When deciding whether to use a technology contractor or hire a full-time IT employee, businesses must consider a wide range of factors. The choice must be rooted in the company or department’s business strategy, followed by consideration of cost.
• Is the function strategic to the business or tactical in nature?
If the function is tactical – tasks are repetitive and support operational business processes or support functions – then the function could be a candidate for using contract resources. Another idea, if the function could be outsourced entirely, then a contractor may be an alternative. Using contractors is a form of outsourcing … contracting out the skills while maintaining management responsibility.
• Is it important to retain the functional knowledge long-term, or is the position process-oriented?
Let’s focus on knowledge, using application developers as an example. In an enterprise IT environment, using contractors for application development might make sense. Once the project is completed, you need application maintenance skills, not development.
For an independent software vendor (ISV), development never ceases and retaining knowledge of product architecture, road map and underlying code is critical. For ISV’s, using full-time employees to retain knowledge and intellectual property is pretty important.
• Are the skills scarce, difficult to attract and difficult to maintain? Or, are they commodity skills that are widely available?
It’s common for businesses to use contract employees for commodity skills, especially when those skills can be obtained for the same or less as permanent employees. For scarce skills, your business strategy may dictate that you need to keep these skills in-house, else they be taken by your competitors.
Another consideration, people with rare skills typically are aware of this and consequently may not be attracted to contract work. The exception to this generalization are “hired-gun” skills for projects. See the bullet, below.
• Is it a position that merits the management and human resources attention and investment of a career path within the organization?
This is quite common. Many organizations don’t provide a career path for every function. Worried about losing talent? Don’t. Just because a person starts as a contractor, doesn’t mean no opportunity exists to convert the person to full-time.
Consider yourself fortunate when you find an extremely talented contractor who you’d like to bring on board. You were able to ascertain the individual’s talent and culture fit with low risk and even lower hiring costs. Contract-to-Hire approaches allow companies to try-before-they-buy. Partnering with staffing provider can prevent expensive bad hires and mitigate risks associated with misclassifying contractors as permanent employees.
• Are the skills required short-term, such as for a project that has a defined beginning and end, or long-term?
– Are the required short-term skills the same as the long-term skills?
– Will person who would be attracted to the short-term assignment (application development) be content with the long-term requirements (application maintenance)?
It is not uncommon that the skills for short-term objectives are different than those for the long-term. Consider contract employees for the former and permanent employees for the latter. Or, a different model is to use your full-time resources to implement the short-term project while backfilling their maintenance duties with contractors. This is more challenging to execute because your existing team may not have the skills necessary, which increases the risk of project failure and cost overruns. However, if you can pull it off you will end up with the best of both worlds.
• Is using contractors culturally compatible with the business or department?
This is important. Business leaders and managers should take a moment to reflect on this. Shifting to a contractor-based staffing model for certain functions should be carefully considered. How will you maintain your company or department’s culture? How will you ensure that you do not create a second-class employment category? How will you communicate these business decisions to your employees?
No issue is insurmountable. However, we recommend a thoughtful approach that prevents issues.
Again, the decision on whether and where to use contractors should be primarily based on the business strategy for your business or department. Answer these questions first, then move to the analysis of whether the benefits outweigh any difference in cost, which may not be what you think.
Later this week I’ll answer that question here on www.3coast.com.
Thanks for reading!