At a meeting of the Dutch Oracle Business Club, I got talking with some other executives of consulting firms. One of the things we can all complain about is the strong decline in rates for our top professionals. A great topic for complaining discussion with some food and a drink or two.
Working in IT for a while, I noticed that especially the larger organizations have changed the process of hiring external staff in recent years. There are probably many reasons for this, the current crisis being one of the more obvious. The less than trusting feelings towards the IT industry after Y2K and the Internet bubble probably haven’t helped either.
Sourcing of IT contractors
Organizations, tired of paying too much for their IT contractors, moved their resourcing away from the projects to a central department. Very often, project managers were forced to send their resource requests to purchasing. And as you might expect, this does not always result in the best match. The IT world is complex, quickly changing and apparently it is difficult for an unskilled individual to know the difference between i.e. Java and JavaScript, MS SQL and MySQL or JEE and J2EE (there is no difference between JEE and J2EE, but try to explain that to a recruiter with J2EE on his wish list). IT skills are not easily compared like printing costs or office supplies and price vs. quality is not always directly evident from just a resume.
To get even better rates and safe some time, the resourcing or purchasing departments have “outsourced” the matching to brokers and intermediaries. With a tender, a number of preferred suppliers is selected based on not much more than revenue history and a proposed pricing level. In The Netherlands, I’ve seen this almost always result in a selection from the big IT firms, completed with one or two brokers. The preferred suppliers because they employ a large number of professionals and can do projects (plus it’s easy). The brokers to handle the smaller specialist companies like ours and the freelancers. All in the effort to save some money. Is it laziness or ignorance.
So now the project managers fill out a requirements form (basically a list of skills the candidate should have). Resourcing sends this list to the preferred suppliers who make a first selection. Resourcing filters this list down to 2 or 3 who are brought in for an intake and the best candidate.
This may not be a bad idea and it could even work for hiring very common profiles or staffing of large projects where the skills of one individual are not too important. There are however a number of problems and unwanted side effects.
So why isn’t this working?
The selection of candidates from a stack of resumes is rigid to say the least. I’ve seen PL/SQL programmers with 10 years experience being outperformed by a high flyer with only one project completed. How can you select that from the bits and bytes of a Word document? How many of the really experienced Oracle DBA’s have taken the time to get their OCP certification?
Because the pre-selection of candidates is done as far as away as possible from the team, selection on soft skills or “team fit” is extremely difficult. Only a small number of candidates is brought in front of the team, this may result in bad team performance. Even if all the hard skills match.
This is of course not the biggest problem. I strongly believe this practice actually increases the rate paid for top specialists. Or, alternatively, it reduces the quality customers can hire for the same budget.
The customer pays
Even in the current economic climate, some professionals are hard to find, even for the preferred suppliers. They will go out and find someone, a freelancer or maybe an employee of another IT supplier. And if they can’t find someone directly, somebody else may know somebody or they will look further as well. Sometimes this will create a stack of many contracts between the professional and the end customer. I have an example where we had to chain 5 contracts! Think about the legal implications of all these stacked contracts. Who is responsible? What control have you got left? And, because every link in the chain will add their own margin (sometimes a ridiculous percentage), the end customer pays a premium. In this particular example nearly twice what we were being offered!
That’s bad. Bad for smaller specialized companies, bad for customers and also bad for the professionals themselves. Professionals who have to live up to the paid end rate that has lost its direct link with the actual skill level.
Is this worth it? Does it indeed save enough money and time? Are projects running better for less?
I am confident it is not and I think I know a better way to do this. More about that later, though. For now, I’m looking forward to hear your opinions and experiences.
That’s my tuppence worth…
{ 2 comments… read them below or add one }
So what is the difference between jee and j2ee?
Anyway, i agree that there’s too much chaining, without added value. I do think however, that we’ll see more chaining in the future. At least a two step chain, were companies will accept and be responsible for projects, but most capable technical people will need to be hired, as most of them will be freelancers. The large, preferred supplier, companies, usually have a lot of unexperienced people. People with experience leave to work for smaller companies or to freelance. So the preferred supplier companies will need to hire the skill to actually do the job.
Andrej,
Thanks for your reply. You are no. 1!
I don’t have a problem with a two step chain. I even understand that companies choose a smaller number of preferred suppliers, for the streamlining of their contracts.
And agree with you about the specialists. We have seen that a large percentage of the real experts choose smaller companies or even the freelancer life. They can’t take the risk of the big projects. This will result in a contractor/sub contractor structure that is common in other industries as well.