How to Keep IT Contingency Worker Costs in Check

Spend Matters welcomes another guest post from Kevin Davis of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom, and shipping.

Contingency workers have long been a source of IT project flexibility for enterprises. For many, it’s an easy way to temporarily increase staff resources and meet project deadlines. But, unfortunately, it’s also a fast path to overspending and reckless IT cost management.

How can companies avoid this slippery slope? It all boils down to the basics. Before reaching for outside help, companies should make sure their current workforce isn’t capable of handling the load. That means consistently considering the following questions every time they are about to spend on contingent IT labor:

  • Does this project need the skills of an outside consultant? Does a current employee already have these skills?  If so, is that person a better choice for the work?
  • Do the business owner and other stakeholders all agree with the decision to bring in outside help?
  • Does it make the most sense to pay the contract worker’s hourly rate, establish a fixed daily rate, establish a project fee, or make them an employee?
  • What is the fair market value rate for contract labor for this type of IT project/skill set?
  • Who will make sure IT contract workers are adhering to the enterprise’s internal policies?

There is undoubtedly a time and place for contingent IT labor in the enterprise. The problem is that many mistake it for a silver bullet without fully understanding the long-term cost and effect it has on the bottom line. This has substantiated a need for vendor management systems that streamline and optimize the contingent workforce management while providing reports and analytic capabilities that outperform manual systems and processes.

One of the greatest risks of bringing in contract IT workers is that the tactic can become a costly habit. And like any habit, once it becomes part of the day-to-day routine of the business, it can be difficult to stop. If you’re expecting to increase your IT contract labor force in 2014, benchmark and analyze how much you are paying outside workers across the business. Then ask yourself if that cost could be managed and controlled in a more efficient way. Oftentimes, the answer is yes.

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