Power
to the Contractor!
The IT worker gets star treatment and more options than ever.
by Michael Nadeau, Andrea Haynes, and Lynn Geiger
Copyright ©2000 Contract Professional Magazine/CPUniverse. All rights
reserved. Used by permission.
It's Java instead of RBIs and batting averages. C++ instead of
touchdowns and interceptions. SQL instead of Jodie Foster or Tom
Cruise. Free agency isn't just for sports and entertainment anymore.
IT contractors and consultants are the free agents of the New Economy
-- highly skilled and highly sought after -- and the demand for
that talent is creating a lot of play in how you can work.
Simply put, if you have high-level skills, you are in control.
As the market creates unprecedented demand for your technical agility,
you can pretty much name your game if you've got what clients need
and possess the soft skills to make them realize it.
To many in the IT staffing and services industry today, you are
"the talent," and they are "the agent." Much more than just lip
service, it's a reflection of where the contracting workstyle is
heading. With more than 850,000 new IT jobs expected to go unfilled
in the coming year, IT services firms are scrambling to give you
top treatment.
Just consider who's speaking at this fall's annual National
Association of Computer Consultant Businesses (NACCB) conference
in Miami. A California talent agent, Carl Bressler, is booked to
talk to members about the talent-agent relationship. Bressler, president
of Montana Artists Agency in Santa Monica, Calif., sees a convergence
in thinking, if not lifestyle, between Hollywood and the IT world.
"The marketplace has changed. People have gone from feeling lucky
to have a job to asking, 'What are you going to do to keep me?'"
The IT services landscape is changing rapidly in response. Don
McLaurin, CEO of the NACCB, expects to see a lot of experimentation
as firms add services for both contractors and clients. The industry
is revolutionizing the way it's doing business as a result of tremendous
market forces, says McLaurin. "Our industry has been a fortunate
recipient of the 'you don't have to take care of me' attitude,"
he says, "instead basing success on one's own skills, initiative,
and drive."
But as you well know, Uncle Sam is very mindful of "how" you work
-- we're talking tax status here -- and this factors in to what
services and benefits you can receive. Nonetheless, the demand for
highly skilled IT pros is mixing in a lot more flexibility -- to
your benefit.
To help you sort out the options in this fast-changing industry,
CP staff interviewed numerous IT services firms and eight contractors
who represent the range of help you can choose -- from none at all
to soup-to-nuts.
Matt Simmonds
First, let's talk about total independence. AS/400 and RPG consultant
Matt Simmonds goes it alone. As a Boston-based developer with a
finance degree specializing in the financial services arena, he
is in demand and doesn't need someone beating the bushes for work.
Simmonds has incorporated his own company, Simtech Solutions, and
has established the infrastructure to provide benefits and handle
administrative functions. "Training is a cost you have to absorb,"
he says.
A former salaried consultant for Whitman-Hart, Simmonds appreciated
the comfort level the job provided, but "the autonomy wasn't there.
"I had to learn the ropes [going independent]," says Simmonds,
"but I never looked back." Working independently isn't for everyone,
Simmonds believes. "It does take the soft skills," he says.
Dianna Moses
Dianna Moses also likes the idea of being an independent contractor,
but doesn't much care for some of the administrative overhead associated
with it. As a financial services application developer with more
than 10 years' experience, her reputation is such that work tends
to come to her. "A staffing firm is a great way to start out," says
Moses, but she feels that her income is higher working on her own.
For the past four years, Moses has used MyBizOffice.com
(a service of Contractor's Resources, Inc., a subsidiary of The
Netplex Group, Inc.), a Web-based firm that provides business
management help, such as financial, payroll, insurance, and other
services, to independents earning a minimum of $60,000 a year. The
cost is 4 percent of the gross billing. "There are 95 to 100 tax
law changes a year," says Moses. "That in itself makes it difficult
to plan." As an example, she cites the fact that last year she could
deduct 100 percent of the cost of computer books. This year, she
can deduct only 80 percent.
Although she still has her own accountant, Moses, a W-2 employee
of MyBizOffice, relies on the company to handle tasks such as payroll,
invoicing, and taxes. The firm is flexible in how it delivers its
services. For instance, if she decides to take five months off,
she can pay MyBizOffice in advance for health insurance to maintain
coverage during that time.
"We provide infrastructure support for contractors looking for
a successful professional and personal life," says Gene Zaino, chairman
and CEO of The Netplex Group. "We're creating a new industry, and
the contractor is the priority."
Tim Sullivan
Contract Web designer Tim Sullivan hated having an accountant do
his taxes and dreaded the possibility of an IRS audit. Although
a contractor for less than two years, Sullivan was getting plenty
of work through personal recommendations; a staffing firm seemed
unnecessary. Then by chance he heard about ZeroChaos.com,
a Web-based W-2 employer for independents, located in Orlando where
he worked.
