Consultant, Contractor, or Staff Augmentation – Do You Know the Difference?
The world of IT is becoming remarkably complex, and companies grow increasingly reliant on outside knowledge and skills for assistance. But when you enter into really uncharted waters and need someone you can trust, who will you call? Unfortunately there are a lot of companies in the industry claiming to be technical experts for everything from “Big Data” to “Desktop Virtualization”. How do you identify the serious resources from the technical wannabe’s?
That is an interesting question. Every since the industry’s rush to identify and fix Y2K problems over a decade ago, the line between Consultant, Contractor, and Staff Augmentation has blurred. The recession of the past few years further masked the distinction between roles, since many laid-off IT employees simply re-branded themselves as “Independent Consultants” in an attempt to secure short-term project work.
So what are the differences between Staff Augmentation, Contractors, and Consultants? Let’s start with a definition. According to Wikipedia:
“Staff Augmentation is an outsourcing strategy which is used to staff a project and respond to business objectives. The technique consists of evaluating the existing staff and then determining which additional skills are required. One possible advantage of this approach is that it may leverage existing resources as well as utilize outsourced services and contract workers.”
“An Independent Contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time he or she may be subject to the Law of Agency. Independent contractors are usually paid on a freelance basis.”
“A Consultant (from Latin: consultare “to discuss”) is a professional who provides professional or expert advice in a particular area such as security (electronic or physical), management, accountancy, law (tax law, in particular), human resources, marketing (and public relations), finance, engineering, or any of many other specialized fields. A consultant is usually an expert or a professional in a specific field and has a wide knowledge of the subject matter.”
…Wikipedia Online Dictionary
Staff augmentation is based on the concept of a “faceless, replaceable skill” that is available for an entire category of labor (Administrator, Engineer, Programmer, Database Administrator, Web Designer, etc.). Since IT relies on a large labor pool of technical skills, these are relatively low priced roles. Since participants are required to have only prerequisite skills in their specialty and no other unique capabilities, they can be hired and released pretty much on demand. Rates are dictated by current market prices, and range from $35 – $95 per hour.
IT contractors are further up the scale in capabilities and value. They are typically companies that deliver a complete service or system to solve a clearly defined problem. This may be a particular operation, type of application, virtualized infrastructure, or network operation. In many instances it is delivered as a complete package, including hardware, software, utilities, installation, configuration, and testing. Contractor services may be purchased on a per-project or a time-and-materials basis and are consistent with similar projects. Bundled labor rates within a specified package or service are in the $125 to $185 per hour range.
At the top of the pyramid is IT consultant. This is a professional service offering highly developed skills and extensive experience in a specialized field. In addition to being a Subject Matter Expert for a particular technology or service, IT consultants typically have an extensive knowledge of related activities that include business operations, project management, associated technologies, industry best practices, quality assurance, security, and other operations. They are sought out by organizations for their comprehensive understanding of business-critical operations or other activity than can have industry-changing ramifications. Since these are highly specialized skills, they command rates from $225 to $450 per hour or more. Although consultants are expensive, they return value to the company that can far exceed their billable rate.
Clearly it’s in the client’s best interests to understand the differences and capabilities of each category. Unfortunately, these titles are frequently intermixed and tossed around somewhat indiscriminately by organizations. Unless due diligence is performed beforehand, occasionally some hapless company will think they landed a senior Consultant for $85 per hr. (plus expenses), when they actually contracted Staff Augmentation. This can quickly becomes the root cause of poor performance, lack-luster productivity, poor organization, missed objectives, and ultimately a failed project.
Technical personnel do not automatically become senior consultants just because that’s a label they’ve anointed themselves with. Buyer beware! Engaging the proper skill-set can either be a game-changer, or a “boat anchor” for the project.