Tech job boom in 2004

18 Dec 2003

All good things must come to an end, it is said. For the IT professional, the end, when it came, was sudden and brutal. Having ridden the technology wave for most of the Nineties, many IT workers were left dazed and bruised when that wave crashed in 2000.

Stories abound about the crazy jobs market of the late Nineties. Silly money was being asked for — and got. Flash cars were dangled as golden hellos. People turned down or left jobs in solid, blue-chip firms in favour of posts with dotcoms that were flush with venture capital money but often had no clue about business. IT contractors were being paid hundreds of pounds per day and skipped from one contract to the next with barely a pause. Ill-qualified candidates were being interviewed for jobs that they normally would not have got a sniff at.

The cracks in this obscene and shaky edifice had begun to appear in March 2000 with the Nasdaq crash and these cracks began to widen as spring gave way to summer. According to Mark Keane, HR director of Microsoft Ireland, the defining moment came in August 2000. “We put a [recruitment] ad into the paper and this deluge of applications came in. I remember looking at the post and I turned to one of my colleagues and said: where did they come from? We had been getting half a dozen replies and suddenly there were hundreds,” he recalls.

What followed was what economists would call a ‘severe correction’. In the front line were recruitment consultants, who experienced an immediate drop-off in business. “On the contractor side the numbers fell by 30-40pc,” recalls Anne Heraty, managing director of CPL, one of the largest IT recruitment firms in the country.

At the same time, wage rates fell sharply. Whereas Oracle developers could command €400 a day at the top end of the market, the rate has now fallen to between €300 and €350, according to CPL. Another agency, Rescon, estimates that contractors’ rates have fallen by as much as 30pc but that the rate decline has now levelled off.

It has taken the guts of three years for the technology industry to haul itself out of the abyss but it seems the recovery is finally under way. “The good news is that we’ve definitely reached the bottom of the market,” Heraty maintains. “In the past couple of months there has definitely been a pickup. The number of contractors we have working this year has gone up 20pc whereas in previous years it had been falling. Where you see the contractor market pick up I think you can expect the permanent market to follow.” Heraty claims the jobs upturn began as far back as the beginning of the year and has been building ever since.

Nessa Butler, managing director of Rescon, paints a similar picture. “The last quarter of 2002 was probably the lowest point. There was a big shift in the first quarter of this year and the average month-on-month increase since then has been about 11pc,” she explains.

Butler believes that several factors are driving the recovery (see panel below). One of the most important is that multinationals have started hiring again after a two-year effective recruitment freeze. Butler estimates that perhaps 70pc of multinationals had some kind of official “procedural holdback” to recruitment and that 90pc of companies across every sector were extremely cost-focused in their recruitment policies.

With the economy picking up, recruitment restrictions have eased and IT workers are once again in demand. But where are they being deployed? Whereas the previous IT employment boom was fuelled first by the Y2K changeover and then by euro conversion projects, this time there is no obvious growth engine. Neither is there a particular industry sector that seems to be leading the demand for IT skills.

What is driving this recovery, Heraty argues, is increased IT spending on existing infrastructure. She observes that the one fear that all businesses share is becoming uncompetitive and this is what is fuelling much of the growth in IT spending. “While they might try to maximise their IT investment, at the end of the day they want to keep their competitive edge and technology is a key way of doing that and from that point of view I’m quite optimistic about it [the jobs market].”

If the recruitment industry is upbeat, so too are the IT firms that are doing the hiring. “The worst is over. I would see a small rise in the absolute number of hires in 2004 but I really feel confident that we have turned the corner,” says Keane of Microsoft Ireland, whose 1,250-strong workforce includes 950 IT professionals.

Five years ago it was fashionable to favour start-ups over established firms. Now the tables have been turned and solid and reliable IT firms such as IBM, Microsoft and Oracle are all benefiting from the perception that they offer long-term job security. “I remember selling the job security story in 2000 and no one wanted to buy it. It’s a different story now,” notes Keane.

While industry professionals are agreed that a recovery is under way, they also believe that the scale of that recovery will be modest rather than something more dramatic. However, if the recovery were to quicken significantly and demand for technical skills to grow accordingly, there are fears that the skills shortage of 1999/2000 could soon return to haunt the industry. Keane is fearful that the falling number of technology students could fuel a skills shortage in as little as two or three years’ time and the industry has got a duty to communicate to young people what he sees as its excellent long-term prospects. “The mums and dads are legitimately concerned about the jobs their sons or daughters will get. What I would say to them is, trust me, IT is where you want to go. It’s going to be so exciting what’s going to happen.”

