IT pick-up?

Feb 21 2002 by Print This Article

Few suffered like the IT sector in 2001. Job losses in IT have been pretty horrific, both domestically and on a global scale. High profile players like Hewlett Packard and Compaq, for example, have discussed (though not yet cemented) a merger that has already signalled the death knell for 16,000 jobs in the sector.

Others, such as Baltimore Technologies in Ireland, have lurched from crisis to crisis - shedding jobs as they went along.

Sucker punch
It is estimated that job vacancies fell by half in 2001 compared to the previous 12 months. While everybody in the industry recognises that the Y2K years fuelled something of a halcyon period for the sector, the last year has certainly been a sucker punch for IT recruiters.

Not surprisingly, a significant minority has gone out of business and those that have stayed afloat have done so with tightened belts. But this month's REC/NTC Report on Jobs offers perhaps more hope for the future than at any stage in the last 12 months.

Before we get carried away, the decline in the demand for IT staff has fallen yet again. However, the rate of decline for both temporary and permanent placements has eased significantly. Thus, while demand is down by roughly two-fifths on last year, the slower rate of decline is giving recruiters in the field some cause for optimism. Elan Computing's regional sales director Mike Berry says: "There is demand for both contract and permanent staff across most offices, but it is still relatively low."

Chair of the Recruitment and Employment Confederation's specialist IT division Toni Cocozza - also the founder and managing director of IT recruitment firm DP Connect - was similarly hopeful. She said: "Confidence appears to be returning slowly. The contract side of our business has experienced the most significant upturn since January 2001."

Has that led to IT agencies looking again at their IT consultant needs? Recruitment-for-recruitment firm Hunter Handley's director Karen Dunwoodie told Inside Recruitment: "I don't think the market ever came to a grinding halt, even in the last quarter of 2001. But definitely since the New Year, we've noticed people wanting IT consultants again. It's tentative, and it's certainly not a flood, but we'll only really be able to assess the market properly at the end of the second quarter of 2002."

CD Sales managing director Jeff Dale was also boosted by the New Year performance. "The IT sales division had its best month ever in January and it does seem that companies are looking again at IT needs. But in comparison to last year, they are being far more choosy than they were this time last year."

Some agencies have actually flourished, despite the downturn. Just last week RDL Group, which generates 97 per cent of its business in the IT contract sector, announced excellent results for 2001. Turnover for the year was up by 169 per cent to £43.6 million and profits before tax and amortisation for goodwill increased by a staggering 145 per cent to £2.7 million.

Geographical spread
Chairman and managing director Andy Richards attributed much of RDL's success to its geographical spread, particularly following the acquisition of Sevenoaks-based M3. He said: "M3's business is approximately 60-70 per cent based overseas - so that geographical spread through Europe, and the development of our skills in niche areas like SAP and Oracle House, has helped. This year will be challenging though because Europe, which escaped the worst of last year, is starting to get hit. "In the UK, things have been different," continues Richards. "We had an awful pre-Christmas but there's been a tentative, but definite pick-up. You couldn't call it buoyant, but corporates are thinking again about updating and implementing new IT systems.

"I'm not sure if it's a pick-up in demand. A lot of IT recruiters have gone out of business, and much of the competition has gone. So, although demand is probably the same, there are fewer agencies in the market. "The reality was that there were a lot of agencies that were doing low margin business, or simply did not know the market well enough."

RDL proves money can be made in a difficult market. The key over the next two quarters will be the attitude of the corporates to their IT needs. Elan's Berry says: "Most major clients, including those in the financial sector, are revisiting IT projects with a view to starting within the next quarter. Managers are being told to work with existing IT headcounts, but this will invariably move to recruitment needs in the future."

Difficult times ahead undoubtedly. But 2002, nevertheless, appears to offer the prospect of some improvement for the IT sector.

This article first appeared in Inside Recruitment: