Does our industry need these IT contracting firms?

Hey all,
As I was considering the prospects of re-entering the IT job hunt in just over a year (after finishing my masters degree) and having to deal with these contracting firms I began thinking (well, first I got sick to my stomach

do we really need contracting firms. I know that they provide the service of being an employee of them as opposed to the independent contractor/employee confusion when working directly with the client company.
But if the legal hassles these companies face when trying to hire a programmer as an independent contractor didn't exist, would there really be a need for 99% of the contracting firms out there. Here is my reasoning.
1) Most of these companies don't deal exsclusively with one firm. I can't count how many times 2 or 3 contracting firms would give me discriptions of the same job for the same client.
3) The contractors advertise in the same public place (ie monster, dice, etc)How many firms really have a stable of programmers who only work through them?
4) The benifits they offer (health insurance, 401k etc) could easily be obtained by the client himself on the open market.
5) Most of the recruiters I talked to had very little knowledge about the field (no more than could be build into a job site filtering engine).
If the legal restrictions for companies determining whether one was an independent contractor or an employee weren't there I'm begining to believe that contracting firms would go the way of travel agents. On a good job site employers could list what they want directly, applicants could upload their resumes, and employers could filter out the resumes they want based on predefined criteria (isn't that what a lot of companies are already doing on their websites).
What do you guys and gals think?
Jon

You could make the same argument for recruiters. Middle-men exists when there is not sufficent support for logistics. For example, candidates and companies are not good, at least not efficent, at matching up, and so recruiters step in to grease the wheel (and line their pockets).
I totally agree with you in principle. In practice... well, the invisible hand hasn't washed them away yet, but maybe some enterprising and insightful people will get it to do just that.
--Mark

Jon:
- Not sure if you posted this or not --- where are you doing your Masters Degree? College, etc.
- Are you working or doing internships now?
Just curious,
John Coxey

A marketplace cannot be 100% efficient/liquid.
Even the stock markets have spreads + commissions.
With the job market would you switch jobs for a $1000 raise? I doubt it. Because it is illiquid there is a large spread which is of course taken by the middlemen (recruitment agents) who will happily work for 30% of your base salary.
If a more efficient marketplace is created it may reduce the middlemen - but only by increasing liquididy (people quitting & getting rehired) is that gonna happen?
Simon

Are independent contractors going to give kick backs?

John -
I'm going to be doing the distance learning Masters in IT at Harvard University's extension school. I start classes this september

. The courses seem stimulating and challenging (from what I have already seen of them), The program is really moderately priced, and I have the flexibility to leave chicago and do the required semester on campus.
Right now Im working as a Database Analyst for a bank. Been doing that for the past 10 months. Basiclly I spend my day writing SQL scripts and creating the ocasional new database, with a little visual basic on occasion. It was exciting at first (mostly because I didn't know SQL at the time) but the job is going nowhere. Im a contract employee, and they have told me from the begining that they have no intentions of making my position permanent (not that I would take it as a permanet position if they offered).
I'm really focusing on long term goals right now. I've begun networking in plans for a job as a software engineer in January or Febuary of 2004.
As a side note - all of the Java programmers out of work, if you've:
1) been searching for a few months with no success
2) have no source of income and the bills are pilling up, and
3) are completely stressing out about 1) and 2) to the point of nervous breakdown

I would recomend taking some job, even if its non technical, just to tide you over for now. It will not only remove some of that stress, it will take some of the urgency out of the situation and give you a chance to breath. From this new vantage point it may be easier to figure out the best course of action.
But what ever you do, KEEP CODING

. working in the day and coding at night is a lot of work but if you are commited to this field, in the long (and short) run, it pays off.
Jon