How I Spent My Summer Vacation - Work Related?

I just returned from vacationing for 8 days or so in Lincoln, NE. Lincoln is not exactly a hotspot resort destination for the general public, but it is a mecca for a group of auto racing drivers.

To get a flavor for what motivates 1,200 or so drivers from all over the country to spend a week or more in Nebraska, check out

http://www.youtube.com/watch?v=UzWGwBd0DBg

My experience is at

http://forum.ovr-scca.org/index.php?topic=533.0

Why bring this up?

There are passions that drive all of us and provide balance in a world full of activity. This is one of the passions in my world.

In my mind, the true definition of recreation is the activity that takes you away from your regular life, where you spend "me time", and do things that bring inner satisfaction. For some, recreation involves high energy and intense activities. For others, recreation is more introspective, thoughtful, calm. I am sure there are some deep psychological reasonings behind why some choose yoga and others choose mountain climbing.

For me, it is pretty easy. As a 6 year old, the guy next door had a '57 Bel Air that he was all the time working on, and I was the kid hanging around. Since then, I've always had an interest in things mechanical and racing.

The thing to remember is to remember is to make time for the passions you have. If you don't, your world will be consumed with everyone else's priorities instead of your own.

Quick Update and Thoughts

Since my last post, business has picked up significantly. This seems somewhat at odds with the general trend in the economy, as layoffs are ongoing in many firms and financial results continue to suffer. This trend is impacting my company across the country, and seems to be consistent in the vast majority of regions.

What is happening here? Why are we seeing a rise in IT staffing positions when the media reports a very slow recovery? If a recovery is underway, why aren't companies hiring FTE?

My thoughts on this are that the cost of contingent labor has dropped to the point where the hourly loaded cost of full time employees and IT contractors is very comparable. Most large clients with formal procurement processes and Vendor Management groups have imposed rate reductions on their staffing supplers. Similarly the supply of skilled IT staff on the market has increased due to slowness in the economy. Conversely, few clients have been able to force a similar reduction in cost on their FTE's.

This has resulted in a very comparable hourly cost between contractors and FTE's. The advantage of contractors is that they can be hired and released quickly without worrying about costs for severance and such. This continues a trend that started some time ago where companies maintain a minimum level of staff to preserve core business knowledge and then use contractors for projects and initiatives that arise. Sort of like a general contractor outsourcing the carpentry work to another company on a building project.

The other oberservation is that I have never seen so much senior talent on the market. Clients seem to be focused on the 5 to 10 year technical professional that can be told what to do and left alone to do it. The demand for management talent in particular as waned. It is as if companies are leaving the technical staff alone to do the work in a self managed manner, and even when a "lead" position comes up, it usually entails the person also being a direct contributor.

This may be short sighted as individual contributors are notorious for shortcutting process and practices such as project management, requirements definition, etc. It is somewhat of a cycle: I expect we will see a rise in demand for Project Managers within the next year or so to fix the initiatives that have gone out of control.

What Candidates Should Expect From IT Staffing Firms - Part 1

Originally, my plan for this post was to do a short piece on what to look for in an IT staffing / consulting company. However, when I asked people for their thoughts and experiences, I received way more questions and and anecdotes than I ever anticipated!

In today's market, many folks are finding themselves working for IT staffing / consulting companies for the first time in their careers. Unfortunately, many are also getting surprised by what they find.

For example:

• The compensation discussed during the interview is not the compensation presented at time of offer.
• The consultant is not paid in a timely manner or at all.
• The consultant is not eligible for health insurance and other benefits that were previously discussed.
• The position is actually a subcontracted position.
• Travel and other expenses are not reimbursed.
• When the consultant comes off assignment, their employment with the consulting company ends.
• They are offered an independent contractor (1099) position rather than a W2 employee position.

And so on. It is understandable that miscommunication happens from time to time, but there is no excuse for a lack of clarity on the key aspects of an engagement and working with a company. It reflects poorly on the Recruiter and Account Manager as well as the industry as a whole.

I had coffee this morning with an individual who worked in the IT consulting industry in the 1990's, and recently relo'd back to central Ohio after working as a staff employee for a leading firm in the IT sector. She was quite surprised - actually, shocked - with practices today compared to ten years ago. For those of us who have been in the industry for awhile, perhaps we have been desensitized to the amount of change that has occurred. For candidates who are just getting acquainted with the industry, it can be an unpleasant experience should they fall prey to an disreputable firm.

