Managing Contractors in Tough Times
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
"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
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. But now that those applications are up and running, he
has been reducing his reliance on outside help in lieu of internal
"As we execute our activities in relation to the goals of the overall
business plan, it may make good sense to outsource certain activities,"
says Micali. "There are two main reasons. The first is to accelerate a
project, and the second is to recruit a specific skill we may not have."
Girding for Growth
Although most organizations are cutting back on their use of outside
help, James Ellison, director of information systems for the Las Vegas
Valley Water District, says his use of external contractors is
independent of the economy.
The water district has recently completed a three-year project to add
to or change a variety of applications, including water billing, order
management, and customer service systems. Ellison says he plans to
initiate another big project in about 18 months and insists that the
outside economy hasn't affected his decisions on either project.
"It's been said that the general economic downturn is a high-tech
problem. But this is still a [growing] resort and retirement area," so
these projects are needed to support that growth, Ellison explains.
For other organizations that are holding back on their external
spending, the logjam of projects and work that has been put on hold due
to the economic downturn should eventually turn in favor of outside
contractors, says Maria Schafer, an analyst at Meta Group Inc. in
"Most companies do not have an integrated process for developing
technical people. So even though outside consultants and contractors
are currently in retreat, when the pendulum swings the other way, they
will come charging back," she says.