CIOs increasingly tap contract IT as talent gap filler

Jobs in technology are plentiful, as evidenced by the nearly 388,000 postings in February, according to a report from CompTIA.

Such figures fuel the fight for talent, says Vince Kellen, CIO of University of California San Diego, but he has a plan to compete in this job market.

Kellen is embracing temporary workers, seeing both contractors and freelancers as an integral part of his staffing strategy. “The top tech talent, they’re not necessarily seeking permanence in work,” Kellen says.

He has found that these workers are more interested in having engaging jobs and learning new skills to build their resumes than landing long-term positions. Kellen uses that to his advantage.

“It’s a war for talent and we have to find rock stars before they’re rock stars. So I’m not afraid to approach top talent to work for us for as long as I can get them, and when they’re ready to move on we’ll help them to do that,” he says.

He adds: “We recognize that the workers coming into the industry have a different mindset about this than 10 years ago, and we’re positioning our units to take full advantage of that.”

Freelance and contract work is not a new trend. But studies confirm that the number of these workers and their percentage of the tech workforce are on the rise.

Job platform company MBO Partners in its “11th Annual State of Independence in America” report calculated a 34% increase in the number of individuals opting for independent work, with figures going from 38.2 million in 2020 to 51.1 million in 2021.

Meanwhile, the “2022 State of Enterprise Tech Employment” report from Motion Recruitment found that 42% of the total workforce are 1099 workers, independent contractors, or freelancers and that 90% of companies are moving to a blend of full-time and freelance employees. The study further noted that “30% of digital leaders plan to increase the use of statement-of-work contracts, and 35% plan to increase the use of contractors in 2022.”

Kellen, other executives, and labor market analysts all say they are seeing more individuals opt for that kind of work arrangement. As a result, they advise CIOs and other enterprise technology executives and managers to build a staffing strategy that accounts for this dynamic.

“A large part of this is thinking about the types of roles and skills to buy, borrow, or build. With contract work, we’re talking about the borrow strategy. And you should think about your freelance/contractor strategy as part of a holistic talent strategy. That’s the route that I think CIOs need to take,” says Will Markow, vice president of applied research for talent at EMSI Burning Glass, a labor market analytics firm.

Plugging the talent gap

Kellen has about 400 full-time staff positions, with a mix of full-time staff employees, contractors, and freelancers filling the roles. He also has about 100 students working part time in his IT department.

He says he follows the University of California’s terms for bringing on contract workers: Contract employees are salaried. They sign one-year contracts, which can be renewed twice for a total of three years of employment. The university extends employee benefits to contract workers.

Kellen also hires freelancers who work on an hourly basis; he says he typically hires them for short periods of time, perhaps months, although some work for the department for longer stretches.

The UC San Diego technology department already engaged contract and freelance workers when Kellen arrived in 2016, but Kellen says more recent employment trends convinced him that he had to build a staffing strategy that incorporated more temporary workers.

As part of that strategy, he and his managers conceptualize work as projects that pull together resources into teams for short durations. They also focus more on what skills are required rather than roles and titles.

“I took the tools I had and built a deliberate strategy,” he says.

Kellen says he plans on 25% to 30% turnover and figures he’ll likely have to go with short-term workers when hiring for the hottest skills. As a result, he works to sell his organization to the talent he’s seeking, pitching how the university and the technology projects on deck can help them grow professionally. When people leave, he says, “We celebrate that and wish them well.”

Convergent trends

The rise of contract work within IT corresponds to other trends that are pushing CIOs to recalculate how temporary talent fits within their staffing strategies.

Info-Tech Research Group and SoftwareReviews

Kellen points specifically to the increase in remote work, noting that it helps him compete for talent he might not otherwise be able to draw to his location. “Remote work is a key part of our strategy as well,” he says.

Outsourcing and offshoring also remain part of CIOs’ staffing strategies, says Tracy-Lynn Reid, research lead for the people and leadership team within the CIO Advisory Practice at Info-Tech Research Group and SoftwareReviews. She points to the firm’s “2022 IT Talent Trends” survey that shows 37% of the responding IT departments outsource roles to fill internal skill shortages.

And CIOs still engage consultants, particularly to address emerging technologies and “disruptive capabilities that can really make or break a business,” EMSI’s Markow says, noting that the big consulting firms tend to have a higher concentration in such experience, making them a popular go-to for such knowledge.

Despite such trends, Lily Mok, vice president and analyst with tech research firm Gartner, says some CIOs have been slow to adjust their staffing strategies. They’re in a more reactive mode, using contract and freelance talent reluctantly as a stopgap measure “and not strategically seeing how they can fit in with the workforce model they’re using.”

