My point was that there has to be a more cost-effective and strategic way to source a relatively typical IT position, which this was, than keeping a highly paid contractor around for more than four years. This CIO's response was that his company was in something of a downturn, and therefore he didn't think anybody wanted its stock. What was going on there was an avoidance of dealing with some of the bigger issues associated with their dependence on contractors. Clearly, it depends on what kinds of projects you are doing, what your current skill set is like, the availability of skills in your market, and other factors. They are also great for specific technical skills that you might need only in the short term and for skills that you don't think your staff can leverage in the long term.
Contractors can also pitch in when there is an unexpected departure in a key area.
In fact, that's likely to be a better approach than allowing existing staff members to pick up the slack during the four months it takes the company to hire a replacement. Another good use of contractors is to offer them a trial engagement before offering them a permanent job. This gives the company and the individual a chance to decide whether they are interested in a more permanent relationship. If you think you may be too dependent on contract labor, do the following. Count the number of contractors, and make sure you track the ratio of employees to contractors on an ongoing basis.