Managing Contractors in Tough Times

By Thomas G. Dolan, ITworld |  Opinion

As IT departments adjust to a slowing economy and tighter IT budgets,
third-party consultants are often the first to feel the brunt of any
changes. But some savvy IT managers who have come to rely on
freelancers are leveraging the economic downturn to get more bang for
their consulting bucks.

The Hartford Financial Services Group Inc., for example, is cutting
back on its use of outside consultants. "This puts us in a stronger
position with the ones we do hire," says John Madigan, vice president
of IT human resources at the Hartford, Conn.-based financial services
firm.

"We're able to exert more pressure for a better deal, to get a reduced
hourly rate or additional services for the same amount of money,"
Madigan adds. "They're saying, 'You guys are squeezing us!' But it's
simple economics."

Like other big companies, The Hartford has increased flexibility by
relying on its in-house consulting unit, which has more than 400
contractors. "We're turning more to them; they have a pretty good
recruiting machine," Madigan says. Previously, consultants from outside
the company were hired to fill recruiting gaps at The Hartford. Since
the market has softened, however, "our in-house team is now recruiting
outside consultants who are looking for work," he says.

Other companies are also finding it more cost-effective to build up
their in-house consulting staffs.

"Rather than paying through the nose for expensive outside consultants,
we've created a group of internal consultants who are not only forging
closer ties with customers, but also generating new revenues," says
Honor Guiney, CIO at National-Oilwell Inc. in Houston.

At The Limited Inc. in Columbus, Ohio, the need for new data mining and
data modeling applications to better focus products and improve
customer relations is leading the retailer to take a mixed approach to
using consultants, says CIO Tom McFadden.

The company has assembled a team of both in-house staffers and outside
consultants to work on systems integration and middleware for a new
customer relationship management system, says McFadden.

Indeed, some IT executives continue to cost-justify the use of outside
contractors where it makes good business sense.

Greg Clancy, executive vice president and CIO at Sallie Mae Inc. in
Reston, Va., is working with Onex Inc., a technology-consulting firm in
Indianapolis, on a Web integration project. Clancy says Sallie Mae
chose Onex because its rates are about half those of larger firms and
there's less contractual paperwork with which to contend.

Enzo Micali, chief technology officer at 1-800-Flowers.com Inc. in
Westbury, N.Y., says he used to rely heavily on outside consultants for
Web development.

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