Manage your contractors to Reduce your IT costs – part VII

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Written By: admin

Its Thursday and you only have two days left in this week to work on cutting costs and improving your position in your IT organization. What do you have planned for this Saturday? Can you move any meetings from the calendar to a Saturday meeting, in the office, without catering services, to increase productive time today and tomorrow with your teams?

We talked about it already once before – what are your people doing. Now is the time to put it into action. Call all of your managers, or ask your management to let you lead a workshop across your peers. But get the IT leadership together, put the organization charts up on the whiteboards, and mark off those positions by types:

  • Full time
  • Part time
  • Temporary full-time position
  • Long term contractor
  • Co-op
  • intern
  • Short term contractor

and for each position, not if it is filled or open.

Now we already discussed putting a free on filling all open positions. Lets see what we can do to work with what we have going on today. Are there positions being filled by employees that we can move down the ladder in terms of costs. Actually in a large number of cases, we should move long term contractors higher up the ladder.

Cut the contractors

Are you paying more for a log term contractor then if you offered them a full-time position? You know you are, so lets list them out and make a strategic decision here for the betterment of the organization. We will talk about reigning in your remaining contractors later, but for now, lets work with those contractors that are living off of 1099’s for whatever reason, be it self sufficiency, work permits, insurance, staff issues, or their flexible schedules. Whatever the reason, why are you paying someone 2x or 3x the full burdened rate of an employee for a long-term contractor?

How much can this save me?

If you have a long term contractor at $300 per hour and you convert them to a full time employee, or if they are not the right fit for your organization, you bring in a new hire. In either case, if your fully burdened rate is $95 per hour, you can be saving $426,400 in operating costs per contractor. Just on one single long term contractor you could be making a dent in the budget that makes today a good day.

All of the methods of reducing or cutting the contractors is one where the current economy and market conditions are favoring us today. On every contract we have today, lets review our options:

1. Reduce the contractor hourly rate

– Call the contract manager and ask what they can do to trim their billable rate as of today for the next 3 months or six months? It can’t hurt, the call is cheap, and it lets them now we are looking. A small trim of their hourly rate can lead to big savings on our contractor expenses and let us move on to other areas.

2. Cut the number of contractors working on the project

– They are contractors, you hired them as flexible works. Time to cut the budget so drop a few of them off of the project.

3. Cut the number of hours the contractors are billing us each week

– Again they are contractors, flexible workers for the short term support of your organization or for a specific project. Cut their hours back.

4. Immediately eliminate any over time or overage hours on contract work

– We have our full time salaried IT management and staff for after hours support and emergencies. If we have a contractor doing this work, who will do it when the contractor leaves when the project ends. This role should never have been done by your project contractors anyway.

5. Slash contractor travel and entertainment expenses

– Do we have contractors traveling on your budget? Switch them to flexible schedules and have them VPN in as much as possible. Now here is where you have to manage contractors even harder when they work from home – insist on specific and measurable goals and quality level work product results. Make sure we get what we are being billed for each week.

How much can this save me?

Lets take a project with 5 contractors flying in each week for 5 days on site. If we switch them to being on site for 3 days a week, every other week, and working from home the rest of the time, we could be saving easily $30,000 per month on just this one simple move. That is enough to add extra staff onto this project or others that need the help. By making a simple change, you can shift funds from no return for the investment T&E into a positive ROI labor category.

What about entertainment contractor expenses?

– Immediately ask all of your contractor agencies what their process is for reducing expenses on entertainment and travel? Are they brining in pizza and salad lunches for our staff to conduct training sessions then billing us for it? Are they going out drinking and eating a steak dinner each night and throwing it onto your tab?

Do we fire all of our IT contractors?

No, we still need to get our projects done on time, if not ahead of schedule, and under budget, while meeting our goals. And those contractors that are flexible staff, are helping meet our staffing needs. But we need to look at how much we are playing these resources, and for how long. And take the time to see what we can save on the hourly rate, hours worked, number of flexible workers, and how much we spend on T&E. All of these are cost savings that will add up in your IT organization.

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