Opinion: Contractors are not the answer to skills shortage

Contracting out is self-defeating in the long term

It’s a question that has been preying on my mind for a while now: Are contractors the answer to the shortage of resources in IT?

I touched upon this topic at a recent New Zealand Trade and Enterprise forum at the GOVIS conference in Wellington and I haven’t stopped thinking about it since.

My feeling is that, no, contractors are not the answer to the IT skills shortage. I would even go as far as to say that the opposite is true. The proliferation of contractors is actually helping to create this shortage.

Before I explain why, some background to the tale.

It’s something I hear often from colleagues in the industry. Why can’t I employ someone for less than $X an hour? The answer to that one is that demand has created contractors and contractors have created soaring rates that then elevate hourly rates in the IT sector across the board.

The other thing I often hear from departing colleagues is “I don’t want to leave, but…” And you can fill in the gaps here — I’m saving for an OE, I’m saving for a house, I’m saving for a family, and so on. It all comes down to the money. The lure of the dollar is a powerful one when it comes to contracting, and there’s very little any employer can do to buck the trend, except hike salaries as much as they can to keep up and hope for the best.

The crux of the matter, however, is not specifically about the money. More to the point, it’s about creating and fostering talent in the ICT sector. We’re experiencing a skills shortage that isn’t going to go away in a hurry, and while stopping the gap with contractors may provide an interim solution, it does nothing for the long term situation.

When an IT worker steps out on their own and becomes a contractor, they are stepping out of the mainstream and out of the fold where, more often than not, their learning curve diminishes to a horizontal path since they are generally no longer in a realm where they experience ongoing training, mentoring and the opportunity to learn.

Often the very nature of contracting is such that, while a person’s skills are utilised, they are utilised in a very narrow fashion, thus eventually dumbing down or eroding their overall skill set. And quite often, when they feel they have become stale in the contract market, they return to the fold for a refresher course.

But what does this exodus from the fold actually mean to the ICT sector? When contractors venture out into the world, they have garnered enough skills to stand them in good stead. It’s these very people that we have invested time and resources into in the hope that they will be around to mentor the next generation of IT workers moving through the ranks. It’s for this reason that we invest so heavily and believe so strongly in a graduate programme. But without a pool of experienced mentors to take the graduates under their wings, the value of such programmes is devalued and the quality of training is diluted. And ongoing graduate training is imperative in order to keep creating valuable IT workers for now and the future.

If we don’t make a concerted effort to focus on valuable graduate training, the skills shortage is only going to become more pronounced. The OE overseas drift is bad enough. As employers in the ICT sector, we need to be strategic in our approach to growing our resource pool.

The vendor vs contractor argument doesn’t end with lack of mentors for upcoming IT professionals, either. The effect of contracting on the IT scene is two-pronged.

We’ve established that contracting contributes to a dearth of IT workers. When organisations opt to engage contractors over letting a project to a company such as Intergen, they begin to put pressure on margins. Unless we can prove there is additional value derived from engaging a vendor, margins will tend to zero. Herein lies the second prong of my argument.

To foster IT talent you need the resources to do so. To get the resources you need the work, and following on from that a profit margin, that will enable you to invest the time and money into training staff.

With costs being driven down by the “no frills” contractor approach, as opposed to the added value, risk-free end-to-end solution provided by a vendor, it becomes increasingly difficult for IT companies to find and allocate these resources. And if, as a result of this, IT companies do not invest in their upcoming workers, the dearth is perpetuated. And so continues the cycle of increased skills shortage.

Some vendors have endeavoured to combat the skill shortage by jumping on the contractor bandwagon themselves and employing contractors, or even outsourcing overseas. While this is a financially practical solution in the here and now, it does nothing to invest in the ICT sector in New Zealand or help pave the way for a robust and leading edge pool of IT talent in the future. In New Zealand we are aiming to build a knowledge economy and focus on growing our services. If this is to become a reality, and not something that we simply pay lip service to, the only way to make it happen is to make a concerted and ongoing investment in the people who will hold this knowledge and deliver these services. There is no other way around it.

So what needs to happen for us to start making a change? Most importantly, companies need to look at the long term picture when thinking about the solutions they employ and recognise that here today, gone tomorrow solutions — like contractors — are helping to dry out the very market that we need to bolster. It is only by investing in our people that we can invest in and ensure the future strength, prosperity and innovation of ICT in New Zealand.

Tony Stewart is the managing director of Wellington-based IT service provider and developer Intergen

VENDORS

Pros

• A team with one unified purpose and clearly delineated roles working towards agreed objectives and timeframes

• Added value of minimised risk, ongoing support and continuation of service and ownership of the solution

• The project is managed so that hidden surprises and blowouts are minimised

• Long term engagement — will grow with you

• Enables an investment in IT personnel and innovative developments in the technology space

• Ensures you are getting the best, most suitable and up-to-date technology for your solution

Cons

• More expensive due to added extras and end-to-end consultation and implementation

• Less experienced team — generally a range from senior to graduate, to enable graduates to gain valuable on the job experience

CONTRACTORS

Pros

• Cost effective

• Generally get a more senior team when engaging contractors

• Short term solution

Cons

• A collection of individuals with no common purpose

• No frills — that is, there are no added extras such as project and relationship management, risk mitigation, quality assurance and ongoing support, no access to resources beyond the individual

• No continuation of service — what happens when a contractor leaves?

• Generally not practical or advisable in the long term

• Strip the ICT sector of mentors for graduates and juniors

• Hourly rate often means that there is no urgency for deadline, and the longer a project takes the better it is for the individual

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