In a previous post, I argued that the current practice of hiring external IT professionals is increasing rates for contractors with scarce skills.
Stacking of contracts is a very common practice that results in higher end rates and lower income for professionals and small specialist companies. This makes it harder to make a perfect match because (pre) selection is only done through resume filtering. Additionally it results in less control for the parties involved, as it’s almost impossible to synchronize all these contracts.
So how do we fix this? Can we?
I believe we need three basic things:
- easily accessible information;
- less intermediaries;
- more transparency.
More information
Using Internet (euh… Google) we can find anything and everything. That includes project openings, if they are posted. Even at this moment almost any resource request in The Netherlands can be found at one of the many intermediary or aggregation sites.
A great open marketplace with good search options would make this even better. A central place where any company can post their requests themselves and where potential candidates may apply online or find the application details.
To add previous project feedback to the static resumes of our professionals, customers can search social networks like LinkedIn and find recommendations or even references.
Ideally both would be integrated into a new system, with job postings, project resumes, customer feedback, etc. I don’t think we are there jet, but there are no technical limitations.
Less Intermediaries
Jeff Jarvis wrote “middlemen are doomed” in his great book What Would Google Do. I agree.
We don’t need intermediaries and I think I’ve proven that. Well, maybe it’s not completely true, or at least not yet. A broker can make it easier for organizations to streamline their contracts and tax-related affairs. Still, that’s the only thing they need to do. Recruitment or hunting is no longer necessary if all open requests are publicly available and for everybody to see.
Dutch social security organization UWV already uses open marketplace for staffing external resources. The police of Amsterdam does the same through another system.
Even with less or no intermediaries or brokers, we will still have stacked contracts. A two-tier setup with a project owner and specialist subcontractors, like Andrej described in response to my earlier post, is viable and very common in other industries.
Transparency
The last thing that is needed, is probably the most difficult one: transparency. No more unknown stacking of contracts, no more hidden margins. Organizations should force openness from their (preferred) suppliers. Just add the following conditions to the contracts:
- preferred system integrators may only use their own staff for contracting, no subcontractors. For projects under their responsibility, it’s their own choice of course;
- brokers have to disclose their purchasing rate as part of the contract and they get a fixed fee for their services (i.e. a couple of € per hour);
- chaining of contract is not allowed: a broker can propose only freelancers or specialist working for the company they do business with.
I am sure that both end customers and professionals will be better off with these three simple conditions. If sourcing requests are freely available, everybody can apply. If no money is lost on margin upon margin, the end rate is always lower.
If everybody can apply for opportunities and rates are transparent, the end customer can make an informed decision and hire the best professional for their budget.
In an article in the Computable (Dutch IT newspaper) of September 18th. 2009, two IT recruitment companies are quoted who are doing something about this. A great start, let’s hope more will follow.
In the mean time, we can do something ourselves when working with a broker. Ask for transparency in the chain and in the rate. It’s simple, two questions: “is this your end customer?” and “what is your margin?”. If they don’t answer, you know you are losing money on them and I would look for another broker. Don’t worry, they all have the same requests. Work with the ones you can trust.
That’s my tuppence worth…
