Salaries for IT consultants have leapt 17% over the past 12 months, following a boom in public sector outsourcing and private sector mergers and acquisitions, research has revealed.
The average pay for IT consultants rose from £41,500 in 2005 to £48,383 in 2006, as management consultancy firms competed for skills, research by SkillsMarket and the Association of Technology Staffing Companies (Atsco) found.
"Consultancies have embarked on aggressive recruitment drives in recent months to cope with the volume of merger and acquisition business, but skills are now in very short supply. Rival consultancies are locked in a bidding war for skills, which is creating a wage spiral," said Ann Swain, Atsco chief executive.
Shortages are becoming so serious that some consultancy firms have said that if they cannot get the staff they could have to turn work away, said Atsco.
A record growth in merger and acquisition activity, which in 2006 reached its highest level for six years, has fuelled demand for external consultants to integrate IT systems.
At the same time, management consultants are in demand in the public sector as more organisations cut back in-house staff and outsource more IT development to the private sector. This pushed public sector spending on IT consultants up by 33% to £2.8bn during 2006.
"Demand for consultancy skills has surged on the back of the recent mergers and acquisitions boom. Post-merger integration of IT systems can be a hugely complex task, and companies rarely have the resources to manage the process internally," said Swain.
"The public sector outsourcing market continues to grow despite recent concerns about how much is being spent on consultants. The primary driver of this growth is the scale and complexity of public sector IT programmes, which cannot be managed in-house and often involve multiple consultancies working on the same project," she said.
The Gershon Review, which identified £21bn of potential public sector efficiency savings, partly by reducing internal staffing levels, is making the public sector more reliant on consultants, said Atsco.
Projects such at the NHS IT programme, forecast to cost £12.4bn, and the £2.3bn MoD Defence Information Infrastructure (Future) project are also pushing up demand for firstname.lastname@example.org