CRN Study: VARs Leveraging More External IT Technicians

More solution providers are using external IT resources than a year ago, in part because they're nervous that the economic recovery may not be sustainable to allow them to begin hiring additional staff, according to new research by CRN.

Sixty-three percent of 106 VAR respondents in a CRN study said they used project-based contractors or technical staff outside their own bench to perform technical work on behalf of their company in 2010. Meanwhile, 62 percent said they expect to use more project based workers this year than they did last year.

The survey, conducted this month, also found that 57 percent of VARs said the primary reason for using external IT workers is they don’t want to or can't hire full-time staff to meet demand right now. Nearly 48 percent cited lower cost benefits to using contractors while 45 percent said they don't have the in-house skills to perform the work required.

Channel executives also said the economic recession has helped create a bigger and better pool of IT contractors to choose from, as 78 percent of the survey's respondents said there are more external resources available now than before the recession. The good news is those workers are doing a good job. Seventy-eight percent of respondents said the contractors they hired performed the work in a satisfactory manner and 55 percent said the skills of the contractors is of a higher quality now than it was before the recession.

Two thirds of the respondents said they hire contractors with whom they have had an existing or long-term relationship. Almost half use someone recommended by a customer or person they trust and 36 percent use a fellow member of a VAR or other IT organization. About 22 percent find help through technical staff marketplaces such as OnForce or two new entrants into the workplace marketplace: TecDirect and Work Market.

VARs -- like other segments of the market -- are still nervous about the economy and don't want to commit to long-term costs to get what could be short-term business done, said Bill Lucchini, COO at OnForce, a Boston-based workforce marketplace where VARs can find technicians to hire on a temporary basis.

"Spending is improving, all the metrics are in the right direction, but they're all worried it won't last," Lucchini said. "We use the term jobless recovery. It's very true. These companies are very cautious about building up the cost basis of employees again. They don't want to go through layoffs again. They can use a much higher percentage of contract work to get the same work done. They want to get verified demand before they add headcount. We see much greater interest to use contract work to make sure expense line items line up with revenue items."

Bob Pojman, senior vice president of operations for Vital Network Services, a Tampa, Fla.-based VAR, believes that huge corporate IT layoffs the last two years has increased the number of technicians looking for contractor work as well as the skills those workers possess.

"We've seen things from, 'We need a pair of smart hands and a tool set onsite' to higher-end Cisco resources. We can get them easier and more plentiful than we could 12 to 14 months ago," Pojman said.

Next: Contractor Quality Improved

Vital Network Services utilizes OnForce to find IT help to expand its geographic reach and have more IT skills at its call, said Bob Pojman, senior vice president of operations at the Tampa, Fla.-based VAR. In the last 18 months, Pojman said the number of independent technicians and the capabilities of those workers has increased, which has influenced his decision to not have to hire full-time technicians. Instead, Vital Network Services, which has staff in multiple cities, waits for the demand to become steady and uses outsourced IT help until that happens.

"From a flex capacity, we're not making a knee jerk reaction and hiring somebody. We watch patterns of work and make more informed decisions over time," Pojman said.

Luke Ford, CEO of My Computer Works, a Scottsdale, Ariz.-based solution provider agreed that the quality of independent technical contractors is higher now than a year or two ago.

"They're not just PC monkeys. Customers are happy with the quality of work," said Ford, who recently started using a new workforce company, TecDirect, to find contractors for hourly-based work. "The market [for hiring independent IT workers] is maturing. There is enough screening and processes in place and we feel confident with someone wearing our badge. We can't be afraid to fail with a [contracted worker]. At the end of the day, we help a customer through a problem. That's when we shine. I don't see the [usage of independent technicians] going south."

In many cases using third-party technicians is less expensive than utilizing fulltime staff for certain projects, OnForce's Lucchini said.

"You can get the right skills for a network install in Tucson for a guy that only had to go four miles. You're only paying for the hours he's there. You don't have to keep somebody on payroll. On top of that, you might have 10 or 20 or 50 guys in the area and can choose who you want."

VARs who might be "jumpy" about hiring new employees also might find managing contractors at any scale is hard to do, Lucchini said. As more VARs look to outsource more IT work, systems to better manage that process will become more valuable, he said. "Managing contractors at any scale is hard to do. It's a good trend of us," he said.

The online services marketplace was pioneered by OnForce more than five years ago and the Boston-based company recently passed the one-million work order milestone, but a couple of new startups, TecDirect and WorkMarket, believe there's room for them too. WorkMarket is led by former OnForce CEO Jeff Leventhal, who also brought much of the original OnForce development team with him to his new company.

WorkMarket takes OnForce's basic principle, providing access to thousands of technicians who can perform tasks in a cheaper or more effective manner than your own company, and adds more, including a higher-level of services skill and a professional services automation component to track all the resources, including internally, such as available through ConnectWise, AutoTask or TigerPaw, said Leventhal.

Next: More Competition Equals More Opportunity

"We built WorkMarket backwards. Now you can manage employees, contractors and third-parties. It's a three-lane highway," Leventhal said. "We have customers on OnForce, but they can't use it internally. Now it's available and 100 percent free of charge. A lot of people also pay for PSA software. We built a system and said why not make it free."

Like other services marketplaces, WorkMarket makes money by taking a percentage, about 10 percent, of the final billing arrangement received by the service technician.

WorkMarket currently has only a handful of VARs using the system, but has dozens more signed up and in the onboarding process, Leventhal said. "We have some multi-billion dollar companies and some small IT shops," he said.

Meanwhile, TecDirect was spun off last year by its affiliated partner, Smart Source, and now has a database of more than 8,000 field technicians to perform break-fix or installation work on behalf of VARs, said Joe Iovinelli, CEO.

"Our average ticket runs $130. It's techs swapping parts, printer repair, desktop repair. It's an economic way to do business. It's not financially possible for most VARs to have IT staff in every zip code," said Iovinelli.

While TecDirect sees opportunity in the market to farm out IT support work because of economic uncertainty among VARs for hiring, Iovinelli said the same uncertainty also is impacting end users. "People are fixing more than replacing right now. They need smart hands to help out," Iovinelli said.

Much of TecDirect's database are technicians in-between jobs or looking to build up business in their neighborhood, Iovinelli said. To ensure quality work, VARs get to rate the technician and future users will get to see that history, he said.

OnForce's Lucchini said more competition for companies that offer up access to independent contractors should help increase solution providers' willingness to use outside help too.

"Jeff [Leventhall] is a good guy, a smart guy. There's not a lot of inefficiency on the market but if Jeff can take a new angle, there's plenty of room," Lucchini said. "With how much work gets done in IT, there's plenty of room for multiple companies in this space. Adding [WorkMarket and TecDirect] to the mix, it will enhance all our creativity. In a year or two, you might see a more vibrant IT market because of new [offerings]."