IT contractor demand to turnaround with economy, says people3
IT contractor demand will experience a dramatic turnaround from its current low position as a result of tighter budgets and deferred or discontinued IT projects in 2001 as the economy grows in the second half of 2002, according to a US survey by people3, the Gartner Group and Mercer Human Resource Consulting (MHRC).
people3 and MHRC said a revival of the IT contractor market is likely to begin alongside a rise in economic confidence following a survey of 36 organisations that collectively use more than 6,200 IT contractors.
The survey showed 47 percent of companies reduced their use of IT contractors between November 2000 and October 2001. Thirty-one percent increased their reliance on contractors and 22 percent made no changes. However, for the 12 months following November 2001, 36 percent of the companies expected to increase their use of IT contractors, 33 percent anticipated a decrease, and 31 percent projected no change.
Rates
A regression analysis from the survey showed a number of combined factors influenced the determination of contractor rates, with skill proficiency levels being the single biggest influence.
The survey findings reported that companies pay significantly higher rates for contractors with advanced levels of proficiency.
It noted: 'Individual skills, e.g. Java, do not have a significant influence on contractor rates. Instead, generic skill categories, e.g. programming languages, tend to impact the actual rates paid. Contractors with networking and enterprise resource planning (ERP) skills are, on average, paid higher rates.'
David Van De Voort, of MHRC's IT division, said: "In most organisations today, IT companies' staffing set-ups include a blend of full-time, permanent employees working alongside contract employees. This provides flexibility and gives organizations a competitive edge in matching IT skills and resources to their ever-changing needs. We see no signs that this trend is abating."
Diane Berry, Vice President of Research at people3, said: "While IT contractors are extremely valuable in filling fluctuations in the workload of the IT organisation," but warned, "prolonged use of contractors may indicate ineffective resource planning and management."
Graham Fisher, a senior analyst at Bloor Research in the UK, said: "The reality is that few contracts are short-term, which is due primarily to poor resource management on the part of the employing organisation with contractors often out-surviving many permanent employees. As the contractor does not appear on the organisation's headcount this provides an opportunity to potentially maintain existing capacity whilst reducing headcount through permanent staff redundancies.
"For IT contractors the economic recovery will mean that there are more opportunities available but rates will remain tight until the next 'bubble' that results in a resource shortage. In general terms the industry as a whole is suffering from overcapacity, primarily generated by the dot com bubble, and it will take some time to get back to business as usual."