* The Business of Software

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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Working directly with Fortune 100 companies

I am a self-incorporated I.T. consultant.

 I get calls from several recruiters who have 'Fortune 100' clients and good projects for me to work on. Most of these recruiters are themselves small businesses - much like myself.

  So - how do I get the customer to work directly with me - as opposed to these small recruiters? Part of my issue is of course, the huge rate cut I have to take in order to work through these recruiters.

 The other part is that I do not see their 'cut' as a justified service - they provide nothing except cutting a paycheck - which I am able to do on my own (using my own payroll service).

AV
AV Send private email
Tuesday, June 25, 2013
 
 
"...they provide nothing except cutting a paycheck..."

The fact that you have to ask this question shows that this statement is not true. It is the classic man-in-the-middle setup, where they furiously guard each end of the relationship from the other, usually through empty threats of legal action for  anyone who "breaks the code".

I worked as a consultant/contractor through various agents for years and sometimes wondered why they got 3-20%, but really there's no point, as without them, there'd be no work.

Big companies very rarely deal with one-man-band businesses, as they prefer to have two or three established agency relationships, where they can satisfy 99% of their recruitment needs.

In spite of what many people think, very few candidates are worth their while to go outside that model, as it works well enough for everyone (not perfect, but good enough).

Only exception I know of is when a client will buy out the agency contract to deal direct with the candidate. One of my clients did that, paying $100,000 to the agent to deal direct with me. It seemed insane at the time, but over the life of the relationship, they saved several times that in commission.
Scorpio Send private email
Tuesday, June 25, 2013
 
 
>I get calls from several recruiters who have 'Fortune 100' clients

But do they? Recruiters frequently make all sorts of dubious, or even downright false, claims to get people on their books.

There was an agency in the UK that used to endlessly advertise a position at a caribbean bank in order to get people to contact them. Maybe they had such a position once. But every month for year after year?

IT recruitment is what you do when you are too dishonest to be in sales and not fit enough to be a mugger. ;0)
Andy Brice Send private email
Tuesday, June 25, 2013
 
 
I've done plenty of work for blue chips without using an agency. The key is to avoid the commodity Java/.Net/Rails stuff and focus on your domain skills.
Ducknald Don Send private email
Tuesday, June 25, 2013
 
 
Re calls from recruiters, by coincidence I've read this piece on LinkedIn today:

https://www.linkedin.com/today/post/article/20130624194641-52594-when-the-headhunter-calls

TL;DR: 

If a search person calls you, your first question will be "How many people have you placed with this employer - the one you're calling me about today - in the past 12 months?"
  .  .  .

Once you get the answer you want to your first question ("I've actually placed seven people in this client in the past year - I talk with them at least once a week") your next question will be "How many people have you placed in the past 12 months for this hiring manager?"
Dmitry Leskov @Home Send private email
Tuesday, June 25, 2013
 
 
"IT recruitment is what you do when you are too dishonest to be in sales and not fit enough to be a mugger."
Not only do I think Andy is serious, but he's also right.

"I get calls from several recruiters who have 'Fortune 100' clients"
My domain is industrial manufacturing.  A few Fortune 100 companies in this domain.    These aren't monolithic MegaCorps, they have multiple divisions/subsidiaries/offices/bureaucracies.  There isn't a Mr. Big who can make you a millionaire overnight.  So technically, these recruiters could have placed someone sometime with one business unit somewhere, allowing them to claim to have a Fortune 100 client.  Or they could be doing gene splicing on the truth.

If a big company isn't in the IT business themselves, they don't hire IT people.  They contract with service providers, who hire independent contractors like you.  They don't deal with recruiters to find service providers, either.  The people calling you are two-bit sharks; even if you deal directly with their real contacts, you are still swimming in a little bucket.  Go ahead, cut them out of the picture, you aren't going to gain much.

There are three ways to get business from big companies.  One, sign on with IBM, Oracle or SAP.  Two, build a working relationship with third party service providers who are certified with one of the Big Three IT Service Providers.  Three, sell your services directly to a local office of a big company.  Depending on your skill set and your location, any of these three approaches are feasible.  The best paying approach for you is number 3, but you need to have some of your own contacts, who know your capabilities, trust you and have local decision making power.  The Big 3 subcontract all the real work, so unless you want to be an account executive, your next best approach is to become first call with a third party service provider.
Howard Ness Send private email
Tuesday, June 25, 2013
 
 
> they provide nothing except cutting a paycheck

(Just for a record: I'm Canadian; YMMV where you are now).

They provide you with two things:

1. Steady streams of new engagements
2. Reliable paycheck times

I'm working almost exclusively through agencies for the last 10 years. And I do NOT want to go into direct subcontracting.

First, payments. In the last 10 years...

- How many times an agency was late with a payment? Zero. Even when the client is late (it is normal!), an agency has a money pool which it uses to pay you on NET30 or even NET15 terms, sharp.

- What was a longest payment delay from a direct contracting? 6 months. And it took much bugging short of sending papers into small claims court.

