Offshoring transforms the market

Harvey Nash group development director Paul Smith reports that his company is seeing boom conditions in its outsourcing business, with annual growth rates of about 40%.

Harvey Nash group development director Paul Smith reports that his company is seeing boom conditions in its outsourcing business, with annual growth rates of about 40%.

This outsourcing of routine IT tasks to Asia and the Far East is beginning to transform the recruitment market in the UK. Low level jobs are steadily disappearing from the UK as employers take advantage of lower pay rates in the developing world.

“Developers and PC support are under most attack from outsourcing: many thousands of jobs are moving out of the country at the bottom end,” says Smith.

So recruiters are increasingly restricting their advertising here to high level staff – project managers, system architects, consultants and development staff who have business as well as technical skills. Employees who can make a demonstrable contribution to the progress of the enterprise are much better placed than those with technical skills only.

Indeed, the writing is on the wall for the traditional programmer or developer, according to Smith, who warns, “You must upgrade your skills rapidly, or specialise rapidly. The Java developer without real knowledge of the business aspects will be one of the first to go. You are going to be replaced by a developer in India or Vietnam tomorrow morning.”

This trend is not immediately obvious from the latest issue of the SSL/Computer Weekly Survey of Appointments Data and Trends, which shows that the number of IT professional jobs advertised on the web has remained essentially static since the end of 2004, with less than 10% variation in the total. This time the number was marginally up both on last time and on the same period a year ago, but by an insignificant amount in each case.

So the overall figures provide no sign of the outpouring of jobs overseas. This is because there is no net loss of jobs: the number of IT jobs in the UK remains the same. It is the type of employment that is changing.

Jobs for contractors fell compared to a year ago, again by a small amount. But although the percentage fall does not mean much, the fact that there is a decline does. It is the second consecutive year-on-year fall, after 12 consecutive rises. The contract market is naturally skewed towards less skilled staff: they account for 75% of this market, compared with less than 60% of the permanent market. So the trend towards outsourcing does show here.

Another sign of the trend is that the software houses community is the only sector in the permanent IT jobs market to show a decline this time. Demand fell by 7%: in contrast, demand in all the user sectors put together rose by nearly 20%. Software houses have been the pioneers in turning to outsourcing for large-scale developments. They still need high quality staff in the UK, however, and that is shown by a near doubling of demand for consultants.

This pattern is the same in the contract market. Software house demand here fell by 16%, while the user sectors slackened off their recruiting by just 5%. Again, the fall in demand took place despite a doubling of the number of advertisements looking for consultants – a major change from the last quarter, where demand for contract consultants was down by a third.

Across the whole IT permanent staff recruitment market, senior posts advertised on the web rose 12% year-on-year while the number of junior posts fell slightly. In the contract market, demand for senior staff was static, but demand for junior staff fell by nearly 10%.

Pay rates illustrate this same pattern of demand. On the web, salaries offered to senior staff were up 1.4% on a year ago. This is well under the government’s preferred CPI inflation rate of 2.4% for August, and only a third of average wage inflation across the UK economy as a whole. But it is noticeably greater than the average rise offered to junior staff, which stood at 0.3% for the quarter.

In the contract market, this pattern is more marked. Senior staff were offered 6.2% more than a year ago; three times the rise for junior staff.

There was again a large rise in the number of jobs advertised in magazines such as Computer Weekly in the last quarter, a trend that has been apparent throughout 2006. The total number of jobs on offer here in the second quarter was up by more than a third on a year ago. Advertising in magazines is generally aimed at the higher end of the jobs market.

Across the whole market, the biggest increase in demand for permanent staff was for systems staff, fuelled by the doubling of demand for consultants. Advertisers were looking for over 30% more senior systems staff and 8% more junior systems staff.

There was also an increase in demand for programmers and software engineers. In contrast, there was a fall in demand for operations staff (who now account for only 1% of the total), PC support specialists and, more surprisingly, technical support staff. Demand fell 17% here – 8% for senior staff, 20% for less skilled staff.

Advertisers were also looking for a smaller number of networking specialists than a year ago, though demand did rise slightly for senior positions. Here is one area where supply and demand economics have not produced the expected effect on salaries. The pay on offer here rose by well above the average for both junior staff (by 5%) and senior staff (by 7%).

These changes in the market are spread remarkably evenly across the UK. The biggest overall increase in demand was just 9% (in Scotland and Northern Ireland), and the biggest fall just 8% (in the North East).

The skills in demand have changed very little in the past year – indeed, the top five skills have remained unchanged. The biggest upwards mover is Embedded, where the requirement rose 68%. TCP/IP saw a similar surge in demand. In both cases the upsurge is not all that significant, as they suffered a freak bad quarter a year ago.

It is almost certainly more significant that the next highest year-on-year increase came from C#, now solidly entrenched in eighth place. Interest in new wave Microsoft skills is booming as users prepare for a new round of Microsoft technology releases.

Another significant trend is the continuing decline of those favourites of the 1990s: Unix and Oracle. They were two of only four skills in the top 25 to feature in fewer advertisements than a year ago.

Another star of the past decade, Exchange, was one of the others, while major rival Lotus Notes has sunk to
its lowest ever position, well outside the top 50.

How the survey is conducted

This article is based on information from the SSL/Computer Weekly Quarterly Survey of Appointments Data and Trends.

The survey analyses ads for IT professionals on the web, in the trade press, and the quality national dailies and Sundays. It is intended primarily for recruitment agencies and CIOs with a substantial recruitment requirement.
The posts are broken down into 55 categories, which include details of the number of posts advertised and the average and median national salaries offered for the past five quarters.

The survey provides further analyses within each job category by platform type, industry sector and regional location. It also gives a breakdown of the technical skills most in demand.

The survey costs £250 per issue or £350 for an annual subscription. This covers four issues, and includes a free software program, which allows selection of combinations of region, industry and software skills for specified job types. You can order it at


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