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Rise of the super-contractors as IT skills gap widens

More IT professionals are becoming contractors in order to charge a premium for their much-in-demand services

The IT skills gap is not a new phenomenon. A lack of qualified staff and increased competition for talented developers have long been the scourge of the industry.

However, as the dichotomy between skills supply and demand widens, more IT professionals are taking on the role of ‘contractor’, forgoing job security in order to charge a premium for their services. 

With demand for web and software experts due to rise at five times the market rate and new immigration laws set to reduce the pool of available candidates even further, technology firms must act now to strengthen their cash position, ensuring they are able to attract talent, invest in their workforce and achieve business growth.

We conducted research with the owners and managing directors of IT specialist recruitment agencies. Some 87% of respondents said a mismatch of skills and job criteria was their biggest challenge, while 79% experienced a lack of jobs versus suitable candidates. Because of this, 84% of recruitment bosses had seen an increase in demand for temporary or contract roles, rather than permanent positions.

The current skills shortage and subsequent rise of the IT ‘super contractor’ is driven by a lack of home-grown computer scientists. New immigration laws that come into effect next April will prevent all non-EU Economic Area workers from staying in the UK for more than five years unless they are earning over £35,000 a year. Some 85% of IT recruiters think this will further reduce the number of available candidates.

Barrier to growth

For technology firms, current market conditions create a real barrier to business growth. The skills shortage is driving a reliance on specialist head-hunters and has led to higher recruitment costs. Alongside this, the increased demand for specialist staff has left many businesses with an inflated wage bill and increased staff turnover.

This uncertainty hits business confidence and hinders business growth. The cost of recruiting the staff required to expand can put huge pressure on organisations’ cashflow, leaving them in a weak financial position and unable to pursue new contract opportunities.

This problem is particularly acute for SMEs, for whom one late payment from a major client can cause a significant strain on their working capital. Our analysis of client debtor payments showed that the worst-offending firms take up to 121 days to pay outstanding invoices.

React and protect 

IT businesses should act now to adapt to changing market conditions. It is vital that firms invest in their staff, working to attract and retain skilled individuals. This can be achieved through careful management of the working environment and implementing an appealing remuneration package. Alternatively, companies may find it more efficient to train staff and develop desired skills in-house.

Either way, this investment relies on businesses maintaining a strong cash position. By protecting cashflow, firms can better absorb the effects of a skills shortage and maintain the agility to supplement their workforce. Doing so will facilitate business growth.

Only the most adaptable firms will capitalise on the increased appetite for digital services at a time when skilled workers are in such short supply.

Steve Smith is managing director of Hitachi Capital Invoice Finance

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It makes sense. If you've got the business savvy to market yourself successfully, then by all means, go out on your own earn as much as you can for your services.
This challenge requires a relatively simple, but structured, approach - which I'm seeing the benefits of in those companies brave enough to take it.
The first step is to admit that your organisation can't adequately answer the following two important questions:
1. What skills do you have?
2. What skills do you need?
There is a long-established industry framework, used in nearly 200 countries globally (but not enough yet), available free to companies using it internally to manage their staff, that provides a common language for describing the skills - and therefore provides the perfect mechanism for assessing the skills that we have, the ones we need, and therefore the gaps - SFIA, the Skills Framework for the Information Age.
Until you can confirm the nature of the gaps, and clearly express what is needed, any action is likely to be very hit-and-miss, wasting limited time and money.
SFIA assessments are relatively easy, quick and inexpensive to do. In my experience, organisations always find they already have skills that they are not making use of, but they also get more quickly to the position of being able to address the ones that are most important because they know where they are starting from.
Interestingly, we’re taking the opposite approach and looking at the benefits of having full-time resources instead of contractor resources, focusing on recruiting and retention.
We want to grow our company, not diminish its core resources. We want to build a family of loyal, creative thinkers. This is definitely not the way to reach those goals.