Rise of the Corporate Skeleton Crew?

Big Stick asks: "Recently I have noticed a trend in several prominent companies in my area of laying off entire technology departments. Just this week in my own company--a division of a well known, mid-sized corporation--the software engineering department was let go en masse, rather than just a reduction in head count. The rationale for the move being that it would be easier to evaluate the potential cost of developing a new product if groups of contractors were hired, instead of the numbers getting lost in the 'free' work of the full time developers. The overall impression this leaves is that many major companies are re-prioritizing the need to innovate new technologies for the presentation of their business, relying on skeleton crews of DBAs/SAs to maintain rather than enhance. The main question this raises is, are we heading towards an era where full time software development is more likely to be housed in technology specific firms? Something along the lines of the construction industry where projects are bid on, constructed, and the involvement of the creators with the finished product is minimal?" If others of you are noticing this trend in the industry, please share your thoughts. Do you think this is a move forward or backwards?

Comments

Contracting and the GPL

[ObviousGuy]

The simple answer to your question is Yes. It is cheaper to hire contractors because the benefits normally paid to full-time employees are not present. A full-time employee who makes $50K a year typically costs twice that when taking the cost of benefits into consideration. It makes much more sense to hire a contractor to write a piece of software in 2 or 3 months at $50/hr and let him go at the end of the stint. It's the same amount, but without the strings attached (like termination bonuses, etc).

As for the GPL, which the title alludes to, it is the biggest proponent of contract-based employment there is. Since the GPL encourages sharing, companies will not develop in-house applications on their own dime and then license the software under the GPL. Therefore GPL programmers will not find full-time positions in companies developing software.

This leaves only businesses that need a one-off program to do some sort of processing. This is where the GPL comes in, and is where the GPL really shines. Programmers who have at their disposal the full set of GPL code can use their knowledge in filling these one-off programming contracts. But it is doubtful that they would ever get hired on writing GPL'd code full-time.

In essence, the GPL is killing the concept of the programmer-career path. It is making it easy for companies to cut costs and build their systems upon free software. This means a dramatic drop in full-time headcount, as you have seen in your own experience.

Excellent! Excellent! Excellent!

[wackybrit]

This reminds me of the Dilbert strip where the staff were fired and immediately rehired as contractors for more money ;-)

But, really, this is absolutely great news. Okay, maybe not for the people who were fired, or for people who are full time employees in technology divisions.. but for those of us who are contractors and freelancers, this is wonderful.

It makes more sense for those companies too. They save a heap on labor costs, and only pay for what actually gets done. It's illegal to constantly hire and fire staff according to workload, but it's not illegal to put work out to freelancers. This is the sort of business we live off of.

This sort of downsizing was all the rage in the early 90's and it led to the start of a massive boom for freelancers and contractors. Maybe this is the sign of the next boom. So, hey, perhaps the lull really is picking up folks. Let's hope.

Economic Recession

[jo42]

What you are seeing is the result of the economic meltdown that started with the dot-com bust. Despite what you see on TV and read in the papers, the economic meltdown continues - the media is masking the severity of this downturn. If you want to see for yourself how bad things really are, take a trip through the US and note the closures of many businesses, the 'downsizing', and actually talk to people. Things are much worse than they are made out to be. Conspiracy? Possibly. However, if the media told how bad things really are, economic conditions would be even worse due to reaction to these news.

How does this fit into the topic of this discussion? Companies are going into holding patterns, reducing costs and hoping that things will turn around soon. I predict a second wave of large reductions over the next few months. I point to an article that IBM is looking to let go up to 20,000 more staff by the end of the year. By letting whole departments go, costs are being reduced significantly. It also allows the company, if it survives, the ability to restructure, either by contracting work out or rebuilding.

Bottom line, keep the hatches battened down for further stormy weather. Bookmark this. Late in the year we will see if I am right or not.

This recently happened to me...

[Anonymous Coward]

This recently happened to me. I worked for a startup. We built a killer-app that a big company paid lots of money for. Oddly, they put some pretty inept managers in charge of us, and before long we no longer had the market leadership that we did when acquired.

The point is, one morning a few months ago, we were all laid off.

The decision to acquire us was a smart one. We were ahead in the marketplace, we needed to grow, etc. etc. Ironically so was the decision to let us go. We were 45 miles away from the main office, had come to be a source of embarrassment for the company, etc.

The stupid decisions were in how the product development was mismanaged. Once that had been done, it made sense for the big company to cut its losses and look the other way.

Re:Like zero-inventory employees

[LazyBoy]

Zero-inventory = getting the supplies only when you need them, saving overhead in storage and so on. Hiring contractors instead of maintaining employees is analogous. Get workers only when you need them.

However, a worker is not like a part off the shelf that can be popped into place.

The large telecom equipment company that I work for has made it plain that upper management thinks we're all interchangeable cogs.

battling corporate bloat

[ninjaz]

I suspect in a large part, this is a housecleaning measure. Corporate environments tend to foster byzantine empires driven more by politics than by productivity. Each department manager fighting to get his budget as high as possible, each manager having his own team of sycophants operating at 5% efficiency while using politics to put a strangehold on other teams.

The contracting houses aren't enmeshed in the corporate political structure, and offer project-based propositions rather than the typical corporate song and dance. Of course, an economic downturn is the perfect time to do this. When things are going well, "if it ain't broke, don't fix it". So, I'd consider this essentially as a corporate maintenance window. Soon, the limitations of outsourcing will rear their ugly heads eg., "oh, you want additional services beyond the contract? 5x the original cost!" which will spur the cycle onward.

Regarding technology-specific firms, I think that's another topic entirely.
In point of the construction analogy, I think the analogue would be software libraries. But the creators of those need skilled people to keep those in order (think movie & image format display stuff)

If you mean in the fabless CPU company sense where a company gives a spec to an engineering company, I think that may end up as a net gain. That way, you get software design expertise concentrated with companies who know how to do that. Think: less hopelessly clueless managers calling shots on software projects, making every mistake in the book and dooming everything to failure through gross incompetence.

Of course, the same companies which would be doing the "design" would need to know a good deal about software to begin with, which brings us full circle to how things were previously: software companies writing commodity software and vertical applications. Internal teams doing specialized work because open-ended/emerging technology is typically not handled well by contracting.

I've never personally seen an IT outsourcing scenario that ended up well for the company doing the outsourcing. Typically this is because of changing business needs conflicting with the locked in contract with the services vendor.