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Technology Stocks : Discuss Year 2000 Issues -- Ignore unavailable to you. Want to Upgrade?

To: John Mansfield who wrote (2462)	8/24/1998 5:52:00 PM
From: John Mansfield	Read Replies (2) \| Respond to of 9818

'Barron's: Wall Street May Be Ready for Year-2000 Problems, But Firms Involved in Transport, Oil and Mines Are Not (requires paid registration)' Anybody here who has access to Barron's? year2000.com

To: John Mansfield who wrote (2462)	8/25/1998 5:58:00 PM
From: John Mansfield	Read Replies (2) \| Respond to of 9818

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. sentrytech.com