If you have questions or observations on working with IT staffing and consulting firms, I would like to hear from you as I am preparing a series of blog posts on this topic. My goal is to coach and advise folks on how to mitigate their risk and align with the higher caliber firms like mine. Please respond via comments on this post or email at Rich.Grunenwald@gmail.com.

I appreciate your thoughts.

Driving Cost Out Of The Contingent Labor Supply Chain

Another winning post title.

When I speak with a procurement professional, the discussion always comes around to bill rates for contingent labor and how our rates compare to others. The importance of low bill rates is constantly impressed upon me, and the offering of most favorable pricing and terms is a requirement to win the contract. Then, the next items discussed are service levels and the added value that I as a supplier of contingent labor can provide to my clients.

I wonder whether this has been given real thought. It seems to me that to drive costs down in the contingent labor supply chain, there needs to be efficiencies in both the supplier AND client organizations. For example, that coverage SLA that the supplier needs to meet? It INCREASES costs to the client because the supplier has to staff recruiting to cover requirements they have no hope in ever filling.

To date most of the discussion in the IT space has been aimed towards the supplier, and solely in the form of rate management. Rates are only one aspect of managing cost. What about sales costs? Administrative costs? Recruiting costs? The cost of a reactive supplier model vs. a more proactive model?

For example, there are many clients that require the assistance of a skilled sales person to help them define their IT staffing need. The sales person has to spend time with the hiring manager, be knowledgeable about the technology and role, and step the hiring manager through definition of their need. Then, the sales person has to accurately communicate this need to internal recruiters who screen and match up candidates with the position, rewrite the candidate's resume', and present the candidate.

Think of the costs incurred by the supplier:

- Sales person salary
- Recruiter
- Time spent: determining need; communicating to recruiter; finding, recruiting, screening and presenting candidate.

This doesn't even get into the interview phase. When the hiring manager decides who they want to interview, the sales person is contacted, then a series of back and forth communications to get the candidate confirmed occurs, candidate prep is done, and then we go from there.

Now, what if it worked like this:

Client company regularly communicates contigent labor forecast for the next 30, 60, 90 days so supplier is able to proactively recruit talent. Hiring manager goes to a portal where he can search through a pool of available candidates from approved vendors. Hiring manager selects candidates they want to interview and sends an interview request along with available times. Candidate and vendor respond back through the portal. Interview happens.

A lot of cost is eliminated in this type of model. There is really no "selling" going on at the transactional level. The supplier's role becomes more of a "resource pool management" and "fulfillment" type of role, and the sales person really becomes more of a true Account Manager, ensuring the process moves smoothly, and that the supplier focuses on value adds rather than managing the individual transactions.

There are other variations of the supplier model, and there are parts of the current processed that can be greatly improved with minimal cost. Still, the point is that a mature client organization and a mature supplier organization can work together, collaboratively instead of adversarially, to effectively to minimize costs in the supply chain, benefiting both organizations directly through cost saving efficiencies and indirectly through increased competitiveness in their respective markets.

So far, the vast majority of the dialog I have read or been exposed to has happened solely within the supplier community or solely within the client community.

I wonder what would happen if a group of supplier organizations with relatively mature processes and a group of client organizations with relatively mature processes got together and discussed how to make the contingent labor supply chain more effective and drive cost out of the process. Think of the discoveries that could be made and the "light bulb moments" that could occur when both client and supplier organizations look at the process as a whole, and work together to optimize it.

Nah, it'll never happen.

More Trends...

I make it a habit to regularly meet with folks in the IT staffing industry on a regular basis. It is always good to keep up with what is happening around town, and to discuss ideas on dealing with the challenges we all face. In fact, I estimate that on average, I talk to anywhere from two to ten sales people, recruiters, branch managers, or senior consultants every week. These are one on one conversations, not networking events.


It's no secret that the economy is tough and that there are changes happening in the business. We saw this back in 2001 - 2003 when the economy was soft. Formal procurement practices really took hold in most companies with large IT services spend. Off shore competition from the likes of TCS and Infosys have found a nice niche and will only continue to grow their market share. We are seeing a similar (although I feel more systemic) change today as companies evolve their "procurement" to more of a "human capital supply chain" type of model.

