IT Help to be More Expensive in 2005

For many years now, IT managers have had the luxury of being able to hire available talent at bargain prices. But, if the IT job market continues the way many industry watchers say it will, this luxury will soon be a thing of the past.

Since about the beginning of 2004, IT jobs have been becoming more plentiful. That trend is continuing and expected to accelerate through the latter part of 2005. If this trend comes to pass, not only will fewer U.S.-based IT workers be in the market but the price for talent will begin to rise.

According to staffing-firm Robert Half Technology’s most recent hiring index released today “[t]welve percent of (1,400) executives polled plan to add full-time IT staff in the next three months while just three percent anticipate personnel cutbacks. The net nine percent increase matches forecasts in the previous and year-ago quarters.”

More analysis by Foote Partners, who track pay based on skill sets, found skills pay in 2004 increased between one-and-four percent. Not a huge increase by any measure, but compared to the six-to-eight percent declines witnessed in 2003, it represents a net increase of some five-to-seven percent.

And this, according to Foote President David Foote is “a pretty stunning reversal on pay for a number of certified and non-certified skills.”

“We do see the tightening (of available talent) and the increased demand and looking forward we do see the some of the spend increasing through 2005,” agreed David Hebert, IT practice leader at The Hackett Group.

According to Foote, 2005 should see a hiring bubble towards the end of the year as companies finish up Sarbanes-Oxley (SOX) compliance initiatives (which was mostly done by contractors and consultants) and get back to the real work of making IT more responsive and efficient; work that has been back-burnered since SOX was enacted in 2002.

“We are definitely seeing a shift going on,” agreed Katherine Spencer Lee, executive director of the staffing firm Robert Half Technology and a regular CIO Update columnist. “I don’t think that the shift is so apparent right now that people are ready to say we’re in a supply-and-demand market again, but we’re getting close to it.”

According to Spencer Lee, the skills most in demand and, therefore, commanding the largest pay increases today are Microsoft .NET developers, IT security analysts, system auditors, and those with business intelligence and data warehousing skills.

“If I were working on projects that involved any type of security issues; … if I were looking at individuals that had heavy audit expertise, for example, because I was still working on SOX compliance efforts; or if I were looking at doing a BI or data warehousing project; or if I were looking at projects that require a staff of .NET developers; then I’d probably put on my calendar as a ‘To Do’ to look at my budget again in June.”

What has already begun at many companies is the shell game: IT managers faced with completing tasks but not allowed to bring on full-time help are shuffling money around from other budgets into their hiring budgets, Boston Consulting Group’s Simon Kennedy, vice president and director of the firm’s IT practice.

For the moment, much of this money is going for consultants and contractors because of so called “hiring freezes,” he said.

“The challenge I see in my clients during the immediate term is they are basically playing budget games right now,” he said. “They’re taking what was really suppose to be capital and using it for employee expense. And they’re going to have a longer term problem in that their expense budgets are not going up for hiring people and eventually they’re going to have to figure out what to do with that.”

This is one of the reasons why Foote believes he is witnessing a “talent war” currently raging among consulting firms.

While no one believes a 1990s era shift in available talent or salaries is imminent but all agree that companies will be looking for more help this year as the economy continue to heat up. And this means there will be fewer people to fill the jobs and they, in turn, will be more expensive.