April 2009

Contractors not as badly off as they were following the dotcom crash

While the IT contractor market remains under pressure, both overseas and in SA due to the worldwide global meltdown, out of work contractors – in the UK – are only half the number they used to be following the dotcom crash.

This is according to Karen Geldenhuys, MD of IT recruitment company, Abacus Recruitment. Geldenhuys said contracting jobs in SA were not facing the same pressure as they are currently in the UK – which is facing a worse recession then SA.

“Interestingly, despite all the doom and gloom abounding due to the credit crunch being felt globally, the current number of out of work contractors in the UK is only around half of what it was following the dotcom crash. While contracting jobs are certainly under pressure locally, we are, at least, facing the prospect of hosting the Soccer World Cup next year – and a substantial amount of IT skills will be needed for this daunting task alone. This does bring some reprieve to our IT market, more markedly to contractors.”

According to recent statistics IT contractor demand and pay might be hurting, but it is not as bad as the hangover affect of the dotcom crash. IT contractors’ long-term joblessness today is just 7.5%, down from 13% in 2003.

The dotcom crash led to mass layoffs in the UK, and around the world. Organisations have insisted on trimming staff and keeping “headcounts as tight as possible”.

According to Matthew Brown from UK-based IT company, Giant, IT departments have since been “pared to the bone” and cautious with “vanity” hires ever since 2003.

After 2003, 12 months of job cuts followed and more than 50% of IT contractors informed Giant that they would opt for a long-term contract over a better-paid alternative due to the onerous – and dangerous - hiring circumstances.

Now two-thirds of contractors are looking for stability over “bigger time” payments, said Geldenhuys.

“Job security,” she said, “is now a bigger concern then it was in 2003.”

“With rates in some sectors having been cut,” Mr Brown said, “contractors are clearly still concerned about job security and whether the market still has some way to fall.”

The latest statistics also show that contractors in the beleaguered financial services sector are showing the most pessimism. Only 15% saw the sector being in a position to offer them their next assignment, down from 24% in 2003.

“These are worrying statistics,” said Geldenhuys. “But our financial services sector has not been as hard-hit as the UK, largely due to the more prudent lending practices of SA banks. But we are certainly looking at some attrition in the local financial services sector from an IT perspective. The beauty about SA is that we face a very real IT skills shortage; and if there are job losses in one sector, other sectors pick up the slack.”