By now, we've all had an earful about the labor shortage facing IT. From news accounts,
experienced IT professionals are in scarce supply and companies are lobbying Congress to relax
immigration standards for trained IT individuals. Although some disbelieve the hype about the
labor shortage, one thing is clear -- Year 2000 projects are consuming IT staffers at a hefty
pace. The effect of this pull is exacerbated by the demand for more resources to meet project
throughput requirements and mismatches between internal skills and project needs. As a result,
more firms are relying on consultants to manage their Y2K projects. As the IT resource market
tightens, staff retention and turnover become severe problems as IT professionals play musical
chairs for higher salaries.
Triaxsys Research LLC in Missoula, Mont., recently conducted a study of the securities filings of
Fortune 250 companies. Based on that data, Triaxsys predicts that, among the Fortune 250
alone, Y2K projects will require as many as 13,000 additional staffers over the next two years.
Where will these resources come from? The majority of firms have already reallocated most of
their IT staff to Y2K projects and are using external resources to varying degrees. With no
excess internal resources, these companies will look to consulting vendors to supply the surplus.
Consulting vendors, however, are not immune from the problems spawned by an ever-tightening
labor market.
Consider the plight of the U.K.: Companies there are in the throes of a severe shortage of skilled
IT workers, hampering their ability to keep Y2K projects on track. Salaries have shot up 40%
in recent months. As IT resources become more scarce, firms are focusing on retaining existing
staff. Many firms are paying loyalty bonuses from 15% to 40% of base salary to squelch
poaching. In other companies, unionized computer staffers are mulling whether to strike over
Y2K loyalty bonuses. Is the U.K. situation a warning bell for U.S. firms, and U.S. consulting
vendors in particular?
While internal staff turnover is a problem, many companies are experiencing consultant turnover
much more frequently. This situation is not surprising considering the nature of a consultant --
someone who trades job stability for increased compensation. Some companies believed that by
hiring outside help, they would insulate themselves from "turnover turmoil." The consulting vendor
would replace the departing consultant with a clone, and the client project would not miss a step.
Nothing could be further from the truth. Any highly trained professional, whether a consultant or
internal staff, who has devoted time to analyzing applications and developing and managing
projects is a valuable commodity. Even if a departing consultant could be replaced with an
identically skilled and experienced worker, there is a loss of acquired knowledge as well as
upheaval in the project.
Consultant turnover issues are not easily solved through contracts. Many consulting vendors
resist obligating themselves to long-term agreements or to guaranteed levels of staff experience.
Further, most vendors bid their projects at a fixed rate. Staff turnover wreaks havoc on these
fixed-price contracts as salaries for replacement workers are increasingly inflated. As turnover
mounts and salaries skyrocket, the consulting vendor must select from a replacement pool of less
expensive, junior people. Over time, this situation leads to a steady decline in the quality of
resources and a rise in client dissatisfaction.
While it is impossible to prevent turnover, here are several recommendations for minimizing the
amount and impact of consultant turnover problems:
First, realize that your Y2K project is your top priority and that high turnover could derail it.
Accept that your highest turnover may be among your consulting staff. Consider using your
internal resources to staff Y2K projects, saving consultants for less important assignments.
Second, be flexible with your consulting vendors. Acknowledge that they may face serious
turnover and replacement issues. Strictly holding them to the terms of a fixed-price contract
ultimately could hurt you. If IT salaries are climbing, and you need the most experienced
replacement project manager available, it may be worthwhile to renegotiate pricing with your
vendor.
Third, consider adopting incentive plans for consultants.
Finally, choose consulting vendors that encourage staff loyalty. Look for vendors that have their
own employees. Vendors with good training programs, compensation, and benefits are likely to
have greater levels of employee satisfaction and lower levels of turnover.
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