Anne Heraty of CPL is more downbeat. She is emphatic that we are again heading for a skills shortage no matter what. “If you look at the demographics, the number of kids going into the science and engineering areas will not be enough to sustain the skills demand. The numbers seem to be dropping and there is no question that in three to four years’ time there will be a skills shortage,” she asserts.

“I think it’s a serious issue for us here if you look at the number of graduates being produced by other countries such as India. It is something that we should definitely be looking at now. I’m sure we’ll have to look at our whole immigration policy again,” she adds.

Butler offers a slightly different perspective. She feels that the skills associated with the latest technologies will always be in demand and even now is seeing shortages in certain areas, such as Oracle RDBMS (relational database management systems). She also thinks that while she that a shortage is very possible in five to 10 years’ time if the supply side continues to shrink, the improving technology market could well prevent this from happening.

Whatever happens in five years’ time, for now the jobs market seems to have reached a welcome equilibrium. The skittishness of the market of four years ago has totally evaporated and a high degree of normality has returned.

Like many other software firms, SoftCo, a leading indigenous software house, has shed staff since the height of the boom. It now has 70 employees, which is back to about 1999 levels. At the same time, according to Alan Kilduff, director of software development, revenue is 35-40pc higher than it was in 1999, a situation he attributes in large part to higher productivity. “There’s a maturity of skills now. People seem to be staying in the job longer and there’s less movement, and maybe because they’re in the job longer and a little bit more mature, they tend to get more done and done well,” he says.

Kilduff also feels that during the boom years the ranks of IT professionals were artificially swollen by industry outsiders of questionable qualifications and skills who were attracted by the huge salaries. He believes that many of these opportunistic newcomers have left the industry again and welcomes the fact that sanity has returned to the labour market after the ups and downs of recent years.

“I think the balance is just about right. There’s a reasonable supply of good people out there. When you look to hire for vacant positions you get good quality CVs and good quality candidates and you pick someone that you’re happy with. In 2000, the situation was that you weren’t getting the pick of the CVs unless you were agreeing to exorbitant rates with the agencies and you actually had a gut feeling in a lot of cases that people didn’t have the necessary skillsets or experience for what you needed but that you were in the position that you absolutely had to hire and there weren’t an awful lot of people out there.”

Kilduff agrees with the assessment that the jobs market is in recovery and is even beginning to see signs of a slight tightness in the market again with the supply of IT professionals not being quite as abundant as they were earlier in the year. He believes a continued modest recovery is both the most likely and the most favourable outcome for the IT industry. “I think the boom and bust scenario is no good for anyone in the long run,” he adds.

All the evidence suggests that the recovery in the IT jobs market is under way but the hope among industry professionals is that it will be modest and gradual and not a repeat of the dotcom years.

By Brian Skelly

Survey suggests continued recovery

There is simply no comparison between the IT jobs market now and a year ago, a recent survey from recruitment consultant Rescon finds. According to the research, the number of permanent IT positions registered by Rescon rose by 44pc in the first quarter of 2003 and has risen by 11pc month-on-month since then.

The company indicates that several factors are driving the recovery: software companies expanding their testing and development teams; hiring freezes being lifted by multinationals; a growing demand for technical sales people; and new customer wins by a buoyant small and medium-sized business sector.

The contract IT market has also recovered, with contract opportunities growing 34pc in the three months to October 2003. The factors driving demand here, the survey finds, are the lifting of hiring freezes coupled with increased workload, and a tendency to see contractors as a more efficient means of completing ad hoc projects than adding to headcount. The skills most in demand include Oracle, Windows XP/2000, Microsoft .Net, C Sharp,, Lotus Notes and enterprise resource planning systems (the back-end systems that run key business processes).

Rescon has observed the following key changes to the IT recruitment market in 2003: the recruitment cycle has become longer, ‘soft’ skills have become just as important as technical expertise, and permanent candidates are placing greater value on benefits packages that include health insurance, pension and life assurance. Unsurprisingly, a lot more weight is also being given to job security.

According to Nessa Butler, managing director of Rescon, the outlook for 2004 is encouraging. “There has been a lift this year and my guess is that the market will steady next year at a higher level. God knows what will happen the following year. Here’s hoping!” she says.