Sundar Eshwar |
There was a time when Indian IT MNCs used to report about their bench utilisation. Anything above 70% was still considered acceptable. Then came a time when these behemoths starting talking about zero bench, or thereabouts. But their own competitive advantage was also under threat if they did not have people, ready to be deployed, for new projects if they did not have a bench. After all, much of the bidding and winning had to be backed up with some just-in-time resources. Without compromising on the ever-decreasing margin pressure the IT MNCs found a new way – outsource it to staffing companies.
Yes, if you carefully observe the number of staff deployed by traditional IT staffing companies you can easily see their graph going up. So, in a way the big brothers are developing clones of themselves to help their volatile business model, the staffing companies are not complaining as it’s allowing them to grow in an attractive space.
Is it working for the IT companies? For now, it looks like it, as it’s helping them distribute larger projects into modules, especially when the duration of such projects is shrinking. Most of the IT work is project-centric; managing software, system upgrades, managing a migration project or developing new platforms which are all pre-defined with an end date. So, having employees through a fixed term, through staff augmentation mode is helping. It also allows them the time and resources to plan for some of the emerging technologies, in-house.
Amidst this volatility, when the IT industry begins hiring resources on their own, it makes way for a 90-day long notice period, post offers. This puts them in a 120-day hiring cycle on an average – a sudden shift in market dynamics could mean immediate cuts to IT projects. Companies that expand with full-time hires are then left with a team they can’t afford, on their payroll. This is where further outsourcing via staff augmentation is helping. Below is data that further explains why Staff Augmentation is in vogue.
- 58% highlighted that Staff Augmentation companies have the ability to respond quickly to volatile demands
- 52% of organisations feel that its reducing administrative work
- 25% of them use Staff Augmentation to find substitutes to existing workforce
- 23% say that they empanel staff augmentation companies because they find it difficult to get the right talent
The benefits of staff augmentation through staffing companies to optimise an existing project, interim strategy for areas of lack of core competencies or to address peaks or troughs of demand, is well understood and experienced. However, one aspect where the staff augmentation model will help is to find your future talent with less heartburn. It’s well-documented that maximum attrition of talent happens in the first year of joining in most companies. This can partly be corrected by a contract-to-hire approach.
Contract-to-hire, as a dependable talent strategy
Candidates may have the skill and experience but a personality mismatch with other team members, or a misfit with the firm’s culture, may hurt productivity and be detrimental to the optimal functioning of the whole team. By getting talent via contract-to-hire mode, companies can also benefit by on-the-job performance which can be a very important parameter and can play a pivotal role in hiring talent for long-term.
Hiring on direct roles is usually expensive as skills are changing and many members of staff may not be required after certain projects are completed. Companies can quickly obtain specialised skills, allowing them to save money for selective hiring and focus directly on core IT expenditure.
Most IT talent have shorter tenures and understand the nature of working for projects. As long as the project is adding value, people do not mind short-term engagements. Increasingly, there is a talent pool which accepts organisations that offer contract-to-hire options so that the candidates can sample the organisation before he/she accepts a full-time position. It may not be their first choice, but it is definitely (in their words!) a ‘stepping stone’.
IT MNCs have realised the productivity enhancements staff augmentation arrangements are bringing to them in terms of time-to-hire, cost-to-hire, and long-term talent search. So, they have been happy to let their benches go to the staffing company’s payroll.
So now you know where the benches are, they are the new agile workforce… and it sure sounds a lot better than bench!