You want to know the "real" reasons that this problem exists?
First, the hiring process. Today's processes work to look for the candidate with the best team fit, not the candidate with the best technical fit. Many times a candidate will be hired just based on the fact that they got along with everyone. Therefore, when it comes to the heavy project lifting, there are usually major skill gaps in the existing employees.
Next, add in the cost of hiring an employee. Basically an employee is the most expensive single asset that a company has with the exception of specialized machinery, Have you ever thought about what it costs a company to have you as an employee? Let's break it down... There's your salary, which in IT is usually more than just about any other position in the company other than sales. Next there is the cost of your benefits. As a manager, we use between 115% and 125% as the "fully loaded" cost of an employee. Next there are the other positions that support your position. If the company has 100 employees, then 1/100th of the total cost of the HR department is you. Add in your workspace, those cubicles, laptops, cell phones, etc. aren't free. What about utilities? Power, telephone, cell phone service, internet... a portion of each of these services is allocated just for you. The list goes on and on. You are already costing the company a ton to employ.
Next, the effect on share prices for those of you at publically traded companies. There's a ratio that is in the annual report which is "Earnings to Headcount". How many employees make how much money each. The higher that ratio is, the better the stock price. BTW, for those of you in private companies, this ratio comes into play when the company is looking for equity financing as well. Contractors and consultants (professional services and outside services) don't count towards the ratio, only "FTE's" (Full Time Employees).
One more employee based item. It's more expensive to let an employee go than it was to hire them in the first place. There is the separation assistance, the HR and Legal time to ensure that the company isn't going to be sued. There's all the time spent by the manager documenting why the employee isn't a fit. There's a ton of time involved in looking for ways to reassign the employee to avoid the costs of termination. There's paperwork with the state and federal government that has to be filed if it is termed a layoff. It gets expensive, fast.
Now a project statistic for you. According to Gartner, more than 80% of all major projects and programs fail.
And a financial concept. 1.00 today is not worth 1.00 tomorrow. The cost of money over time is a killer. Read up on it. Most companies will use a discount rate of 8-10% when projecting money over time. This means that, if the company paid you $100 for day 1, then to recover that cost, they would have to make $108 one year later to actually break even. For multi-year projects, this adds up fast due to compounding. Yes, this applies to contractors too, but overall the contractor will be cheaper to the company than you are (in terms of TCO) for a major project, especially if you have to be trained to do the work.
Now, given these factors, put yourself in the company's shoes. You have a project you need to complete that is going to give a major boost to your profit margins. Do you A) Hire a new employee, the cost of whom is going to give you an immediate negative return on the project that has to be overcome when the project is complete, IF it is completed? B) Train existing staff who will have a new skill that will only be employed for the new project, IF it succeeds? C) Hire an outsource firm that already has the skills needed and whom can be released with minimal or no repercussions if the project gets derailed?
For a long-term project that will require in-house support after deployment, the order of precedence is A, C, B For a shorter project that will not need specialized in-house support, such as a web app or programmin
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You want to know the "real" reasons that this problem exists?
First, the hiring process. Today's processes work to look for the candidate with the best team fit, not the candidate with the best technical fit. Many times a candidate will be hired just based on the fact that they got along with everyone. Therefore, when it comes to the heavy project lifting, there are usually major skill gaps in the existing employees.
Next, add in the cost of hiring an employee. Basically an employee is the most expensive single asset that a company has with the exception of specialized machinery, Have you ever thought about what it costs a company to have you as an employee? Let's break it down... There's your salary, which in IT is usually more than just about any other position in the company other than sales. Next there is the cost of your benefits. As a manager, we use between 115% and 125% as the "fully loaded" cost of an employee. Next there are the other positions that support your position. If the company has 100 employees, then 1/100th of the total cost of the HR department is you. Add in your workspace, those cubicles, laptops, cell phones, etc. aren't free. What about utilities? Power, telephone, cell phone service, internet... a portion of each of these services is allocated just for you. The list goes on and on. You are already costing the company a ton to employ.
Next, the effect on share prices for those of you at publically traded companies. There's a ratio that is in the annual report which is "Earnings to Headcount". How many employees make how much money each. The higher that ratio is, the better the stock price. BTW, for those of you in private companies, this ratio comes into play when the company is looking for equity financing as well. Contractors and consultants (professional services and outside services) don't count towards the ratio, only "FTE's" (Full Time Employees).
One more employee based item. It's more expensive to let an employee go than it was to hire them in the first place. There is the separation assistance, the HR and Legal time to ensure that the company isn't going to be sued. There's all the time spent by the manager documenting why the employee isn't a fit. There's a ton of time involved in looking for ways to reassign the employee to avoid the costs of termination. There's paperwork with the state and federal government that has to be filed if it is termed a layoff. It gets expensive, fast.
Now a project statistic for you. According to Gartner, more than 80% of all major projects and programs fail.
And a financial concept. 1.00 today is not worth 1.00 tomorrow. The cost of money over time is a killer. Read up on it. Most companies will use a discount rate of 8-10% when projecting money over time. This means that, if the company paid you $100 for day 1, then to recover that cost, they would have to make $108 one year later to actually break even. For multi-year projects, this adds up fast due to compounding. Yes, this applies to contractors too, but overall the contractor will be cheaper to the company than you are (in terms of TCO) for a major project, especially if you have to be trained to do the work.
Now, given these factors, put yourself in the company's shoes. You have a project you need to complete that is going to give a major boost to your profit margins. Do you A) Hire a new employee, the cost of whom is going to give you an immediate negative return on the project that has to be overcome when the project is complete, IF it is completed? B) Train existing staff who will have a new skill that will only be employed for the new project, IF it succeeds? C) Hire an outsource firm that already has the skills needed and whom can be released with minimal or no repercussions if the project gets derailed?
For a long-term project that will require in-house support after deployment, the order of precedence is A, C, B For a shorter project that will not need specialized in-house support, such as a web app or programmin