Employers will face shortages of IT professionals with enterprise resource planning skills over the next 12 months, putting pressure on IT directors to raise pay rates, a recruitment specialist has predicted this week.
Demand for IT professionals with SAP, Oracle Finance and Siebel is growing rapidly, driven by a wave of technology upgrades by leading firms, public sector projects and financial compliance regulation, said Parity Resourcing Solutions.
The upturn in activity is likely to push contract rates for ERP specialists up by 15% by the end of the year and create new recruitment difficulties for IT departments, said Parity.
"There are a lot of new programmes going on, such as the national programme for IT in the NHS, the merger between the Inland Revenue and Customs, and Basel 2. In addition, there is another cycle of technical replacement coming around - five years on from Y2K," said managing director Joe Kelly.
IT departments will come under increasing pressure to offer longer contracts to freelance IT staff and to renew contracts more quickly than they have in the past if they want to retain key staff.
"Now the market is much tighter, candidates are not waiting for renewals. Employers that are not quick off the mark will find they are potentially losing people. Before you could wait until a week or two before the contract ends to renew. Now you need to be thinking at least six weeks ahead," said Kelly.
Over the past year the proportion of contractors turning down renewals because they had a better offer elsewhere has risen from 33% to 40%, figures from Parity have revealed. During the same period, employers have extended the average length of their freelance contracts from 13 weeks to 16 weeks.
Demand for permanent staff is also rising, but at a more modest rate than contractors. SQL, Unix, Microsoft Office, Cisco, and C++ are among the hottest skills, according to Parity. Java skills are in particularly short supply, forcing some employers to turn to India to find skilled programmers.
"The war for talent is back and firms have to compete in an internal market to attract the right skills. They have to make sure their organisations are a good place to work and that they have a good work-life balance. They need to pay more," said Kelly.
Parity is advising employers to set up regional databases of skilled IT professionals so they have a panel of people to recruit from when vacancies arise.
There are often regional differences in the types of IT skills available. For example, recruiting helpdesk staff in East Anglia is relatively easy, but there are shortages of helpdesk staff in the South West and North West.
Projects, mergers and legislation boost spending
Strong financial results from IT recruitment specialist Spring Group have provided further evidence of growing demand for IT skills.
Since late 2001 demand for IT skills has fallen in the UK because of the collapse of dotcom boom and the economic downturn. However, in March Spring Group announced a 37% increase in revenues to £476m. Operating profit also grew from £1.9m in 2003 to £9m last year.
Richard Barfield, chief executive at Spring Group, said, "There is no 'next big thing', but a range of themes are keeping the market active. We are seeing demand across the board, but the things that drive the market include a resurrection of projects that have been on hold during the economic downturn.
"There is also greater activity in mergers and acquisitions which creates IT projects to integrate systems. There are new IT products and services to link companies with suppliers and customers. There is a serious amount of money available for a new business-to-consumer approach based on the internet. In the finance sector, new bank accounts, insurance policies and credit card accounts are created this way."
Because of the threat of viruses, worms and spyware, there was also demand for IT security skills across all industry sectors, Barfield said.
"Lastly, regulation is driving demand, particularly in the finance sector. Projects to meet the requirements of the Basel 2 regulation in Europe and Sarbanes-Oxley in the US are creating strong demand for IT staff that understand banking processes and new technologies."
Barfield said the skills most in demand were application projects based around Windows .net and web servers. Also there were migration projects to Windows XP and 2003 and demand for Unix and storage area network skills, he said.
But Barfield does not expect the jobs market to crash in the same manner as 2001-2002. "There were four things that contributed to the demand in the last recruitment boom: Y2K, the internet, the introduction of the euro and a range of new technologies. This meant that in the late 1990s IT staff were in huge demand and rates went through the roof. This time we will see a more gradual increase, so I do not expect to see demand fall off a cliff the way it did in the dotcom collapse and the following economic downturn."
This was first published in April 2005