CIOs Opting for IT Contractors Over Hiring Full-Time Staff

The Bureau of Labor Statistics paints a dark picture of the IT job market, but there's a bright spot -- CIOs are hiring more skilled IT contractors.

The latest Bureau of Labor Statistics data reveals that over the last 12 months, only 77,600 IT jobs were added, as CIOs and hiring managers remain cautious about the slow economic recovery, says Victor Janulaitis, CEO of Janco Associates, a management consulting firm that specializes in IT.

According to the BLS data, September's IT jobs number was adjusted down from a gain of 2,500 jobs to a loss of 3,600 jobs. At the same time, the number of jobs reported as gained in October was only 5,200. But amid these dismal numbers, Janulaitis says, there's a bright spot companies are increasing thier budgets for hiring skilled IT contractors.

IT contractors

CIOs Reluctant to Hire, Eager to Contract

"Based on my recent interviews of 84 CIOs over the last two weeks, we see that CIOs have become more cautious," Janulaitis says. While more than two-thirds of CIOs interviewed say their aging, legacy infrastructure is making it difficult to implement new technologies, budgets simply aren't available to do so, he says.

"They all need larger budgets and staff to deal with this but are reluctant to hire new, full-time employees," Janulaitis says.

That's where IT contractors come in, according to IT recruiting, staffing and consulting firm Mondo. A recent survey of more than 200 IT decision makers in combination with data from Mondo's network of contract IT placements reveals that 48 percent of respondents plan to hire more IT contractors than full-time staff in the next year to 18 months, and 32 percent expect to increase their annual budget for hiring IT contract workers, says Laura McGarrity, Mondo's vice president of marketing.

"Budgets for contract spending are increasing, especially in the media, communications, publishing and higher-ed markets," McGarrity says.

"What we see from our clients is they are using those budgets to invest in IT contractors skilled at maximizing and squeezing additional value out of their existing technology platforms. They need Web developers, application developers, and mobile development professionals, and also a lot of that spend is being pushed toward marketing," she says.

According to the Mondo survey, 73 percent of survey respondents currently use contractors for application development, Web and mobile development, application hosting and application maintenance.

Thirty percent of respondents indicated they plan to outsource more application development work and 27 percent plan to outsource more mobile and web development in the next 12-18 months, according to the survey.

Peter Cannone, CEO of IT contract staffing and workforce-as-a-service provider OnForce says the findings are consistent with what his company's clients are experiencing.

Demand for IT Contractors Is No Fluke

"Demand has definitely increased for IT contractors," Cannone says. "For our clients, they are facing an aging workforce, and they want to leverage existing technology to the fullest without increasing budgets for full-time hires," he says.

"They want to build a flexible workforce, streamline and drive cost efficiencies, and they are asking us for help to save anywhere from 30 percent to 60 percent off the bottom line," Cannone says. That demand has increased monthly applications to OnForce's Workforce-as-a-Service solution increase from about 750 applicants per month to around 1,000 applicants per month, Cannone says.

He adds that this trend toward contractors instead of full-time hires isn't just a fluke, especially as enterprises cut back on benefits and perks for full-time employees and move toward a contractor-heavy workforce.

"This is going to continue to be the norm for the next few years, I believe," Cannone says. "We're actually expecting that, next year, the number of IT contractors in the market will double, based on the increased number of contractors we have signing up with us," he says.

Don't Expect to Save Money

While companies can save money by increasing their contract workforce, says Mondo's McGarrity, there's a caveat. Many IT contractors have left the full-time workforce by choice, or are working as contractors because they're unable to find full-time employment. But that doesn't mean they're less skilled or less desirable; in fact, they could have deep and broad skillsets, says McGarrity.

"It's a common misconception; in some cases, it's not any cheaper to outsource," she says. "And while companies certainly can save by hiring on a contract basis, there's still expenditure. What we're seeing, is the demand from clients for a much more mature, deep skillset and greater experience across multiple platforms," McGarrity says.

These types of employees are much harder to find, and much more expensive, and that fact could correlates with a budget increase in contract spending, she says.

In some cases, she says, clients experience sticker shock when they realize that the skills, experience, and maturity they want in an employee is going to cost more than they thought, but at the end of the day, to remain competitive in a tough market, they must pony up.

"In order to get the talent they want at the skill and expertise level they want, they have to pay for that, whether it's a contract employee or a full-time hire," McGarrity says. "Sometimes, their lowering budgets can be a negotiating tactic, but, in many cases, it's just a matter of educating the client about the real-world value of these employees," she says.

"They believe they're saving so much on the bottom line by using contract workers," McGarrity says, "but they just don't understand how expensive it will be."

Sharon Florentine covers IT careers and data center topics for CIO.com. Follow Sharon on Twitter @MyShar0na. Email her at sflorentine@cio.com. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.

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