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Other
Concerns
1. The Money
Factor
Contrary to
popular notions, companies don't always save money by using
contractors instead of employees. In fact, contractors can cost
more. The best often have benefits through their agencies, and
companies are willing to pay for talent that's worth the price.
Tokyo Electron
America's Russ Finney says one of the reasons he uses Ajilon is that
it "provides robust benefits to its employees. Frankly, we have
happier, more stable contractors." Finney doesn't always pay top
dollar. "If it's a short-term contracting job, we might try to find
the lowest-cost contractor." The company might also be willing to
pay less for administrative help, taking the cost below that of an
employee. "If we're getting someone for a longer-term contract, we
tend to get higher-benefit contractors -- in many cases actually
more expensive than full-time employees. It's a way to supplement
head count to meet our staffing targets within our budgetary
constraints, and later convert them to employees when we have
increased head-count approval."
2. Flexible Head
Count
Using
contractors "is popular in IT because it's an administrative
function," says Finney. "It gives an IT director the flexibility to
increase or decrease the size of the staff in response to business
conditions. For example, if business is down and you have to reduce
head count, a company goes to the administrative functions first.
You're able to reduce [head count] if required to do that. It's a
defensive position, a buffer -- so you don't have to reduce [the
number of] full-time employees, which is painful. "
3. Burn-Out
Positions
"Some positions
have a high turnover, and you don't want to stick your full-time
people in them," says Finney. "It's a way for a contractor to come
in and maybe move on to something else in the company." He cites PC
technician and help desk positions as examples. "The person might
not want to make a career out of it," says Finney, "but it's good
experience for a few years, and then he or she can move on to a
higher role within the company, such as network administrator."
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More Than the Bare Necess-IT
Whether they admit it or not, most mid- to large-sized companies
use contract IT professionals. We tell you why.
by Rebecca Rohan
Short term or long term, information technology contractors are
now a vital part of the coax jungle across many kinds of businesses.
Rented IT experts have burrowed into broadcast television, climbed
into clothing store chains, swung into semiconductor equipment
makers, nestled into newspapers, landed with long-distance
providers, and inched into ISPs. Why would companies of all shapes
and sizes open the honey jar for contractors? Here's a look at what
goes into the decision to make short-term arrangements part of
long-term policy.
The reasons for opening IT to contract professionals vary from
company to company -- and within companies, who might use them in
different ways at different times. For example, the same business
might use contractors for short-term projects, to meet short-term
staffing shortages, to test-drive potential employees, or to do just
about everything.
Life in the Projects
From setting up a database to linking two branch offices,
short-term projects are often fertile ground for contractors. The
Y2K minefield has many companies reaching for contract help. Few IT
departments have spare people to throw at the Y2K problem, or have
people with the right training for it. Some say they're reluctant to
use high-priced consultants, so expert contractors are just the
ticket. Since companies don't like to advertise that they're still
fixing potential Y2K vulnerabilities, none would go on record, but
we heard from one company that brought in about 50 contractors to
work beside two employees on the Y2K project. As of the beginning of
September, it was down to 17 contractors.
Maxing Out a Business Launch, Then Waving Goodbye. Maxis
Communications, Inc., is a year-old long-distance company and ISP
based in Atlanta. "We're like a small Sprint, AT&T, or MCI, and
also an ISP like a small MindSpring," says Patrick Lentz, executive
vice president. "We've gotten all our systems off the ground -- the
whole phone company and Internet service -- in one year. We built
all our software systems in-house. We brought in the right talent to
do it, and saved a tremendous amount using our permanent and
contract people in the most efficient way to get the job done and
still build all systems in-house. We saved a half-million dollars
doing the software."
Companies can ramp up with a lot of concentrated talent while
slowly adding staff, then wave goodbye to the contractors once the
business takes off. "We went from zero employees 11 months ago to
35, now," says Lentz. "We've gotten a few contractors from agencies
such as MATRIX [Resources]. We invested in a few high-powered
contractors with a track record. It was a good investment for the
company. We're 11 months from conception and five months into
billing." At this stage, the contractors are moving on, and three
permanent people will maintain the on-line and batch systems.
Rolling a Media Empire Forward on Rotating Skills. Cox
Enterprises, Inc. (Atlanta), was founded in 1898 around the
newspaper business. "As technology and time evolved, Cox expanded
into radio, then television, then cable, then automobile auctions,
then the Internet," says Stan Green, Jr., manager of systems and
databases. Green came into the 56,000-employee company as a
contractor in December 1998, and has been an employee since April
1999, so he has little difficulty appreciating the role contractors
working through companies such as Ajilon Services, Inc., can play in
his IT department.
The ability to engage just the right expert at each phase of an
initiative is one of the key reasons companies call in contractors.
"With a company this size, a lot of IT projects are going on
throughout the company," says Green. "We've been using contractors
lately for deploying a PeopleSoft implementation for HR and finance
here at corporate. We had a fixed timeline -- a three-year project.
We use different contractors in different phases."
Green is using 15 to 18 contractors overall for the PeopleSoft
project. The necessary skill sets were readily available in Atlanta,
where a variety of competitive contract firms have a home. "Some
companies are better in ERP, help desk people, and so forth," says
Green, who checks with different agencies for expertise and
availability as needed.
Green uses contract agencies, as opposed to sifting through
independents, with one or two exceptions: people he already knows.
