'Stop treating IT consultants like a commodity'

Martin Smith of GCS, the IT recruitment specialists, proffers a plea and personal view on the growing trend of IT personnel being viewed as purchased goods and of agencies being forced to take lower margins.

Martin Smith writes:

People are the life blood of our business; the single most important business critical resource, the future of our company. So say most companies and with all sincerity.

And where is it more true than with IT staff, who have the ability to enable, streamline and protect key business processes?

However when it comes to large corporates and institutions looking for a supply of IT staff, the onus for identifying the supplier is mysteriously handed over to an organisation's Procurement Department, who proceed to do what procurement departments do, i.e. select the supplier that looks the cheapest and then squeeze them until the pips fall out.

Why is the 'life blood of the business' treated in this way, as a commodity to be purchased under the same rationale as a paper clip, or a toner cartridge?

Most IT departments have plenty of great Programme and Project Managers who are excellent negotiators in their own right, and entirely capable of running a budget. Instead of centralising the acquisition of crucial IT staff to procurement, why not re-empower Project Managers to do it under the control of a policy set by the IT Director? Wouldn't this be closer to the much vaunted business model that decentralises huge monoliths and enables them to run as a cluster of agile business units under a commonly branded umbrella?

It's fair to say that as well as being the biggest asset, staff are often the biggest overhead for a business, and shaving a percentage point from the margins charged by recruitment agencies for all contract staff has an appeal the average CFO would find hard to ignore. However, on further examination and given that the recruitment agencies' charge represents only a fraction of the overall cost of staffing, does this focus on paring of margins really produce business/commercial benefits to an organisation?

There is no factory churning out identical contract IT staff, they are all totally individual unique 'items' and long may they be so. The key to maximising the value of these individuals to a given organisation is (surprise, surprise) matching them to the right job in the right place at the right time, something only a skilled and experienced recruitment professional is capable of doing.

These recruitment professionals are bright, motivated and capable people who cost money, and the better they are the more they cost. No contract where the recruitment agency is paid only eight per cent on the cost of supplying staff can be fulfilled by people as good as this. So, by commissioning procurement departments to set up supply agreements with recruitment companies at margins below 10 or even 15 per cent, organisations are in fact telling us that they want to be supplied with an army of clones by a team of monkeys at any old price, as long as the margin is right.

Ann Swain, the CEO of the Association of Technology Staffing Companies (ATSCo), has expressed, 'Historically, the decisions on IT recruitment lay wholly with the IT Directors who understood the value of using recruitment agencies and paying for this quality service, especially as they would be working with the staff employed. Now, however, the IT Directors are a part of the decision making group; this group includes procurement professionals, even though they are one step removed from the service offering and are totally focused on costs.'

Reducing the margins paid to recruitment agencies looks great on the Procurement Manager's CV; it does the organisation no good at all. No matter, in a year or two s/he will be gone, having found another step up the ladder at another company and a new Procurement Manager will be drafted in, looking to impress and improve their CV by cutting margins.

And so the cycle continues with yet another round of tendering, the same arguments submitted by recruitment companies as to why it's expensive and counter productive to use a 'cost plus' approach for procuring IT staff, and the same deaf ears with their own agenda for these arguments to fall upon.

Martin Smith

GCS Ltd