Contracting in and out

Contracting in and out

IT contractors can be crucial to operational efficiency. But how can CIOs get the most value from the flexibility and experience that contractors provide?

After years in the wilderness, contractors are again becoming part-and-parcel of IT shops in New Zealand and Australia. Recruitment agencies are always a good indicator of market demand, and they are busy building up lists of skilled professionals ready to take on well paid, but temporary positions.

“For the past two years, we have seen a steady increase in contract opportunities due to the skills shortage in the IT

industry,” says Grant Burley, director of recruitment firm absoluteIT. “We are seeing contracting opportunities that we haven’t seen in the past six years, in the period leading to the dotcom boom.”

Across the Tasman, Victor Konijn, managing director of ICT contractor recruitment firm Plutonic Zoo, says his business has picked up noticeably in the last 12 months, with demand increasing from all sectors of the economy.

“At this stage we have about 300 ICT contractors on our books, and that seems to be keeping up with demand,” Koijn says. “We don’t guarantee we will find the right person at the right time, but in practice we’ve never had a problem.”

Unlike the last spike in demand for IT contractors which came amid the mad rush of the late 90s, this time around demand for contractors is increasing in pace with demand for IT professionals generally.

“What we’re looking at now is an active market which has been growing steadily over the last 12 months,” says Cyrus D’Cruz, executive general manager for recruitment agency Hudson’s IT&T in Australia. “There’s demand for contractors, but there’s also a surge in permanent hiring, because lots of organisations are in a confident mood and looking to lock-in talent.”

Research carried out by Hudson suggests demand for contract staff may increase further over the next 12 months, with almost 20 percent of IT managers and CIOs surveyed suggesting they would be increasing their contract labour force.

Moreover the skills in demand are many and varied: Specialists in SAP, Oracle, Java, .Net and Unix are all hot property, as are project managers, systems, architects, testers and developers.

Managing the mix

However, the decision to source much sought after skills on a permanent, or contractual, basis is very much underpinned by the overall corporate strategy.

According to Peter Noblet, regional director for Hays Information Technology, IT managers and CIOs have largely moved away from employing contract staff on a long-term basis, preferring instead to hire them for specific roles and periods of time.

“These days the focus is very much on short-term roles, with specific targets. Contractors know what’s expected of them, and they know they need to maintain a good reputation,” says Noblet.

Good team members

Savvy CIOs balance the need for contract staff with the strategic needs of the company, while ensuring permanent staff don’t feel threatened. As a result, contractors who can work well with existing staff, participate in company events and actively take part in staff training or technology transfer are highly prized.

Roze Frost, CIO at CSIRO in Canberra, says she is keen for contractors to participate in regular leadership and training sessions. “It’s important to get contractors to participate and be a part of the overall team even if they are here for only a short while,” says Frost. “Permanent employees get nervous if there are too many contractors suddenly brought in, so you need to take measures to reassure permanent staff.”

In a similar vein, Ian McBride, who holds the dual roles of chief knowledge officer and chief information officer at KPMG, runs a range of contract staff alongside his permanent IT team.

By and large, contract staff are treated in the same way as permanent. However, Williams is keen to invest in permanent staff and offer them career progression support. “It is important the people who work for us have both the technical skills and a clear understanding of the business.”

Within KPMG, contractors make up just under 10 percent of his 230 strong IT team, although numbers rise and fall depending on the demands of different projects, and can get as high as 20 percent of the overall IT team. However, McBride is keen to ensure the role of the contractor is clearly defined from the outset.

“Sometimes it’s a matter of running someone in a position for six months or so, while the role itself is being assessed, or technical writing staff, or covering holiday time on the help desk,” says McBride. “Our decision to take on a contractor is based on filling gaps, topping up or finding a specific skill set.”

However, attracting a specific skill set can be a particular challenge if CIOs are operating in smaller markets, and within specific wage constraints. This is a particular issue for government CIOs looking to recruit staff in Canberra.

