Why IT contractors don't always build empires

Many IT contractors are in a perfect position to grow their seedling companies into mighty Apple trees. A good contractor will; gain the trust of the client, demonstrate commitment to quality and a grasp of the business. And, not least, a contractor invariably has access to the client's key decision makers.

With all this going for them, why do so few end up heading multi-personnel businesses?

"The vast majority of contractors do not fully appreciate how much of a competitive advantage they have by merely being part of a client's operations," says Vaughan Vandenberg, author of an IT Contractor Guide.

Vandenberg thinks contractors could offer multiple additional services such as training or documentation.

"Money and kudos can also be gained by introducing people with necessary skills and providing specialised software appropriate to the organisation," he says.

But after twenty years contracting, Ben Straw, senior architect, says he's never seen a contractor place a product or grow their commercial presence at a client's site.

"I've never managed it, and I haven't seen anyone else do it either," he says.

Trouble is, 'it takes balls', suggests Joel Turland, managing director of Redland Business Solutions (RBS), a financial services IT consultancy.

"Building a business takes risk and work. It takes you out of your comfort zone," he says.

And Turland should know. Five years ago he and his partner ditched their permanent roles and set out to build a consultancy and software development company by starting as contractors.

An initial, direct contract provided the start they needed. They used the earnings to launch the business and ride periods of uncertainty, including six months without work.

"We were trying to sell the concept of the company. We could have taken simple contracts through an agent, but we held out for a company position," he explains.

Initially, Turland recruited contractors as associates to his own business and made a small margin, but now, RBS has 17 permanent employees and turns over in excess of one million pounds a year.

To convey a sense of the commitment and discipline required, Turland and his partner say they're yet to draw a salary greater than that offered by their original permanent employment.

"We have always reinvested the money," he says.

Turland believes it was the single-minded goal of building a consultancy that led to out-growing the contractor label. He has never worked through an agent, and has always taken senior, business-advisor roles where he is expected to provide solutions to client problems.

"There is responsibility," he says, "you can't abuse a position and employ your mates."

Client expectations are key: Straw believes that where contractors are employed for definite, minor roles their "suggestions" can be unwelcome.

"There is a lot of internal resistance to contractors 'overstepping' their position," he says.

And Doug Twistner, a contract business analyst for over two decades, adds, "You usually find corporates lack the vision to buy small fry packages. It's been a long time since I saw a department take on package that didn't come out of another corporate."

A good proportion of contractors work for large corporations and government clients, and these usually have, "extensive tendering guidelines," says Straw, suggesting that contractors are rarely in a position to compete with bigger companies.

Client procedure is not the only barrier to hurdle before building on opportunity. The largest obstruction is probably psychological.

Daniel Pink is an author, business mentor and former chief speech writer for US vice president Al Gore.

He told Contractor UK: "I noticed something intriguing during my interviews with free agents [freelance professionals] in America. Many of them didn't grow larger because they didn't want to grow larger. Growth often entails more administrative and management work, and can move a person further from the work that drew him to the profession in the first place."

Pink implies that people might enter contracting to gain a higher salary for doing something they already love. It's a common view. Twistner reminds that for many in the UK, a limited company can simply be a tax-efficient vehicle for providing services, and is not necessarily the acorn of a corporate empire.

"Many people go out on their own not to become the next Richard Branson, but simply to lead a slightly more prosperous and dramatically more fulfilling life," says Pink. "For them, bigger isn't better. Better is better."

William Knight

Wednesday 15th Nov 2006
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