Why Are IT Contractors So Expensive?

LONDON, ENGLAND, August 19, 2011 (Press-News.org) When I'm asked this question however, I do generally have to ask some supplementary questions in order to clarify what they mean. The first is - "as compared to what?" In virtually every professional discipline, a contractor will generally get paid more than a permanent equivalent for entirely understandable reasons.

Contractors don't usually attract the benefits of a permanent employee and hence need to be compensated in other ways and, equally, their very convenience comes at a price. Bought in skills will always come at a premium, and a great contractor is never going to cost what that Big 4 audit will, even though it will only last two weeks and won't spot that gaping hole in the accounts!

Contractors who are simply employed to cover an inter-regnum, maternity leave or year-end are never going to be paid a huge amount more than a permanent member of staff and IT generalists are no different in that respect. However, most IT interims are actually bought in for the knowledge they have - knowledge that isn't available within the organisation. Hence, they get paid for their knowledge as much as their skills, just as a finance director might employ a tax specialist or a HRD might engage a comp and bens consultant. Employing a contractor to do something that no-one else can do in your organisation might cost a lot of money - but that doesn't necessarily mean that they are 'expensive!'

At current estimates there are about 250,000 IT contractors in the UK; hence there may be as many as one million assignments every year. Many of these will be conducted by skilled, professional contractors on behalf of reputable, responsible recruitment consultancies - but, it is sad to say, some will not. Big money spent does not always mean big money earned, and clients can sometimes be short changed.

Here's how to avoid wasting big money on the wrong contractors in five easy steps:

1) Pick the right consultancy - the barriers to entry into the recruitment industry are relatively low and hence numerous 'IT contracting specialists' are incorporated in the spare bedrooms of middle England every week. Armed with a phone, budget PC and Jobserve account they launch themselves on an unsuspecting public.

A large recruitment business is always more professional and thorough than a 'niche' player, offering a high degree of comfort. They'll actually meet the candidates, check their references and carry out employment checks.

2) Use the right selection process - many customers are used to utilising a set HR-led process for permanent recruitment and, for many customers, this works well but only for permanent recruitment. Engaging with a contractor is, in reality, much more like engaging with an external firm of auditors, investment managers or lawyers than it is hiring a permanent person. Not only do you not have the time to put a shortlist of candidates through three interviews, a competency based skills assessment, 16PF and trial by sherry, it probably wouldn't lead to the selection of the right candidate anyway. Clearly, when a finance director appoints a new auditor he would expect to meet the senior manager leading the audit, but he probably wouldn't base the award of the audit on that meeting. He or she would probably be more interested in the pedigree of the firm, their provenance in the industry and the work they had done for his/her department, or other parts of the organisation.

Hence, to select the best contractors becomes a matter of selecting the right recruitment consultancy, ensuring they have the right information they need to select the right interim and are allocating appropriate resources to your assignment. Typically, the consultancy might recommend a face-to-face meeting between client and the recommended interim - not the thirty minute 'interview' where nothing really gets discussed, but a thorough briefing meeting where both parties get clarity about what's required.

3) Ensure there are no surprises - if the engagement process runs as above then the contract should run smoothly, but in many cases the project fails before it's even begun. Just as you wouldn't tell a decorator to "paint my kitchen" and expect that everything will be done in exactly the way you would expect, the same is true of the IT contractor who is told, "implement SAP."

OK. I'm being a little flippant, but most IT contracts that do go wrong, start to do so at the initial brief. The client expects the contractor to 'get it', the contractor expects the client to 'get it', both getting it is different to both parties and chaos ensues. I have to say that as much of the fault lies with the contractor as the client in these cases, but it's your money at risk so it's generally incumbent on the client to ensure the contractor understands the spec. Generally, asking the contractor to write an 'assignment brief' is best, detailing what they understand to be the key deliverables, timescales and stakeholders in play. Not only will this be a good way of measuring fit, but it will become the critical path of the project.

4) Remember contractors are humans too - I sometimes wonder whether the reason why contractors get paid lots is because it's tantamount to danger money. Perhaps it's just envy about the money, but in many instances the conditions interims are expected to work are horrendous - no invite for a beer on a Friday night, no cheery greeting on a Monday morning and even, in one case I've heard, requested to use different toilet facilities! A professional contractor, who values their reputation in the market, will still deliver what they've agreed in these kind of circumstances, but generally people will do a better job for people who treat them with courtesy and consideration. The more engagement that is offered by the client, the less likely you are to find your solutions architect pulling out four weeks before the end of the project having received a better offer.

5) Don't go cheap - it is odd to end an article about the high cost of IT contractors with a recommendation to pay more money, but I do so advisedly. Ultimately, paying GBP600 a day for three months on a successful project is much better value than paying GBP400 for six months to deliver the same project.

It isn't always true that one gets what one pays for, but you always don't get what you haven't paid for!

Written by Stephen Rutherford, managing director, Michael Page Technology. Visit our website to view the wide range of technology jobs we are currently recruiting for.

Website: http://www.michaelpage.co.uk