Quick Update and Thoughts

Since my last post, business has picked up significantly. This seems somewhat at odds with the general trend in the economy, as layoffs are ongoing in many firms and financial results continue to suffer. This trend is impacting my company across the country, and seems to be consistent in the vast majority of regions.

What is happening here? Why are we seeing a rise in IT staffing positions when the media reports a very slow recovery? If a recovery is underway, why aren’t companies hiring FTE?

My thoughts on this are that the cost of contingent labor has dropped to the point where the hourly loaded cost of full time employees and IT contractors is very comparable. Most large clients with formal procurement processes and Vendor Management groups have imposed rate reductions on their staffing supplers. Similarly the supply of skilled IT staff on the market has increased due to slowness in the economy. Conversely, few clients have been able to force a similar reduction in cost on their FTE’s.

This has resulted in a very comparable hourly cost between contractors and FTE’s. The advantage of contractors is that they can be hired and released quickly without worrying about costs for severance and such. This continues a trend that started some time ago where companies maintain a minimum level of staff to preserve core business knowledge and then use contractors for projects and initiatives that arise. Sort of like a general contractor outsourcing the carpentry work to another company on a building project.

The other oberservation is that I have never seen so much senior talent on the market. Clients seem to be focused on the 5 to 10 year technical professional that can be told what to do and left alone to do it. The demand for management talent in particular as waned. It is as if companies are leaving the technical staff alone to do the work in a self managed manner, and even when a “lead” position comes up, it usually entails the person also being a direct contributor.

This may be short sighted as individual contributors are notorious for shortcutting process and practices such as project management, requirements definition, etc. It is somewhat of a cycle: I expect we will see a rise in demand for Project Managers within the next year or so to fix the initiatives that have gone out of control.