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It just got trickier to get inside Intel. To the dismay of local companies that funnel specialized tech talent into Portland's Silicon Forest, Intel decided last month to use a single out-of-state agency to fill its high-tech temp needs. Intel, which once contracted with more than four dozen high-tech agencies, will soon rely solely on the nation's fifth-largest temp agency, Philadelphia-based CDI. A company's choice of temp agencies might seem about as important as its choice of bottled-water supplier for the break room. But given Intel's prominence in Oregon's new economy, local high-tech temps and the firms they work for say the change is dramatic. As federal regulators and consumers ponder the effects of consolidation in every industry, from banking to auto dealerships to telecommunications, Intel's decision to go with a single temp service reflects another trend in these days of bigger-is-better: monopoly of the local workforce. For a couple of reasons, high-tech titans such as Intel rely on highly specialized temps who earn as much as $60 an hour. First, the ever-changing nature of computer projects makes it difficult to maintain an adequately trained staff. Contracting out with temps who use specialized skills for specific projects is commonplace. The high-tech industry's volatile work cycle is another reason firms rely on temps, says Robert Schlesinger of All PC Software Development Inc., a Portland software and temp agency. "Software and hardware development projects come in bursts of time," he says. "Companies need people to work very intensely for a short amount of time, but then they don't want to have to pay these highly skilled people to just stand around for months at a time." There are about 85 high-tech temp firms in the Portland area--ranging from big vendors such as Aerotek, which has 250 tech contractors, to smaller firms like Ease Software, which has about 20 folks. The Oregon chapter of the American Electronics Association says 1,360 people worked as specialized temps in Silicon Forest last year. Intel, which has 11,000 local workers on staff in Oregon, usually has about 350 high-tech temps working on projects, according to spokesman Bill MacKenzie. The temps typically work on intensive three-month projects rushing to get out new products or tweaking software that's already on the market for a midseason upgrade. Typically, Intel managers build a relationship with their favorite temps and use those people repeatedly. In the past, partly to ensure access to all the managers' pet temps, Intel has contracted with as many as 50 different high-tech temp agencies. Intel officials won't discuss the details of their contracting arrangements, but sources in the industry say that late last year Intel narrowed its list of temp agencies down to eight companies. According to local contractors familiar with Intel, the company then put the pressure on, demanding that the firms squeeze their profit margins. In the temp business, margins come from the difference between what the temp firms pay their workers and what a company like Intel pays the firms. Bigger companies such as CDI, which employs 20,000 people internationally, have more room than smaller firms to trim their margins and still make a nice profit. A 4 percent margin is average for tech temp firms, says the manager of a local firm who has contracted with Intel. That means that for every $1,000 paid to a typical temp worker, his or her agency keeps $40. CDI's margins are about 2.5 percent, which earned the company $37.6 million last year, according to financial data in its latest annual report. Trimming margins while paying temps competitive wages forces firms to skimp in other areas, such as benefit packages, says one local temp-firm manager whose firm couldn't compete under Intel's new budget squeeze. CDI officials did not return repeated calls from WW. In any case, last month CDI beat out the competition from Intel's other temp vendors, including All PC Software Development Inc., Aerotek, Mark Ace and HL Yoh. "Cost and efficiency was obviously a factor that drove this review process," says MacKenzie. He offered no other explanation for Intel's decision to go with CDI. MacKenzie said the decision to work with one company, whether CDI or any other, was part of Intel's recent effort to tighten its belt and cut costs. Intel's stock has been hit by a computer-industry slowdown--earnings per share are down 14 percent this quarter from last, and revenues dropped 6.25 percent between first quarter '97 and first quarter '98. Dealing with one contractor instead of eight, MacKenzie says, will streamline the hiring process and cut costs on paper work. High-tech temps and their employers contacted by WW said that they weren't sure what the ramifications of Intel's move will be but that it represents a dramatic change. "It was a bit of a shock," says the president of one local high-tech temp company, who learned about the change last week. Local techies, including managers at Intel, have three concerns. First, they say, Intel's decision to go with CDI is a blow to local business. "I would like Intel to support Oregon businesses," says Lew Tarnopol, 47, an expert in developing online help systems. He's been doing temp jobs at Intel on and off for nine years, currently through local agency Mark Ace. "There was a time when I felt like they were supportive [of local business]," he says, "but now they're squeezing Mark Ace out of work." If Tarnopol wants to work at Intel, he'll have to leave Mark Ace for CDI. Tarnopol's stint with Intel expires at the end of the month. This highlights the second red flag for local tech contractors and Intel project managers: The decision jeopardizes current contractors' relationships with Intel. To the chagrin of staff engineers, the move to use only CDI makes certain temps unavailable unless they leave their company and get a job with CDI. "This is being driven by the cost cutters at Intel and not the project engineers," says a spokesperson for one losing temp agency, who asked not to be named. Finally, high-tech temps worry that with its Intel monopoly in place, CDI could lower temp wages to increase its profit margins. MacKenzie says Intel will not stand for any wage cuts for its contract workers. When wage cuts to temp workers find their way to Intel's bottom line, however, it could certainly be tempting. |
