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.
In reply to Don't contractors normally cost more than permies do.