Findings in a recent survey conducted by The InSource Group of more than 3,300 decision-makers in the IT space indicate a significant increase in the hiring of IT resources in 2007. The survey also revealed a significant divergence in opinion regarding the ideal mix of contract versus full-time IT employees. Accepting certain variables, there are some basic yet essential facts that should be considered before determining whether to fill your increased head count with full-time or contract staff. Careful re-examination of your current hiring strategies will ensure that you’ve assessed the proper fundamentals necessary to make informed decisions before solidifying short- and long-term commitments to resources.
First, let’s look at the robust hiring trend illuminated by the survey. Of the decision-makers surveyed from companies with more than 100 IT employees, the vast majority plan to add IT staff with nearly half adding more than 25 employees and more than a third adding 100 or more. Of these hires, approximately 40 percent will be contract and 60 percent full-time. Among smaller companies with less than 100 IT employees, 70 percent of planned hires will be full-time employees.
What are the drivers that result in a propensity for either full-time or contract resources? Do organizations have a bias in favor of one over the other? What impact does a competitive market have on these decisions? Feedback from some of our clients suggests that the constraint imposed upon the hiring market during the technology sector downturn has created a pent-up demand for full-time IT resources over the last three years. Further, technology is ever changing. As development tools have become more sophisticated and reduced or eliminated many of the mundane tasks that programmers used to perform manually, more applications with larger feature sets can be built with greater speed. Add to the mix specific organizational requirements, and those responsible for staffing initiatives have multiple, and often competing, factors to consider.
Still, survey results indicate that the largest single factor driving hiring decisions is budgetary concerns. The irony is that companies citing budget concerns as the main driver for hiring strategy arrive at significantly different solutions. For instance, some companies said they avoid contract employees because of their high hourly rates, while others avoid too many full-time employees because of the high cost of benefits and perceive contract employees to be more cost effective. How can you sift through seemingly opposing perspectives to determine the best course?
Businesses must stick to the fundamentals by identifying their specific IT needs before hiring. Required skill sets must be determined, as well as the duration of the project and implementation time tables. Once you have identified the specific IT needs for which you are hiring, then it is time to factor in long-term benefit burdens. It may seem cost effective to hire full-time resources over contractors. But consider that contractors enable businesses to adjust quickly to rapidly changing market demands and technology developments without worrying about long-term salaries, benefits and severance issues.
In some circumstances, contract staff can ultimately be less expensive. An IT manager at a manufacturing company saved almost 20 percent in resource costs using contractors instead of adding additional full-time employees for a 9-month development effort. “My full-time programmers were good at their jobs and did their best to keep their skills current. But I had to deliver a solution built with new technologies utilizing architectural best practices,” the manager said. “Contractors are exposed to more technologies and gain expertise at a much faster rate since they get more exposure to different industries and problem sets and must stay cutting edge to remain competitive in the contract labor market. The end result was that I got more code written in less time with fewer defects by using contractors that had more experience in the newer technologies. And when I compared the bill rates to the fully-loaded cost of my internal staff, the per-hour costs of each were surprisingly close. Given the productivity gains, I more than made up the difference,” he said. “Best of all, my existing full-timers picked up new skills much more rapidly by working on a real project with seasoned specialists.”
So where does a full-time employee make sense? “There are clearly roles within my organization that are best filled as full-time positions,” one technology executive told us. “In those areas where the need for internal business knowledge and relationships is as acute as technical acumen, I tend to seek candidates who are looking to build a career, not just complete a project.” That executive recently replaced a long-tenured software development manager with another full-time hire. “This role is critical within our company. We need technical skills, certainly, but this position requires industry-specific knowledge, intimate understanding of our company and the credibility that can only be gained by repeated successful partnerships with our business units. It will take a year just to get our new hire fully up to speed,” he said. “The outlook for the position of software development manager is easily three years or more.”
Certainly, in positions that require continuity, commitment and institutional knowledge such as management or systems architecture, long-term resources can be effective. Where specialists are required for a project, contractors are often the most efficient overall resource. The key is finding a balance when developing your long- and short-term hiring strategy.
Specifically, consider the following before committing to a resource strategy:
- Required skill sets and years of experience needed
- How long specific skill sets will be needed
- Project timetables
- Long-term architecture maintenance needs
- Industry knowledge requirements
- Long-term benefit costs
- Severance costs
Rooting your decisions in proven IT fundamentals will help steer your strategy beyond shortsighted tactical considerations and better serve your long-term business objectives.