uses contract workers in its engineering department, it was Manage.com’s director of product marketing, Ping Hao’s, first experience using contract help on her IT staff of eight. The project lasted one month and the temporary hire provided Manage.com with the senior project management and Internet architecture experience needed. The professional ATS provided had 15 years IT experience with plenty of firsthand knowledge building e-commerce solutions, most recently an Internet shopping network. “He was absolutely a terrific fit for us,” says Hao.
Rules of the road
Anyone with experience in staff augmentation, contractor or client, probably agrees that striking up the right balance for a successful relationship might be more art than science. Hiring managers must deal with cost/budget, personnel, and management issues.
As every IT manager knows, hired guns aren’t cheap. Pricing varies depending on the required skill set, level of experience, and geographic location. From Ruhl’s July 1999 Real Rate Survey, rates for all contractors ranged from $15 to $195 per hour with the highest concentration in the $40 to $93 per hour range. Architects, managers, database administrators, and team leaders earned the highest median rates. People who defined their jobs as “Y2K” earned rates slightly less than the group as a whole and lower than those calling themselves senior programmers (see chart, “The price you’ll pay”).
According to ATS’ Black, what hiring managers need to know about highly skilled specialty contractors is that it’s a sellers’ market. “Clients must be prepared to pay top dollar and provide interesting work and an environment to keep the contractor motivated,” he says.
Top dollar is exactly what Manage.Com’s Hao had to pay. Since she is in San Jose, one of the most costly markets for IT talent, and was looking for a high-degree of experience in a cutting edge technology, she paid over two hundred dollars per hour for her contractor. “It was very expensive, but I had to look at the cost-benefit proposition,” she says. Despite the fact that she experienced sticker shock regarding the cost of the contractor, Hao says she probably saved herself money by clearly predefining the project, various parties’ roles in the project, and accountability.
For those companies that need an individual with a precise set of advanced skills, employment agencies agree that clients will pay a premium. Ruhl suggests that hiring managers can save themselves money and find a good match if they can afford to spend a little time training the temporary staffer. “I’ve seen companies who are very successful hiring people that needed a little preliminary training versus bringing in someone with a narrowly defined skill set,” she says.
Another significant issue companies face when bringing in temporary IT staff is keeping everybody happy when it comes to internal vs. contract pay scales. Salaried full-time staff, who often have no idea exactly what their firm is paying temp workers, get jealous or demoralized knowing that their own salaries are probably being exceeded by two to three times.
“[When] dealing with multiple work relationships it’s important that everyone understand the need for contractors versus full-time employees, understand the rules of the road, and why there’s a good reason to be one versus the other,” says Bob Cohen, senior vice president at ITAA, in Arlington, Va.
Industry participants agree that staff augmentation works well when companies manage the process. Given the fact that a lot of staff augmentation is project driven by IT, business units, or customers and trading partners, corporations need centralized resource management to make it work. “Companies have to be proactive. They wouldn’t let their own employees run amok,” says Bace.
As more companies hire temporary workers to meet IT project deadlines, IT managers will realize that staff augmentation is a task to be taken as seriously as hiring full-time staff. The bottom line is the more knowledge IT managers have about the process, the more success they’ll have. //
Lynn Haber is a Boston-based freelance writer focusing on data communications and telecommunications. She can be reached at [email protected].