Doing Your Sums on . . . Build, Buy or Rent

CIOs should never forget that while new technologies have a maturity cycle, the maturity cycle for human beings in IT is even longer

Even with the global war for talent continuing to escalate and with no sign of hostilities easing any time soon, software giant SAS Institute is determined to do as much as it conceivably can internally.

CIOs should never forget that while new technologies have a maturity cycle, the maturity cycle for human beings in IT is even longer

While other organizations struggle with decisions over whether to build, buy or rent talent, SAS - recognized in both the US and Europe as one of the 10 best places to work - lives by the words of founder and CEO Dr Jim Goodnight: "If you treat employees as if they make a difference to the company, they will make a difference to the company." That attitude even extends to the people who do the landscaping and housekeeping.

SAS CIO Suzanne Gordon says even the IT group, which does occasionally hire consultants on a special needs basis, never resorts to outsourcing. And those consultants it does bring in are almost always project managers, and when they work out, SAS does everything it can to put them on staff. "The reason we do that is because we have found over the years that you really don't know if you've got a good project manager until they've managed a project," Gordon says. "So we hire through a contracting firm and then if they work out we like to keep them . . . and if they don't we've only wasted a little bit of time. When we have a good contractor start, we treat them pretty much like a regular employee."

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Of course when SAS first formulated its approach 30 years ago there was much more talent around than there were positions for them to fill. Smaller companies can find it much harder to build talent at a time when top performers can be highly selective about the company they keep, can practically name their own price, and are free to decide - as many do - that consulting offers a more lucrative and independent career than they can achieve as an employee.

Eric Steinmetzer, executive vice president and general manager of US-based systems integrator Logicalis Contract Consulting Service, says some of the cream of the IT crop are no longer interested in working as employees. His company has had relationships with some of its freelancers for more than seven years. He says freelancers like being able to control their own expenses and working from home where they can leverage a home business status for tax and write-off purposes. Many see contracting as a means to broaden their skill sets or a way to work only nine months of the year so they can spend time with family and friends.

"They can be very independent-minded - some of the best IT professionals prefer to freelance," he says. "We work with one guy who knows more about .NET than the folks at Microsoft who invented the code. A major international financial firm wanted to put him on salary but he told me: 'Eric, I like to ride in on my white horse, fix a problem, make some good money, then go skiing for a couple of months.' He's typical of some of the best software brains in the business."

There's an old saw that IT people work in the industry, not for a company, and CIOs struggling with build, buy or rent decisions must frequently find that saying ringing true. With the supply of IT professionals increasingly tight and with everyone going after the same talent pool, hostilities in the talent war are intensifying, and CIOs have to arm themselves as best they can to defeat their foes. That means performing a difficult balancing act. Should they grow their own, draft their team or barter their way to the team they need on the field? What projects can they afford to outsource? How large a team should they retain in-house, and when they do manage to build a strong internal team, how far should they go to keep them?

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"In an era of true global competition, remaining competitive comes down to managing the capability and capacity of your organization to meet the demands of your target customers, an activity that is largely dependent upon your ability to recruit, retain, motivate and develop your labour force accordingly," wrote well-known HR thought leader and professor of management at San Francisco State University Dr John Sullivan, recently.

"Note that in the modern era, your labour force is made up of more than just the employees on your organization's payroll; it includes a significant volume of contractors, consultants, outsourced service organizations and strategic partners.

"Developing world-class practices to manage the talent resources capable of driving capability and capacity will be the ability most in demand by leading organizations over the course of the next decade and as the next war for talent builds momentum. Already, organizations and individuals in developing nations flush with an influx of operating capital from outsourcing and offshoring work are looking to expand the capability and capacity of their operations by looking outside the borders of their home country.

"Are you ready to compete globally? You had better be!"

Sullivan notes that leading organizations are applying capability and capacity planning to talent as they seek to transform talent management from art to science. The discipline is helping them balance the load of labour they need to meet or exceed strategic objectives with the optimal mix of resources. For CIOs without the resources or management backing to apply such discipline, or the deep pockets to lure candidates away from those leading players, it is like trying to feed yourself by dipping a plain rod in the ocean while your competitors are sweeping up the catch with giant nets.

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"At Accenture, we tend to work with larger companies," says Gary Curtis, global lead of Accenture's Strategic IT Effectiveness practice. "Companies that tend to be a couple of hundred million dollars US in annual IT spend and much more, and when you get to that large scale, capacity and capability planning in one form or another is very important. IT top managements do those things."

In companies with a much smaller IT spend the decision process will likely be different, Curtis says. Although the formality of their planning will vary depending on the management team, these days even the most informally inclined must look forward as far as possible at capacity, he says. "The needs for IT capacity and the various things that IT does can change fairly radically when business changes have significant IT implications, especially transactional events like mergers and acquisitions. There's a lot of that going on these days so it's at the frontal lobe of many CIOs."

