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It’s about the people – vendors versus contractors

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 conference in Wellington and I haven’t stopped thinking about this quandary 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.
The thing I often hear from departing colleagues is “I don’t want to leave, but…” And you can fill in the gaps here – e.g. 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.

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.

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.

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.

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.

Posted by: Tony Stewart, Intergen Group CEO | 25 July 2007

Tags: Contractor, Vendor, ICT

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