Is the IT Sector softening?

I have been interested over the last few weeks to see the varying discussions that Australia is or is not in a recession at the moment. While the jobless figures overall are not too bad at 4.3% for July 2008 (according to the ABS), there are reports of the RBA easing interest rates due to concerns on the health of the economy. The Seek Employment Index has a 27% drop in job ads in the last 12 months.

So it was with some amusement I saw the following three articles on the Australian IT site.

Firstly from 23rd July about increases in skilled migrants entering Australia to help with our “deeping skills crisis”.

The second has NAB offshoring about 2,600 jobs over the next few months as part of a $1 billion technology restructuring program.

Finally yesterday we have an article announcing more falls in the job vacancy rates, with a fall of over 17% in the last six months.

So I have to wonder what is going on? I think I know. Yes vacancies are falling, yes people are cutting jobs and yes there is a skills crisis. The issue seems to be that many of our corporate IT workers just don’t have the right skills for the new work required.


5 thoughts on “Is the IT Sector softening?

  1. Michael, my view is that it is a correction in the market, just like what happens in the stock markets from time to time.

    It’s now perhaps not quite as hard to find good quality skilled people as it was 6-9 months ago. But there’s still a shortfall in many professional disciplines.

    This was in the AFR yesterday;

    “Monday, 11 August 2008 – New figures released today forecast that ICT skills shortages will grow by 29% by the year 2010 to just over 14,000 jobs unless we make changes to policy on ICT employment and skills. The gap in ICT unemployment is also predicted to reach an estimated 25,000 jobs by 2020.”

    What skills are you suggesting that our corporate IT workers lack for the “new work required”?

  2. One of the biggest differences between ICT and many other industries is the need for continuous learning. You know the whole spiel about things always changing in IT, always needing new skills and so on and so forth. It’s true.
    The trouble is that once you’re settled in a job, there is less incentive to continue actively learning because it’s not going to help you in the immediate future. Then when you are looking for your next job, you find you don’t have the skills that you need, because all of yours are out of date. You might call it “COBOL syndrome”, where John has spent 15 years programming in COBOL, and is very good at it. But the skills he has are useless in a job hunt, because nobody wants them.
    So we get lots of ICT job vacancies, and lots of unemployed ICT professionals. But they don’t match, because the jobs require skills that the job seekers haven’t learned yet. Combine that with The Experience Problem (where everyone wants experienced employees, but nobody wants to give a candidate their first couple of years), and you’ve got a strangled ICT market, all for want of continuous education (or self-education).

  3. I agree with the comments above. I also think that companies are changing down a gear, bracing for possibly very harsh conditions over the coming months. The first thing to get stopped is always discretionary expenditure followed immediately by projects of uncertain value, and projects which can be deferred. These hit IT&T directly.

    Also, on the “market correction” point above – if you build a system using contractors (or a big enough system using FTEs) now and spend say $1m, but you know there’s a 10 to 15% correction in IT salaries coming, you could potentially build the same system in a year for 900k. Thats a significant difference for the number crunchers, who’d also compare using nett present value and so on.

    If you expect a big drop in IT wages it makes perfect sense to defer anything you can defer with no significant revenue impact.

  4. If you are spending $1m on a new system that isn’t going to save you or make you $100k in a year, then you shouldn’t be building the system anyway!

  5. Ok so really bad numbers to illustrate my point 🙂
    How about if there’s a 25% correction coming for contractor rates, and you’re building out a common platform for a $50m business, which is a one or two year project but includes significant upshot for system capacity and capability. You can defer chunks of it but will hit capacity problems in two years.

    The scenario wasn’t my point, the possible significant drop in cost was.

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