(As an aside, I despise terms like "human capital". We are talking about PEOPLE, not widgets!)

What really surprises me is the reaction of my peers and colleagues to this change. It ranges from subtle resistance to outright denial. Per my previous post, IT is a typical industry on a product life cycle, and IT services are following the product life cycle. Given this, should anyone really be surprised that margins are going down, the supply chain is consolidating, costs are being reduced in the supply chain (or profits depending on perspective!), and labor rates are being impacted? Particularly in a down economy?

I suppose I can understand how a person that has been insulated inside the walls of a large corporation for 20 years or so might be unnerved by these changes. You dedicate your career to a company, put forth a good effort, and drink from the company fountain. Then, one day you see your colleagues laid off and jobs go out the door, only to be replaced by lower cost labor. I can understand how a person might have some resentment.

At the same time, it surprises me that my contemporaries and competitors who are out in the market in front of customers and companies every day resist and deny the changes happening. How can a person be in an industry for 15 or 20 years in a sales capacity and not understand the trends and adapt their business to the direction the customer base is headed? Or, decide to target another market with their services?

Can there be anyone that's unaware of what has happened to the manufacturing base in the US and not see the same thing in the services sector? It boggles my mind. In the technology field, we like to point out how innovative we are and that we serve as change agents for our clients and business at large by providing better solutions and tools to facilitate commerce. But when it comes to change that impacts us, we are among the worst at dealing with it!

One of my sayings is, "I'm not that smart, and even I can figure this out!" For whatever reason, I tend to try and step back and look at the big picture. I can thank my parents and upbringing for the inquisitive and analytical nature, and my education from The Ohio State University and University of Dayton for providing the framework for looking at the macro picture. I've been fortunate to meet get to know people along the way that provide other ways of looking at things, and additional perspectives. There are reasons that companies do what they do, and my job as a services provider is to understand and acknowledge these reasons.

It's pretty simple, really. Be aware of what is happening in your market space, adapt and evolve, or move on.

Staffing Industry Trends

As noted in my description, I lead a branch of a IT services firm in central Ohio. We help clients who are challenged by new technology, who are struggling to get projects done, or need help finding the right people to fit in their environment. It is a great company led by smart people who get the business.

Note that my thoughts and opinions here are mine only and do not reflect those of my employer, its management, or its employees.

Information Technology at large is a maturing field. While there will continue to be technology advances that will change how IT is levereaged to help people and business, it is unlikely that there will be revolutionary changes similar to those of the past 15 or so years (the Internet, Distributed Technology, etc.).

Much of what I am seeing is that the IT services sector is following a traditional product life cycle:

• Market introduction stage: Costs high, sales volume low, no/little competition, demand has to be created, etc.
• Growth stage: Costs reduced due to economies of scale, sales volume increases significantly, profitability, competition begins to increase, etc.
• Mature stage: Costs decline as you are well established in market and there is public awareness, sales volume peaks, increase in competitive offerings,
  prices tend to drop, etc.
• Saturation and decline stage: costs become counter-optimal, sales volume declines or stabilizes, prices and profitability diminish, profit becomes more a challenge of production/distribution efficiency, etc.

Depending on what segment within IT services that you look at, the sector is somewhere in the mid to late Growth stage or early in the Mature stage.

Why is this noteworthy?

Virtually all of the people employed in the IT services sector - Developers, Analysts, Exectives, Project Managers, Engineers, Sales people, etc. - joined the industry when it was in the heart of the growth phase. We have enjoyed great careers, significant compensation growth, and job security. However, our world is changing and we aren't used to it.

This is causing discomfort for many:

• People used to 6 figure incomes are faced with a potential decline or adjustment.
• Companies accustomed to traditional profit margins have to reengineer the way they do business as well as adjust their mix of services to stay vibrant and growing.
• Customers for IT services are changing how they have to buy these services as formal procurement and supply chain practices are applied to what is a significant expenditure for companies.

What we are seeing is more fundamental than a temporary drop in demand like we saw early in this decade. It is a major realignment of the sector.

Now, more than ever, it is critical that IT services providers:

• Have 100% clarity and definition as to what business they are in.
• Understand how their business and target markets are evolving.
• Adjust their operational models and tactics to align with the direction in which the sector is moving.

Some thoughts on the implications of this later.