Winning the Battle and Losing the War

My last post was Losing the Battle and Winning the war.  Today I have a similar title, but that is the end of the similarity.  I had the opportunity a few weeks ago to hear a talk from a professor at the Fisher College of Business at Ohio State.   His topic was pretty interesting.  He was talking to a group of IT staffing company owners.  Most IT staffing companies have some sort of CRM, but what he was talking about was the opposite side of this which he called SRM or Supplier Resource Management. 

I’m not going to be able to adequately summarize a two hour talk in a few paragraphs, but one of the things that I thought was interesting is how companies are trying to commoditize IT staffing.  Looking at it from a numbers only point of view, he said that some companies have been able to reduce the cost of IT staffing by as much as 70%.   They have used a variety of purchasing techniques to accomplish this such as reducing suppliers, buying “in bulk”, instituting a VMS (vendor management system).  Being an IT consulting firm that also does IT staffing, I was not feeling too good about some of the trends discussed.  That was until he started talking about the real cost of savings.  

These same companies that have saved so much money, have also reduced their talent level to the point of not being able to accomplish anything.  The reduction in price has come at a cost of reduction in talent.   In some cases, companies were actually spending more than before.   This is because instead of one IT consultant, they may bring in two or more consultants.  There measurement was cost per hour by job title.   Cost per hour was indeed way down, but IT spend was up.

Another problem with the reduction in talent levels is that progress was not accomplished and that resulting in bringing in a high paid expert(s) toward the end of the project to try and salvage it.  The end result was little to no savings and huge opportunity costs to the business.   I guess the moral of the story is like the old saying “you get what you pay for.”