Pros and cons of contract staffing

CIOs have reason to be cautious, Mok and others acknowledge, as staffing with contract, freelance, and gig workers has both pros and cons to consider.

Gartner

On the positive side, CIOs can use temporary employees to gain flexibility and agility by bringing on needed skills for only the durations they’re required, Mok says. CIOs also often use those transient workers to train permanent employees on what they’ll need to maintain systems, so it’s something of a double win here.

CIOs also typically find they can more easily get workers with high-demand skills on a temporary basis, Mok says. Markow agrees, adding: “You can really bring in new skill sets and capabilities more quickly in some cases.”

But CIOs must be careful not to misclassify workers as contract when they should be staff, a legal distinction that could run the company afoul of labor laws, Mok says.

In addition to potentially misclassifying these workers, Mok says CIOs who use contract and freelance workers too heavily or for extremely long stretches are often also operating on a more reactionary versus strategic basis, which can translate to missed opportunities, higher costs, and poor morale.

“Using contract workers can be more cost effective when you have ad-hoc needs that need to be addressed,” Markow adds. “But that said, it can be more costly if those projects run far longer than anticipated or roll into other needs or if there are unintended requirements that come about and those workers need to stay on.”

CIOs must also consider whether they want transient workers to handle ongoing core services and, if so, how they’ll ensure that sudden departures won’t be disruptive, experts say. They should also consider how these workers fit in with long-term staff employees and whether and when to readjust teams as individuals come and go.

“There could be some culture-related cons there,” Markow warns.

EMSI Burning Glass

Indeed, that has created some criticism on the use of contingent workers in IT — criticism that echoes what some see as problems in the growing gig economy.

The TechEquity Collaborative, for example, issued its “Contract Worker Disparity Project” report that found that temporary, contract, and contingent workers “are often doing the same work as their directly-employed peers while making less money, receiving fewer benefits, and experiencing career immobility.”

Kellen, Mok, Markow, and others say those potential downsides should not stop CIOs from leveraging contingent workers. Rather, it’s another reason to be strategic, so CIOs can minimize the negatives and optimize the benefits.

Sharie LaMarche, vice president of SaaS platform operations at Workspot, is deliberate in her use, saying the company leverages contract and freelance talent for project and specialized skills.

“When hiring on a contract/freelance basis, I’m looking for highly skilled specialists that I don’t necessarily need full-time,” she says. “I’ll personally pay more for the right highly skilled resource that I know will elevate performance and expedite work for the team. This investment will ultimately improve productivity in a cost-efficient capacity.”

LaMarche has ideas on how to keep teams running smoothly.

“In managing teams with freelance or contract workers, ensure that everyone knows the role of the contract worker and what work should and should not be assigned. It’s essential to communicate how many hours are allotted and monitor those hours closely,” she adds.

Best practices

Given the benefits that the strategic use of contingent workers can bring, Mok says Gartner is seeing some CIOs adopt a gig-worker approach to their staff as a whole — including their staff employees. CIOs are deconstructing work into smaller components, advertising available jobs, and letting workers opt in to assignments. That model has its own challenges, but she says, “It facilitates internal talent mobility and retention.”

Workspot

It’s growing in popularity: In its January 2021 report “Innovation Insight for Internal Talent Marketplaces,” Gartner predicts that “by 2025, 20% of large enterprises will have deployed internal talent marketplace to optimize the utilization and agility of talent.”

To be strategic in using contingent workers, Mok advises CIOs to work with HR, rather than procurement teams, to hire. She also advises CIOs to be thoughtful and deliberate about what skills to hire on a contingent basis.

Markow says CIOs should also consider whether the skills are tied to specific projects or otherwise required for a finite time or have a more open-ended demand.

He advises CIOs to analyze the costs of contingent versus staff in those roles, so they have good insight on the financial pros and cons of their decisions. They should also factor in whether the needed skills are critical for IT or the organization’s strategic goals and whether there’s more or less of a risk going with contingent workers for those.

“The gig economy can be a useful means of filling skill/functional gaps, but organizations should be taking a measured and evaluative approach to deciding when and how to pull the contractor/freelancer lever,” Info-Tech’s Reid adds. “IT departments often find themselves in firefighter mode, but anticipating and planning for talent demand should be a critical priority. In my opinion, it is logical to believe that those who already had a contingency plan in place for external staff augmentation are likely faring better in this tightening labor market than those who were a little too confident in the world returning to ‘normal’ when the pandemic was over.”