The services that ZeroChaos.com offered would ease his concerns
about taxes, but he was also impressed by the benefits. He pays
$175 a month for health benefits and participates in the company's
401(k) program. As a W-2 employee of ZeroChaos, he receives another
benefit: greater access to credit. "Banks and creditors like a steady
employer of record," says Sullivan.
One worry that Sullivan had about ZeroChaos was that the company
was responsible for collecting late payments from clients. "I wanted
to be very careful," he says. "I didn't want ZeroChaos to interfere
with my client relationships." In the one case where a problem might
have arisen, Sullivan worked with ZeroChaos to handle the situation
appropriately.
The company offers two service plans to independents. After a setup
fee of $125, the charge is $274 a month for an option that covers
all administrative paperwork and access to benefits, compared to
a back-office-only plan for $139 a month.
The site has a cartoonish look and an irreverent tone -- "Independents:
We cover your backs by doing your administrative paperwork, filing
your taxes, protecting you with group-rate insurance, and pampering
you with raw freedom." Adds John Riley, president and director for
ZeroChaos, "We cater to the 1099 professional, without them having
to lose their tax efficiency."
These "profit centers" or "business units" from which contractors
can manage their business revenues and costs "empower the independent,"
according to Michael O'Connor, president of Independent
Professional Services (IPS), a back-office support organization.
At IPS, maintenance costs run 3.5 percent of an individual's gross
billing and cap at $4,000. Contractors interested in joining must
bill a rate of at least $45 per hour.
As for contractor requests, O'Connor says ease and a fair price
for paperwork is the top request, followed by marketing intelligence.
"They want to know how we can help them with the market," he explains.
"The Internet has taken the human contact out." He anticipates a
major backlash against services that "commoditize" contractors.
Establishment of this service for independents, generally known
as the "employer of record" concept, served to neutralize the effects
of the 1986 Tax Reform Act, or more specifically, Section 1706.
Essentially, the legislation took away the federal tax code's "safe
haven" for technical services firms, making it a difficult and risk-laden
process for businesses to hire independent contractors and prove
that they were, in fact, independent.
O'Connor recalls the day he was told he had to become an employee
while working as an independent IT pro in New York City following
the passage of the legislation. O'Connor responded by launching
his "profit center" model, allowing contractors to work independently.
Adding job search services to the mix, at FreeAgent.com
contractors can search and bid on available projects, as well as
obtain back-office services through its "e-office," according to
Wendy Reveri, senior vice president and general manager for FreeAgent.
A monthly e-office fee of $274 is assessed after an initial setup
charge of $199. You can bank on a regular paycheck and access to
benefits that include a 401(k) and four options of health insurers
as long as revenue is flowing. FreeAgent will process your business
expenses, and not just the ones involved in the assignment you are
currently on. IT pros working as 1099s can find work through FreeAgent,
but don't have access to e-office services until they change to
a W-2 status.
The people who rely on full-service staffing firms to find work
tend to fall into one of two categories: they are just starting
out as consultants and are looking to build a clientele and a reputation,
or they want to focus on their work as much as possible and let
someone else do the job hunting. However, other consultants who
usually find their own work often turn to staffing firms during
dry spells.
Michael Beyer
Michael Beyer runs his own consulting firm, System Dynamics, but
turns to The Computer
Merchant, Ltd., in Norwell, Mass., in some situations. For example,
after recently completing a year-long project in California, Beyer
found that some of his contacts at his East Coast clients had moved
on. The Computer Merchant found him a project in a week. "[It was]
a lot faster than I wanted to go to work," says Beyer.
Beyer also values the network of consultants that he meets through
The Computer Merchant, not to mention the new clients he reaches.
Some have later asked Beyer to bid on projects. Beyer returns the
favor by referring the firm when System Dynamics finds a project
that doesn't fit with its capabilities. "The company usually gets
the right person [through The Computer Merchant]," he says.
Since 1996, The Computer Merchant has been the only firm that Beyer
uses. The company respects his abilities and requirements. "Computer
Merchant is one of the few firms where there is no issue of what
the rate will be," he says.
Sheila Maguire, director of national accounts, says contractors
will find the assignment they want in today's marketplace. There
is a lot of competition for qualified talent, Maguire says. "[Contractors]
get to choose," she adds, noting that 90 percent of The Computer
Merchant's business is contract placement.
The firm's main focus is on relationships -- matching the right
candidates with the right opportunities -- although it does offer
comprehensive benefits and perks. The rate markup varies depending
on the tax status of the contractor, the volume of work done with
the client company, and the difficulty of the candidate search.
The company works with corp-to-corp and W-2 contractors, but doesn't
currently serve 1099-status contractors.