"We have run into situations where a project has come up all of a
sudden," says Green, "for whatever technical reasons, and some
people really enjoy doing a well-defined short-term project. A year
and a half later something else comes up and they come in and do
another project." Whether they come from agencies, referrals, or
repeat association, contractors allow Green the flexibility to
respond dynamically to short-term needs and the unexpected. "We get
the skill sets that we need, bring it to completion, and move on.
"It's a process we're familiar and comfortable with," says Green,
"once we've found an agency we like and see that it is good for us.
Occasionally things don't work out as planned -- someone with a
six-month contract decides to leave in four weeks, for whatever
reason -- but that happens with employees, too. In general, using
contractors is a positive experience."
Fast Results, Good Attitudes with Contractors Please
Telecommunications Giant. Sprint Business is a 13,000-employee
unit of telecommunications "Big Three" Sprint Communications Co.,
L.P. Tim Dockins is program manager for Sprint Business, defining
business application requirements for sales and marketing and
developing them. For example, Dockins's people have built a
marketing encyclopedia for 6,000 users, growing to 23,000 next year.
He's been using contractors for about two years. "We wanted to make
Lotus Notes Web based and expand it," he says. "We saved about six
months using contractors instead of internal resources."
Dockins came in as a contractor himself and began calling on
MATRIX and other IT contract agencies, where he understood the
advantages. "They've pretty much taken over new development," he
says. He's looked for contractors skilled in HTML, JavaScript,
DHTML, and back-end competencies -- "A few years' experience with
Oracle or Domino." The need is ongoing. "Initially, we needed
Domino," says Dockins. "Now we've branched out to more end-tier
types of solutions -- whatever's on the back end when people are
using Web browsers on the front end.
"The quality of the people has always been good," he adds. "We've
always found they're getting a good rate. They have the skills we're
looking for. They're pleasant to work with, and the service we get
from them internally -- they have an attitude that they're there to
provide a service and, internally, we're all their customers. That's
what's been keeping it alive.
"Sometimes it's difficult to find funding," Dockins says, "but,
because of the benefits [of having the contractors], we definitely
try for it, and are always able to come up with that money."
Supplementing Staff
Sometimes businesses are looking for the best route to the best
people for permanent positions, and find that good contracting firms
are the best way to find them.
Ready People, No Screening for Equipment Maker. Tokyo
Electron America, Inc., is the American branch of a Japanese
semiconductor equipment firm with $4 billion in revenue worldwide
and $500 million in the U.S. "We make the equipment that Intel, AMD,
Motorola, and Texas Instruments use to make their chips," says Russ
Finney, director of information systems for all U.S. operations.
Tokyo Electron has roughly 10,000 employees around the globe,
including 1,200 in the U.S. "We supplement [our full-time employee
base] with contractors in certain positions, on long-term needs such
as help desk, database administration, and network administration,"
says Finney, who uses Ajilon.
In some cases, Tokyo Electron America is converting contractors
to employees. "We're growing rapidly -- from 50 employees in 1994 to
1,200 in 1999," says Finney. "We try to limit contracts to six to
twelve months with an option to convert. We never convert
consultants -- we bring them in for a specific problem -- they tend
to be more short-term and, frankly, they tend to be more expensive.
With our growth rate, it's tough to get the head count --
contracting helps us meet all our business requirements."
For a while, contractors made up 50 percent of Finney's
department, but now they make up about 15 to 20 percent, since many
have been converted to full time. "It's the pot at the end of the
rainbow for some contractors," Finney says. "It's nice to have
somebody show up with the required skill set. Somebody else does the
searching and qualifying for you."
Test-Driving Potential Employees. Emerging Solutions,
Inc., is a 40-person Internet company in Atlanta. CTO Matthew Brown
sets the vision for R&D and has to attract, hire, and keep
capable technical personnel. "Our goal is to entice contractors to
stay on permanently. This helps us find highly capable technical
people. It helps us attract them in a way that they're used to
working. So we come at them where they're at. They're used to
contracting -- we bring them in as contractors. The goal is to get
long-term team players. If they want to stay contractors, that's
fine.
"The placement agencies we use have a fee structure, so if we
hire during a certain time, there's a fee, but that goes down over
time. After a certain time, there's no fee," says Brown. "We find
out if someone is a good fit for our company and if we're a good fit
for them. We feel an inherent commitment to our employees that goes
beyond what the laws provide for, but some of the issues -- setting
up insurance, setting up the HR process; state and federal forms
that have to be filled out -- take an administrator's time. Say you
bring on an employee -- there's an interview process to go through
and go through again, then getting them set up, acclimated to the
environment...all the other stigmas that go with turnovers. Our
turnover is very low -- even with people we bring on as
contractors."
Brown uses Ajilon, MATRIX, and Silas Group to augment the core
development team. He says that recruiters save him time and are able
to deliver the specific skill sets he needs. "It has been no trouble
to request and find someone with two to three years in Active Server
Page development, a bachelor's in mathematics or computer science,
and SQL database experience."
Brown hires two or three contractors a month as employees for
roughly a 50 percent conversion rate. Only 3 percent to 5 percent of
the contractors used at ESI have remained contractors, he says.
Not Just the Projects
Some of the companies that hire for special projects also look
for permanent help from contract agencies. "As a general rule,
companies look for the high-powered talent from a contractor," says
MATRIX's Lentz.
Cox Enterprises looks beyond its special projects to hire
permanent employees on a contract-to-permanent basis.
Contract-to-permanent is "very typical," says Cox's Green. "It's a
very competitive marketplace for IT people."
Rebecca Rohan is a freelance writer based in Seattle.
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