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IT contractors in demand – but need business savvy as well as tech smarts

Contractors are a flexible resource for IT departments
Contractors are a flexible resource for IT departments

The number of IT contractors who are out of work has halved over the past year as demand for IT skills has rebounded, according to a leading bellwether survey recently conducted by SJD Accountancy. We spoke to Claire Johnson, Managing Director of SJD Accountancy, about the survey, IT skill shortages, "hybrid" staff, and whether contractors are more sought after than permanent staff members these days.

TechRadar Pro: What is the current state of the market for IT skills?

Claire Johnson: The market is definitely on an upward trajectory. The number of IT contractors who are out of work has halved over the past year as demand for IT skills has rebounded. We sampled 600 IT contractors and found that 6.5% were out of work compared to 12.6% the previous year, so that's a very dramatic fall in joblessness over a relatively short period of time.

TRP: Are contractors more in demand than permanent staff?

CJ: It is often said that contractors are the first into and first out of a recession. We typically see demand for IT contractors pick up first and the market for permanent skills lagging behind. In fact, according to National Statistics, record numbers of workers are self-employed, so this seems to be mirrored in the wider economy. For some IT departments, the attraction of contractors as a flexible resource may give them the edge over permanent staff at the moment, but as confidence builds CIOs will also look to create more permanent roles.

TRP: IT contractors suffered cuts to their daily rates over the last few years – is that continuing?

CJ: Rate cuts are an occupational hazard of contracting. It's generally much easier to cut contractor rates than salaries for permanent employees. On the flipside, contractors are often able to command higher rates than permanent employees when demand recovers.

The proportion of IT contractors who have seen their earnings fall has effectively halved to 11.7% at the time of our survey, compared to 21.2% the year before. With the number of jobless IT contractors rapidly falling, pressure on rates is building. As the market strengthens and skills shortages bite harder, rates should start to move northwards at a much faster pace.

TRP: Are skill shortages becoming a more widespread issue?

CJ: It's a truism, but talent is always in short supply whatever the market. With the proportion of IT contractors out of work falling so sharply – which is a very useful bellwether for demand for skills across the board – skill shortages will undoubtedly intensify.

CIOs frequently say that skills are among their top concerns, and as new technologies become mainstream, skills need to be reassessed to meet demand. As the economy recovers and investment in IT grows, this will fuel demand for candidates experienced in the latest technologies.

TRP: To what extent are projects which were put on hold during the recession now being revived?

CJ: The recession saw many IT projects put in the deep freeze, or else investment channelled to projects that would produce a short-term return. With IT budgets edging upwards, there are clearly projects which, while difficult to sell to boards a few years ago, are now much easier to construct a compelling business case for.

Our data shows that contract lengths (IT contractors are typically engaged on fixed term contracts) are, on average, growing, indicating that end user clients are increasingly willing to commit to longer term projects. Just 9.9% of contracts are currently three months or less, compared to 11.6% the previous year.

TRP: Why might IT departments bolster contractor numbers rather than increase permanent headcount?

CJ: Contractors represent a relatively low risk way of increasing capacity without adding to fixed costs. It's not unusual, however, for contractors to take permanent roles in IT departments, but for many it is an attractive lifestyle choice. With the recovery not on a firm footing as yet, contractors are an attractive way to engage IT skills.

TRP: What areas are CIOs looking to invest in?

CJ: Our data doesn't lend itself to forecasting, but IT departments are currently increasing spending on digital technologies, such as web and mobile platforms, as consumers continue to demand greater innovation in how they interact with businesses.

Marketing technology is another of the fastest growing areas of IT spending as the marketing needs of organisations take a larger slice of IT budgets, such as linking marketing and customer relationship management systems, or putting big data at the disposal of marketing teams.

TRP: What kind of candidates are most attractive to hirers?

CJ: Digital skills are in demand, but IT professionals with good business skills, who can marry the strategic needs of an organisation to technological solutions, are at a premium. These hybrid candidates have long been in demand, but the direction of travel is still very much slanted that way. Increasingly, IT is no longer just an enabling technology but core to the strategy of many organisations, which is why candidates with non-technical skills are often highly sought after.