“We have set rates we can pay staff, so I need to decide at the outset whether we can compete for contractors, or whether we are better off outsourcing a project to manage the skills demand,” says CSIRO’s Frost. “Most recently we outsourced a large scale SAP implementation project to Fujitsu, precisely because I did not want to take on the issue of sourcing SAP skills when they are so much in demand.”

As a result, contract staff are brought in to “fill in” a range of roles, and tend to represent about 10 percent of the CSIRO’s IT team. “In some cases it’s strategic, where we need a specific skill for a short period of time, but at other times, it’s just about having a person filling a role so that the rest of the team can keep operating.”

From contract to permanent

At the Australian Taxation Office (ATO), CIO Bill Gibson faces similar challenges. While he holds IT contractors in high esteem, strategic considerations have lead him to increasingly convert contract positions to permanent roles, so as to retain a core skills base and product knowledge.

“Contractors are great to fill short term pressures, but by using too many of them for your day-to-day operations you don’t retain the product knowledge you need within the organisation,” Gibson says. “Our total headcount has remained close to what it was, but what we have been doing is substituting permanent staff for contractors, and looking at opportunities for skills transfer.”

This campaign has seen number of contractors used by the ATO drop from 20 to 10 percent in keeping with the strategic requirements of the organisation. Contractors are now used strategically by the ATO to introduce new skills by working alongside permanent staff in project teams, or to implement specific change programs.

Moreover as the general market for IT staff becomes tighter, Gibson is placing a greater emphasis on the ATO’s graduate recruitment program to further develop this internal skills base.

Outsourcing the issue

The decision to overcome skills shortage headaches either through outsourcing, or internal development isn’t a challenge limited only to the public sector. Paul Williams, vice president of IT at Arnott’s, says his operation is a classic light model IT shop, where much of its technical applications support and hosting is outsourced.

However, he is also keen to create relationships whereby contract staff both fulfil temporary roles, and increase the knowledge base within the company.

Part way through a company-wide adoption of SAP, Williams has been bidding on the contractor market for some of the most coveted skills in the industry. And he’s keen to train permanent staff, to ensure he has the skills on hand to complete the project.

“We choose the technology to fit the business needs, which can mean we need specific technical skills over a short period of time,” says Williams.

“However, adopting a particular technology means we need to keep trained staff on the books, so we engage permanent staff in project work as well to give them an opportunity to train in that technology. It’s part of the value proposition we offer to permanent staff.”

Large scale outsourcing is also a great way to avoid the headaches associated with determining what a particular contractor is worth. Much of the resentment expressed towards IT contractors during the late 90s, was based around the exorbitant rates they were charging.

These days however, rates are largely determined by the level of skill and experience a contractor brings to a role, and CIOs are more than willing to hold their recruitment agencies accountable for the standard of work supplied.

KPMG’s McBride says he’s keen to maintain an ongoing relationship with good quality contractors, and works closely with a select number of recruitment companies.

“Whether we’re looking at recruiting a full timer, or contract staff I need to know they can follow the company processes, and understand the way we operate,” McBride says. “Recruitment agencies also know what is expected of them, they know if they send us a dud, they are risking their contract down the line.”

And when it comes to paying for contracting skills, McBride knows the value of good quality staff, and is prepared to pay the difference. “Established contractors are well aware of their worth, and I’d rather pay more and be sure of the result than pay less, and have the project take twice the time to complete.”

Jeff Knowles, NSW state manager for Ambit Recruitment, says most CIOs are well aware different rates usually signal different levels of competence. He says rates will vary by 20 or 30 percent depending on the level of skill and experience a contractor brings into their role.

“The critical thing is to have a clear understanding of what you need when you go into the recruitment process. If you’re looking for quality people you need to be prepared to pay for that level of seniority, but you need to know beforehand what you’re willing to pay,” says Knowles.

With additional reporting by Divina Paredes

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