Now, contracts:

- What was my downtime (in between of paid projects) in the last 2 years? 0%. I only take vacations.

- What number of outbound calls (or cold calls) I had to make to find a new contract? Zero. I post an update on LinkedIn/Monster 2 month before my contract ends, and agencies call me. I just need to choose.

Do you have a network and/or a well-known name to provide you with a continuous stream of income?

What time do you think it will take you to find a new contract on your own?

Do you have skills to do cold calls all day long?

Do you want talking to prospects for 3 hours and then hear "We actually do not have that kind of budget..."? (Agencies do that instead of you; they pre-screen prospects).

Some people can do both development and self-marketing and self-sales, and I respect their hustling abilities.

I though personally prefer to cut my agencies 20% and enjoy a relative peace of mind.


The desired place to move from sub-contracting is not direct contracting, but product. It scales and it has less unpredictability.
Vladimir Dyuzhev Send private email
Tuesday, June 25, 2013
 
 
> If a big company isn't in the IT business themselves, they don't hire IT people.  They contract with service providers, who hire independent contractors like you.  They don't deal with recruiters to find service providers, either.

This is a simplified picture. It may be true in your industry, but where I work (banking, insurance, telecom, energy) it is not true.

Big companies do use service providers. HP, CGI and a few smaller are those who works around me now.

Big companies do hire contractors through agencies too. About 20 contractors works only on my team right now, may be 100 on the floor at whole.

I do not know how the management makes the decision when to send the work to the provider and when to a contractor. I though noticed that the quality of service provider resources is generally lower than that of independent contractors. I assume skilled people do not work for service provider (as a salarymen), and the client understands that.
Vladimir Dyuzhev Send private email
Tuesday, June 25, 2013
 
 
> The best paying approach for you is number 3, but you need to have some of your own contacts, who know your capabilities, trust you and have local decision making power.

Exactly.

And that's what agencies have -- they have foot in the door and they do pre-screening of candidates and usually recommend good ones.

This is a win-win for all parties.
Vladimir Dyuzhev Send private email
Tuesday, June 25, 2013
 
 
"This is a simplified picture."
I don't know the financial services industry, but my employer's clients are virtually every company that uses mechanical and electrical devices.  The bigger customers have global IT service contracts worth $100 million plus with one or more of the big 3 (and my employer is also in that bracket), most use third party prime contractors to maintain their IT infrastructure which is based on products from the big 3, and a very small number still have a middle manager who gets sysadmins and programmers directly from recruitment agencies.  If there is something like a CIO in the executive suite, he/she typically has a tiny staff, whose only function is to manage the service contracts and broadcast articles from Information Week.

I think the sticking point is "recruiter."  To me a recruiter is someone who gets a placement fee in return for providing candidates to interview.  An agency that provides contractors for specific projects and handles E&O insurance, performance guarantees and collects the full amount of the contract, is not a recruiter in my view.

Small projects don't fit with big service providers, so lots of middle managers like myself go outside the global contract to get things done for an amount that doesn't require board approval.  Personally, I don't want to manage a team, I just want a finished website/app/EDI/reporting system along with maintenance and support, so I go to a consultant who can provide finished goods, not independent contractors who spend six months in our office.  I know that consultant uses contractors, not employees, but I don't care.  I do use consultants that are close enough I can demand a face to face meeting if nothing seems to be happening.  And it's been this way for over 10 years.
Howard Ness Send private email
Tuesday, June 25, 2013
 
 
>The desired place to move from sub-contracting is not direct contracting, but product. It scales and it has less unpredictability.

Products do scale better than consulting. I would say they are less predictable though - some products sell really well, some not at all and many shades in between. You don't know which one yours will be until you try to sell it.
Andy Brice Send private email
Wednesday, June 26, 2013
 
 
"You don't know which one yours will be until you try to sell it."

So true.
Ducknald Don Send private email
Wednesday, June 26, 2013
 
 
>  I would say they are less predictable though - some products sell really well, some not at all and many shades in between.

What I meant is when a product's revenue levels change (grow or fall) relatively slow. One can notice the negative changes in time and do some defensive actions.

A product making 20K/mo would probably take a year to get to zero even if neglected.

Contracting may go from 20K/mo to zero as short as instantly. Someone on upper management floor decides that the project doesn't have a business sense anymore, and boom.

P.S. My contracts usually include 2 weeks notice clause, but it is not uncommon to have 0 days notice there. (Most contracts though happily go to the agreed end date, and often extended.)

BTW 2 weeks notice may be yet another overlooked benefit of working via agency; direct subcontractor would have to hustle to get this into the agreement, I feel.
Vladimir Dyuzhev Send private email
Thursday, June 27, 2013
 
 
Vladamir,

There is some truth in what you say, but you are talking about successful software products. Many people slave away on their products for months or years and never make a penny from it.

Also product businesses can die pretty quickly, for a variety of reasons.
Andy Brice Send private email
Thursday, June 27, 2013
 
 

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