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Don't contractors normally cost more than permies do.

by hackmare (Pilgrim)
on Jun 06, 2001 at 13:37 UTC ( #86154=note: print w/ replies, xml ) Need Help??


in reply to Permanent != Permanent
in thread I've had my current job for

It seems to be an interesting approach to drop low-cost staffers to replace them with expensive contractors (unless their pay got chopped too). The chief bnifit of contractors is that they are easily removable, but their chief danger is that they can easily leave. I'd like to get inside the ehad of the decision maker for that action in your company. This would normally mean that the contractors are now either underpaid and will look elsewhere for better contracts, or are too expensive and will cost even more when the demand comes back up.
Other than the fact that staff get paid out of payroll and contractors get paid out of another pool, I don't see much sense in that action.
That said, my contract is doing exactly the same thing as your project. As a matter of fact they're going one deeper, and adding a sole-source supplier in the middle, which generates rate multipliers between 1.5 and 2.5 to the customer, while in the region the standard is 1.15 - 1.2.

Then again this simply looks to me like traditional corporate short-sightedness - looking at the apparent spending of a department rather than on the real picture, and relying on the Battling Business Units concept to work things out.

I'm luckily currently sitting in a huuuuge bank, which keeps me in somewhat the same position as you, I think. As long as my project lives and as long as I dont get too demanding, it's a long term contract.
I also think that like you, the fact that I'm in application development plays a major role in my longevity in contracting. It just does not make sense to have knowledge-critical infrastructure outsourced. But then again some manager's manager could wake up, sneeze, and the project would be cancelled. Your last point about IT's permanance is a good one, to which I also subscribe.

Don't you also nevertheless get a feeling that the dot.com hype in the states, and the following bubble phenomenon has nurtured an environment in which many, many corporations (luckily usually only the immature ones that were on their way down from the start) have sunk far more ino their IT budgets than they could possibly hope to extract under even the most optimistic scenarios?

I for one am watching the crumble of the US dot.com industry with some trepidation, thinking of all the lost contracts & hungry workers that are going to be flowing out of the failed dot.coms.

-hackmare


Comment on Don't contractors normally cost more than permies do.
Re: Don't contractors normally cost more than cermies do.
by cacharbe (Curate) on Jun 06, 2001 at 16:33 UTC
    When you look at staffing there are a couple of points that effect the graph when it comes to "Cost". One is salaray, and the other is BENEFITS. If the company knows that they need to staff a unit, they can keep close to the same number of people on staff and cut their overhead by 25%-50% merely by using contracts. Now, let's say you are a Tier 1 auto supplier with a HUGE contract with a company like Sequoia Services. The contract goes to services, not the number of people. We sign a deal for 'X' services over 'Y' years, Sequoia quotes us a number, we pay, and they worry about the number of people. Those services don't fall under the HR blanket per se, they are now billed to IT as a service, like Compaq's server setup fees or MS liscensing.

    It is Corporate short sightedness(tm). It has to do with morale and loyalty.

    Don't you also nevertheless get a feeling that the dot.com hype in the states, and the following bubble phenomenon has nurtured an environment in which many, many corporations (luckily usually only the immature ones that were on their way down from the start) have sunk far more ino their IT budgets than they could possibly hope to extract under even the most optimistic scenarios?

    *sigh* That depends. Much of the infrastructure in the United states didn't get the same overhaul because of WWII that most of the rest of the world did. Europe was "lucky" in that they got the onetime upgrade when it came to manufacturing and infrastructure. This is even more true regarding Japan, who had already undergone a more substantial technical/industrial revolution. Which means everyone had the knowledge workers, and they rebuilt with the newest technology. They saw it as a necessity, and have continued to do so.

    This does not hold true in the US. Because of this, much of the manufacturing sector, the auto industry especially, (hey, I'm from Detroit) is working in the fricking dark ages, especially when you get below Tier One. I've been to some of these places. You're lucky if you can find a fax machine, let alone a PC (And there are no hopes of an IT staff).

    The investment that you have seen has been to bring much of our IT infrastructure up to date with the current model. Most of my headaches center around making 19 different systems - (old systems - really old systems) ranging from Dec/Vax and IBM AS/400 to NT/Win2000 - exchange and share data in a meaningful way (hence perl - although I am also implementing BizTalk and other XML tools platform to platform...) I think this first *burst* of technology investment is critical to setting the stage for further advances in the future. Moving our suppliers from faxing us orders,POs, etc. in various EDI formats to a web based email system (still EDI - but now I can handle it with BizTalk and a MSMQ or Q-SERIES applicatiom) was a big investment up front, but it is already showing returns.

    Ford's implementation of Plumtree as a B2E resource, and putting their HR info there wil save them around 8 million dollars this year on Paycheck related paperwork (stubs, administration, etc) alone. Big up font investment, sure, but definitely a pay off.

    Tech is like any other industry, it isn't some magical pill. I didn't get hurt in the tech crash because I realize this. These are companies like any other, they have the same HR headaches, they same supply problems, and the ones that are dealing strictly in Intellectual goods have an even bigger problem...Inventory. Smart investors don't take dreams as collateral. The bubble grew so big that it burst because of hype, media and speculation. If these .com comapnies had based their growth and prospects on reality, rather than pumping the dream, all would have gone well. The net isn't going to die, too many companies are now counting on it as a communications medium, as a trading medium and as a medium for eperimentation. We, as technical people, need to foster this ideal, but we also need to be the voices of reason. There are no free lunches, and, unfortunately, I think many people in this industry realized that.

    C-.

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