Adds Maguire, "There are a lot of Web-enabled services, and contractors
are going to want help muddling through. No way this business is
ever going to be commoditized. People are still going to call me
seeking personal understanding."
Nelson Johnson
Except for a four-year stint as an employee in the early 1990s,
software developer Nelson Johnson has been a consultant since the
mid 1980s. He currently is working on a W-2 basis through California-based
staffing firm Hall
Kinion, which does about 20 percent of its business with independents,
including 1099s. "Agencies do all the work: Talk to the client,
set up contracts, collect money," says Johnson. "It's a big convenience
when coding."
Johnson ran his own incorporated business for six years, but "it
wasn't my cup of tea. The business issues interrupted my programming,"
he says. The decision to change his working status was difficult
to make. "It takes honesty with yourself," he says. "Your ego gets
involved; you should be in charge."
Working on a 1099 basis had no appeal to Johnson. "You might get
paid once a month, or you might not." The amount of time he would
have to spend on the phone dealing with potential clients was another
turn-off, as he is serious about maximizing his coding time. "It's
sort of like being in a cocoon. You can navigate easily as long
as you are uninterrupted," he says. "Programmers very often need
to have agents getting the next gig."
Representation seemed to offer the best option for Johnson, although
he believes his income would be higher as an independent contractor.
He's happy with his choice of Hall Kinion. "When I want a rate change,
they go to bat for me." He also takes advantage of the firm's 401(k)
plan. He's not complaining about pay, either. "We're almost like
movie stars; we make almost as much as they do," he says. "I'm having
fun."
Hall Kinion supplies the vendors of technology, including Microsoft,
Intel, and Hewlett-Packard, not the users, says Rita Hazell, executive
vice president, contract services. "Our people are developing technology,
not implementing Oracle at Wells Fargo, for instance."
While staffing and services companies are honing their people skills,
online job tools are becoming more sophisticated. Tools being developed
now will enable a resume to go out on the Internet in search of
just the right job, and job postings could also search for the right
resume, according to Zaino of The Netplex Group. Online services
increasingly are adding the human touch, while the traditional staffing
firms are melding the human element of the business with the streamlining
capabilities of the Web.
Dick Bramel, vice president of organizational services at the national
service center of kforce.com
in Tampa, maintains that even though the industry is swinging more
toward an online presence, the human touch will always be necessary.
Kforce, with a Web site and more than 100 offices, is taking a hybrid
approach.
Scott Conley
Consultant Scott Conley believes kforce gives him the best of both
worlds: old-school staffing firm and Web-based e-cruiter. In other
words, he has a recruiter who "has a rapport with what I can bring
to the table and what I'm interested in," and he has the convenience
of the Web to browse through opportunity listings.
A contractor since 1997, Conley says he "doesn't want to be troubled
with the mechanics of consulting," although he admits that he would
probably take home a bigger paycheck by going independent. "I don't
have the ability to attract a diverse range of customers," he says.
"I'm willing to pay for that."
Conley tried project boards such as Guru.com and "played the field,"
calling six staffing firms before settling on kforce. "Kforce does
an exceptional job of being proactive," says Conley. "I'm confident
I'm going to meet my goals." He also praises kforce for paving the
way with clients. "Contract work comes with a stigma. The prejudices
are subtle, but there. I don't feel any of that [with kforce clients]."
"Traditional staffing is still our bread and butter," says Bramel.
"Advocacy best describes what we do." Salaried consultants represent
the largest group of kforce's contractor workforce, followed by
hourly pros. "More and more permanent-minded folks are open to doing
consulting work today, but want the warm fuzzies of W-2 status,"
says Bramel.
Kforce offers its contractors, who work on a W-2 basis, full benefits
and stock options, which Conley takes advantage of. However, they
are just "icing on the cake" to him. The relationship and quality
of assignments are what keep him loyal to kforce.
Dean Bliss
Network/systems engineer Dean Bliss likes to work through staffing
firms with "recruiters and salespeople that take the time to know
me and what kinds of assignments I would be interested in." He values
good communication: feedback after interviews, ongoing assistance
during assignments.
His current assignment is through Kenda,
headquartered in Salem, N.H. He has used the firm for three years.
He sees Kenda primarily as his marketing department. "I stay focused
and apply 110 percent of my abilities to the client's goals during
the course of an assignment," he says. "When the end of an assignment
is approaching, I do not like to spend time and energy looking for
the next opportunity. Marketing myself either cuts into my work
time, which the client is paying for, or my personal time."
Earlier this year, Kenda became a client of HireAbility.com,
a Web job site for IT contract and permanent pros and recruiters,
for its job and resume board. Contractors will be able to conduct
"database-like searches" based on criteria including their skills,
activities, and location, says Elias Israel, technical project manager
for HireAbility. This service, available in October, will enable
contractors to maintain their resume and profile, and announce their
availability for jobs.