Curtis says there is no slam dunk or golden rule for managing talent that always works and there is huge variance around the world. But he says CIOs should never forget that while new technologies have a maturity cycle, the maturity cycle for human beings in IT is even longer.

"Recruiting for a key position these days, especially with the talent shortages that appears to be global, might take three to six months or even longer depending on the nature of the position," Curtis says. "With such long inherent cycles, capability and capacity planning is very important and those who have done it less formally in the past I find are doing it more formally today. That is, they are actually going through a methodical exercise a couple of times a year, if not more often, on the human recruiting front to really size up what capabilities they need and in what numbers and where they will need to be deployed in the world if they're supporting global operations."

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Only Themselves to Blame

It behoves CIOs attempting to get the balance right at least to acknowledge that business itself must bear some responsibility for the current talent shortage.

"I think that the IT industry itself has created a big problem in this area," says Bryan Salas, talent intelligence manager for recruitment company Talent International. "When they have an in-demand skill set or they have a need where they demand a specific skill set, they have gone out traditionally to go get a contractor. But what was expedient in the mid nineties is not necessarily the case any longer."

Contractors, in repeatedly coming in to a specific area and working on a specific project, tend to lose their organizational skills, Salas says. And over time, their sheer numbers tend to contribute to the serious dearth of professionals with the business skills needed now and into the future.

Organizations also go wrong by approaching workforce management in a largely haphazard fashion. They hire people expected to be high performers or they seek out those with skills relevant only to a specific point in time and immediately immerse them in a project or projects. Peter Polachi, managing partner with executive search firm Polachi Company, argues this traditional approach fails to take account of the rapid pace of business change given the rate of technological innovation, as well as the need for certain organizations to adhere to mandatory compliance initiatives. This type of workforce management is reactive rather than proactive, though it does often produce short-term success.

Instead, organizations need to think ahead, he says. As projects are considered, new skill sets are needed to staff them and organizations that take the traditional approach to workforce management are left scrambling to find the right people with the right skills at the right time. The all-too-common result is that the organization does not get the work done, has to outsource it on the fly without enough time to properly vet it or, perhaps worse, bites off more than it can chew, which causes quality to decline precipitously across the board.

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"The alternative to constantly hiring just for the needs of the moment is to outsource those projects or business processes that require skills or resources that the organization cannot or will not be able to muster. But most organizations lack much visibility into their future project pipeline, much less what skills and resources they will need to meet the demands of these projects," Polachi says.

In doing their sums on the build, buy or rent equation, CIOs need to review closely internal as well as external core competencies, says Jim Lanzalotto, vice president at Yoh, one of the largest providers of talent and outsourcing services in the US for the IT, scientific, engineering, health-care and telecommunications communities.

They should be looking at what their current talent does best, what experience partners in their vertical industries may be able to offer and the expertise of their recruiting teams in key skill areas. "The biggest mistake that organizations make is not having a plan in place before beginning to look for new talent," Lanzalotto says. "One way to avoid this is to meet before hiring and create a plan. Additionally, hiring managers should try to effectively pipeline key and often reused skills when managing their current talent or looking for new talent."

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Build, Buy or Rent Equation

For large organizations like SAS, knowing what is coming down the pipeline and doing the sums on the build, buy or rent equation is relatively easy. Hacy Tobias, currently general manager people and performance, for mining firm Ausenco, says she was the Asia Pacific human resource director for SAS for four years. The most effective organizations, she says, work hard to develop a multi-pronged approach to skills management. Since the skills shortage means they will never be able to rent or buy enough talent, such organizations grow their own whenever possible, often by putting development programs in place. For instance, Tobias points out it can take a year to learn SAS code, so it makes sense for that company to hire new people and grow them, and to work out ways to fast-track their development in order to have core competencies reside in the organization.

She urges organizations never to forget that while using contractors might often prove essential, their tendency to flit from job to job means they are prone to disengage four months into a six-month job as they look for the next opportunity. "What's the solution to that? I would only use contractors personally as a top-up in peak times," Tobias says. "Just as in the power industry you have base load and then you use gas for the peaks; with no disrespect to contractors, that's when I would be using them."

However, Accenture's Curtis points out that for many organizations the "build" part of the equation is often constrained by the availability of local talent at the right price point. "It used to be the case that the CIO could look at the capabilities in-house and say: 'Ideally, I would like to build ABC and buy XYZ'," Curtis says. "With extremely rare exceptions that is simply not available as a planning assumption these days. So the local availability of talent at the right price point or lack thereof, which is sort of a binary distribution, turns out to be the controlling element almost always, especially in developing or smaller economies.

"When there is talent available at whatever the right price point is, and that varies usually depending on the need and the nature of the role and the company, the decision tends to be around the need to maintain a long-term knowledge base or long-term skills base," he says.

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