Software development,Staffing

Finding the right long term contractor19 May

I’ve been using the oDesk service to build custom software systems for about 3.5 years now. I’ve worked with contractors from across the world including India, Philippines, Bolivia, US, Canada, and Mexico. There’s a world full of very skilled people out there, and oDesk makes it easy to connect with them and accomplish great things.

Over the years, I’ve been lucky to establish strong relationships with a number of highly skilled contractors. So Brian McDonough from oDesk interviewed me to find out what I think makes a contractor great. I think it’s an interesting article and one that’s relevant to me personally in my role as a consultant.


Overtime Exemptions24 Sep

In another corollary to why SMBs should not hire IT employees, consider the overtime exemption rules. Montana has never adopted the overtime regulations for computer related occupations as stated in the FLSA. Many attorneys are now realizing the revenue stream available by pursuing companies on wage and hour lawsuits.

I like the fact that Montana generally favors employees in labor legislation. It makes it harder to run a business here, but we live in an area where jobs are scarce and wages are already lower than the national average. Employees need this protection. But in my opinion, this loophole in our state’s regulations needs to be fixed.

In a prior life, I had an employee who had been with the company for many years. He knew the company’s data, but as a programmer he was mediocre. He spent more time supporting applications he had built over the years than he did building anything new. And he had injected himself into many business processes because his applications “couldn’t be” hardened enough to hand off to users.

Given his longevity, this employee had a high hourly rate. All the stuff he had to do to support his applications required that he put in huge amounts of overtime. He was no longer creating value. He was no longer driving efficiency. But this employee ended up making more money than nearly anyone else in the department.

If you’re an SMB in Montana, make sure all your IT employees are properly classified and pressure your legislators to eliminate this loophole. But most of all, consider shifting your IT resources from internal to external. With external resources, you either get additional value from every hour billed or you find different resources.


No, I’m not crazy13 Sep

Found this post by John Soat today that validates my thinking about not hiring IT employees. Luckily, I started publishing my 3 part series (Part 1, Part 2, Part 3) before he published his. I like to think I’m not just regurgitating someone else’s thoughts.

While he’s specifically talking about larger companies, the trend still applies to the SMB market. The IT skills of the future are project management, business analysis, vendor management, and especially communication.

Today’s “jack-of-all-trades” will either go to work for IT firms that resemble law or accounting firms, or will become internal IT managers. They’ll be capable of doing some things, but time and cost pressures will force them to push most non-value-added technical work to outside sources.


Hiring IT employees, Part 311 Sep

Over the past few days (Part 1 and Part 2), I’ve had a couple posts related to hiring IT employees for your SMB. I’m convinced that SMBs shouldn’t do it. Instead, they should opt to use a Managed Service Provider to handle their network and desktop support, and tap into contract developers for applications needs.

If you’re a business owner, you may wonder how the heck you’re going to manage all these technology folks running around your business?

The key to solving this problem is to recognize that there aren’t just 2 sides to IT – Infrastructure and Applications. There is a third component – Management. Besides executive level roles, IT employees in this category have titles such as Business Analyst and Project Manager. These people have the ability to speak both technology and business. They can identify opportunities to use technology to improve the business, and then they can mobilize and coordinate the appropriate resources to make that change happen. Your Project Manager becomes the liaison to the MSP and as many development resources as you need.

So let’s look at one way you can put it all together. To make it simple, let’s say you have 50 employees/PCs and you were going to hire 1 full time IT employee at $20/hour. Let’s also assume that you’re not philosophically against outsourcing some work to low-cost rural or offshore locations as long as the quality is good.

Hiring Internal Staff
Salary 2,080 hours @ $20/hour $41,600
Overtime 10% @ $30/hour $6,240
Benefits 40% of compensation $19,236
Total annual cost   $66,976
Alternative Model
MSP $50/PC/year $30,000
Project Mgr 5 hours/week @ $100/hour $26,000
Developers 20 hours/week @ $25/hour $26,000
Total annual cost   $82,000

Alright, so $82k is not less than $67k. But consider the cost of turnover. Figure 100% of compensation every 4 years or so. What do service disruptions cost when systems go down during your single IT employee’s vacation? How productive can your employee really be when faced with frequent interruptions to fix printer jams? How quickly will your employee’s skills fall behind under the crush of keeping up with day to day tasks?

Under the alternative approach, you get a team comprised of highly skilled specialists in all areas of IT.

Your PCs and network are constantly monitored, maintained, and backed up. Help desk services are always available. Most MSPs even provide some on-site time every week to handle things that can’t be done remotely.

Your development resources can be scaled up or down as needed. If you don’t have projects going on now, you don’t pay for them. If you need more help, you can add hours without adding another full time employee.

And your Project Manager keeps track of all outstanding issues, helps prioritize projects, coordinates development and delivery of new applications, and helps identify areas where you can use technology to improve operations.

As your company grows, you will eventually hire internal IT staff. Start with bringing your Project Manager on board full time. Then bring on developers as you require enough of a specific skill to justify a full time specialist.

With this approach, you’ll be off to a great start using information technology strategically.


Hiring IT employees, Part 210 Sep

In my last post, I stated that small to mid-size businesses do more harm than good by hiring IT employees. Yet, technology is a critical component of any modern company’s growth plans. So what’s a business owner to do?

First, understand the difference between Infrastructure and Applications.

Infrastructure = Servers, desktop PCs, file storage, email, backups, printers, network security, etc.

Applications = Packaged software, custom built applications, databases, reporting, your website, etc.

For the infrastructure component, find a Managed Services Provider (MSP) with a local presence. They do this work for many companies so they know what they’re doing and they make sure their staff keeps up with latest developments. Make the investments they recommend. They’ll keep your servers and desktops running and your network secure; they can’t do their work if you won’t follow best practices. Trust your MSP to help you get this foundation right and focus your energy on the stuff that truly has the ability to help your business grow.

In the applications area, identify consultants that do software development. You may actually need to find several resources, because software development, database work, web development, and MS Office programming can be very different animals. Depending on your personal preferences and business philosophies, you can find large organizations with a variety of development skills in-house, use a roster of local contractors, or find developers across the globe who can do the work at much lower rates than you’d find in the US. (Sourcing will definitely be a future topic in this forum!) Make sure the people you identify have the bandwidth to either give you a set number of hours per week or jump in quickly when you have needs.

In both areas, be certain to talk to client references. For MSPs, you’re looking for pro-active support, availability during your business hours, published service levels with penalties for failure to comply, and regular reporting on incidents and performance.

In the applications area, you’re looking for consultants who can deliver a usable solution in a timely manner that doesn’t require ongoing support. Understanding user requirements is key, so they have to be good at communicating with all levels of your organization. And be concerned if the consultant doesn’t insist on end-user participation in testing the application before it is delivered.

To be sure, if your company’s product is technology, then this approach may not be right for you. But most other companies shouldn’t seriously consider hiring internal IT resources until they are sufficiently large enough to maintain expert level IT staffs.

There’s still one more missing piece. Who gets to be in charge of managing all these different vendor relationships? That’s the subject of my next post. Tomorrow, I’ll put the final piece of the puzzle in place and show how this can be more cost effective than hiring an internal IT resource.

Read Part 3

Contact Me

Granite Peak Systems, LLC
PO Box 80892
Billings, MT 59108
Tel: 406-672-8292


Since 2007, I have funded a Kiva account in recognition of my clients. Whenever I get a new client, or find a microloan that relates to the industries my clients serve, I contribute to the account. You can see my lender profile here: