I currently work with a company that’s done a lot of business with a computer consulting company. Recently, management told us the IT department is being outsourced, including my senior IT position to—you guessed it—the consulting company. The owner of the company has already approached me about hiring me (or making me an independent contractor), and my main client would be the company I work for now! As crazy as this sounds, I am seriously considering doing it. I don’t know what my options are to keep working if I don’t. If I do it, should I be an employee or an independent contractor?

The more the world changes, the more it stays the same. I’ve been in the computer world for decades, and every time the budgets get tight, essential services such as IT get outsourced. The company gets to make its profit picture brighter because, instead of paying salaries and items associated with salaried employees (such as bonuses and training), it gets to pay an outside vendor. It’s the same money most of the time, but since it’s in a different accounting category, it makes the company look more profitable.

When the economy improves and budgets loosen up a bit, IT goes back in-house. It might take a year or two after the general economic picture improves, but I’ve never seen a company stay with an out-source relationship if it got into it because budgets were tight. Why? Because managers (if they can afford it) like to manage their own staff—not a group of independent contractors—and they don’t like to depend on outside consultants.

What does the future hold?
I’m telling you this so you’ll understand where your potential new employer fits into the puzzle. Some consulting companies are stable organizations that weather bad economic times because they offer solid services. Others come and go as the economic weather changes and profit in bad times because companies are outsourcing their services. I would put the consulting company you mention in the second category.

That means that when the economy improves and companies start taking IT back in-house, then you could be out of job if you work for the consulting company. The same is true if you work for the consulting company as an independent contractor. In either case, the president keeps his job, and you’re the disposable talent that gets trimmed back because the client base is now smaller.

If the consulting company sets you loose, you might get lucky and be rehired by the company that you are working for now. Or it could decide that it really needs to start fresh with all new faces. There is no guarantee that you’d get your old job back, and I’m sure it would be odd fitting back into office politics if you were rehired.

Look out for yourself
So, the bottom line is that you’re being let go from your present position, and the consulting company president is looking to pick up some IT talent, probably at the lowest rate he can manage. Whether you decide to go to work for him as an employee depends a lot on the promises he makes and how much you can trust those promises. Try hard to win some good benefits for yourself, including health and continuing education, training, and certification. If the new boss balks, that’s a sign that he regards you as easily replaceable, which isn’t a good sign.

If you decide to go out as an independent contractor, make sure to set yourself up as a separate, small business. Hang out a shingle and work hard at getting clients other than the consulting company. Don’t let the consulting company eat up so much of your time that you can’t build your own client base. It will try to do that, but if it succeeds, you will not have enough time to build your own business.

In my mind, since you’re out of a job anyway, you might as well take the consulting company on as your first client and go the independent contractor route. You’ll have to pay your own expenses, including health insurance, but you won’t be putting all your career eggs into one rickety basket.

Here are some Web sites that might be helpful: Free Agent Nation is a companion site to the book of the same name. The site has a lot of good advice about working for yourself and even some group health insurance plans. National Association of Computer Consultant Businesses is a site for businesses that want to do more IT consulting. The Independent Computer Consultants Association might be helpful, particularly if there is a chapter in your area, so you can network with other consultants.