Looking beyond just the next assignment, IT staffing and service
companies are owning much more of the consultant's career progression,
adds Paul D. Silvio, Kenda's chief operations officer. "Consultants
are looking to us as a consultant," Silvio says.
"I enjoy working with Kenda because they know me and represent
me so well that I have a sense of security in knowing they will
find my next opportunity," Bliss says.
Also important to Bliss are Kenda's resume preparation and review
services. "It ensures that my resume effectively represents my achievements,"
he says. He also takes advantage of the firm's 401(k) program.
Bliss assesses staffing firms based on a few criteria. "The integrity
of the agency's personnel is probably the most important asset,"
he says. "After that it's their communication skills, their patience,
and then do they have the client base that suits my skills."
Kelly IT Resources,
a business unit of Kelly Services, Inc., emphasizes its "hiring
to retiring" services for contractors. Vice President Mike Sheback,
Jr., says this philosophy of providing good continuous assignments
is an attempt to repair the social contract between employer and
employee.
Sheback says Kelly offers consultants alliances with some of the
top companies in the world. "A contractor can move from customer
to customer with the best assignments in the industry," he says.
Kelly IT offers "everything from payroll to career development
training," says Sheback, with the aim being retention of its contractors.
The number one desire of contractors is a paycheck that's on time
and commensurate with their skills, he says. "They also want to
be recognized for what they do and have access to challenging assignments
and training,"
In addition to conventional benefits such as training, contractors
working through a staffing firm in today's high-demand market may
find themselves with a free pizza for dinner, movie tickets, or
a weekend trip to Tahoe. Recruiters at Hall Kinion have a budget
that allows them "to be creative on the floor" with their high-end
talent, says Hazell of her company. Echoing the parallel to the
entertainment industry, "We view our contractors as stars, our recruiters
as agents," she says. "That's the relationship we have with our
contractors."
Hugo Bernier
Hugo Bernier started contracting at age 16 as an object-oriented
programmer in Quebec. Now 30, he built a reputation based on word
of mouth. When he moved to Toronto early this year, however, no
one knew him. He decided to find a staffing firm, but was put off
by what he describes as "resume sharks" more interested in filling
a job than making a good match.
Eventually, he hooked up with eTalentGroup.com,
a staffing firm that uses more of a pure talent agent model. There,
Bernier found "somebody who represents you and takes the time to
find out about your interests and goals." He was also impressed
by the company's claim to place the best of the best.
ETalentGroup takes a "solutions staffing" approach, meaning that
it assembles teams of professionals and presents them to potential
clients. Bernier, now an e-commerce specialist, likes this because
it allows him to form a network of people who work well together.
"Relationship is the key word," says Bernier about why he stays
with eTalentGroup. "[The relationship] is much closer than with
a usual staffing firm. I would have no problem inviting someone
like [eTalentGroup founder] Jonathan Ward to my wedding."
The firm stays in touch to find out how things are going and to
offer assistance if needed. "They take care of everything not related
to doing what you do best," he says. That includes handling expense
reports, invoicing, and in some cases booking travel or dealing
with course arrangements. Bernier says this approach allows him
to bill more hours.
Bernier knows that to stay on top of his game, he needs to keep
his skills current. The company helps out with a program whereby
Bernier can earn credits toward training. He accrues credits according
to the number of hours he bills and by other means, such as interviewing
peers on behalf of eTalentGroup.
Ward says he founded the company so he could focus on the contractor.
When he worked for an IT staffing firm in Toronto, he remembers
many contractors feeling like a commodity. "That's the way the market
is, and that model just doesn't make sense," he says. "In this model,
it is much more about taking personal interest in their careers.
We sit down and talk, and then market their skills to the clients."
Another talent agent model is Boston-based Aquent.
"I definitely see others latching on to the model," says Matthew
Grant, minister of enlightenment at Aquent. "What is going to differentiate
them is who they represent." Aquent is a niche firm specializing
in creative, Web, and technical staffing. The firm's "Partner Program"
has 300 "full-time" contractors who work a minimum of 80 percent
of the time and then receive benefits year round. "The concept particularly
appeals to those looking to move into contracting," says Grant.
"It is not order-driven and puts more responsibility on the agent"
in terms of the contractor's career.
So there you have it. A small yet representative sample of the
ways contractors are working today, the services they use, and the
satisfaction they gain from concentrating on what they love to do.
Perhaps Hollywood agent Bressler sums it up best when he says,
"It's a knowledge marathoner's world." Technology led the way to
the contingent workforce. Now, IT workers are reaping the benefits.
Michael Nadeau, Andrea Haynes, and Lynn Geiger are CP editors.
Contract Professional/CPUniverse, Dec. 21, 2000.