Next-Gen contractors to beat 'old IT'

Contractors who re-invent themselves and accept equivalent rates of pay to their Indian outsourcing counterparts' will inherit the future of IT, industry-watchers predict.

A US columnist recently reported on the curious story of a Boston entrepreneur who bucked the trend of using offshore contract programmers for application development.

The entrepreneur - nervous about sending his development work overseas - did some comparisons...

Whereas Indian companies cited an annual programmer rate equivalent to $40,000 (£21,482), the entrepreneur advertised locally for four programmers at the equivalent of $45,000 (£24,168) a year.

He was flooded with resumes, many from highly-qualified local programmers.

He got qualified local talent for a short-term project - the columnist reported - managed to keep the work within geographical reach and subsequently hired the top performers as full-time employees at regionally appropriate rates.

Diane Morello, vice-president and research director at research house Gartner, says the shrewd director's business model could be the shape of things to come for IT workers across the West.

"While the [Boston] case provides further evidence of rate suppression in the IT contractor marketplace, it would be an oversight to write the process off as simple exploitation" she said.

"Ninety local people jumped when the Boston businessman offered them the opportunity to work for $45,000, despite the high cost of living in that area."

Morello says many companies who hear the story will consider adopting the same tactics. But the way in which they do it will be what sets them apart as "goodies" or "baddies" in the long-term.

"The same companies who callously stripped people and talent from their organisations over the past couple of years may adopt this tactic as a way to flex compensation muscle and exploit the desperation of out-of-work or underemployed IT professionals," she says.

"But other companies hit badly by the economic downturn may compassionately offer lower contractor rates now in exchange for higher permanent-employment salaries later."

Although the entrepreneur's tactic is just one example, it could be a boon if it were switched from a company tactic to an IT professional tactic, analysts predict.

What's more, they add, it could return power to IT contractors who are prepared to band together to promote competitive rates and well-coordinated project teams, much the same as artists, technicians and trades people do in the film industry.

Such partnerships could help fill emerging demand and promote co-operation rather than exploitation, they say.

Richard Gilyead, an architecture consultant, predicts the fear of exploitation of these professionals by companies that are unwilling, or unable, to invest in increased productivity and who seek out low salary costs to compensate will create a "next generation" of super-savvy IT consultants.

"In IT, the promise of new business practices like Service-Oriented Development of Applications (SODA) and virtualisation is to reduce reliance on large numbers of technical workers through automation," he says.

"This new world of IT will involve a smaller number of highly-skilled, business orientated people working closely with users to optimise processes."

Morello says the subsequent shift in both domestic and global sourcing to enable this to happen is likely to mean a "transition" for the IT profession and those who work within it.

"In the future marketplace, specialised technical skills will fail to differentiate IT professionals," she says.

"The same transferable skills that enabled IT professionals to move from position to position in the late 1990s are the same transferable skills that now allow enterprises to move activities, systems and applications to other companies and other regions.

Therefore - she reasons - if the previous era of the IT profession was characterised by specialised technical skills that increased IT professionals' mobility, the new era will be characterised by the contextual application of technology to specific business and process problems and improvements.

"Professionals who accumulate skills without context will be the first to see their work and activities transferred to other sources and labor markets," she adds.

The way for IT contractors to meet this changing demand is primarily to train themselves in new technologies, she says.

"But that alone is not sufficient," she adds.

"They need to customise their knowledge and skills to the context, behaviors and personalities of enterprises, industries and processes."

Morello calls this "the disorientation process".

"The disorientation and insecurity of many IT professionals is too easily attributed to outsourcing and cost-cutting. A more subtle reason," she suggests, "is the shifting profession and the fear that many IT professionals will be unable to keep up."

Contractors who are able to re-train and adapt to the changing marketplace consequently stand much better odds of reaping the long-term rewards of the Boston businessman's model for using professionals on home soil. That's provided it catches on...