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As 2023 dawned, the direction that the technology recruitment market would take was highly uncertain. We had seen two boom years due to pent-up demand during the pandemic, but with downside economic indicators gathering – rising costs, rampant inflation, interest rates increasing – would that hold?
We trusted our instincts and predicted that the market would be resilient, given tech’s "protected" status. The digital transformation agenda is simply an imperative that organisations need to keep investing in, and for that they need people and skills.
A more settled market
Six months on, we’re pleased to say that this has been borne out. In fact, our permanent placement mandates in the first quarter of this year were at the same level as in 2022, one of the post-Covid boom years.
Nevertheless, activity levels have eased as the year has gone on. But this is no bad thing – the market was moving at breakneck speed before. Now, it has settled, becoming less frenetic and more measured. We are probably back at the kind of levels we were at before anyone knew what a coronavirus was. Organisations are considering more carefully before going out to hire; they’re taking a breath and reflecting before they issue an offer; it’s not the same frantic competitive whirl as it used to be.
Candidates have also become a little more measured. In a tighter market and economy, they’re weighing up more carefully the potential benefits versus the potential risks of a move.
It is also a market with perceptible differences by sector. Big Tech players, of course, have been resizing their workforces which unfortunately has led to some quite significant lay-offs. However, this trend has been slowing and indeed we’re now beginning to see signs of an uptick in some areas.
The SME end of the technology market has been affected too. With funding for scaleups and startups harder to secure (there was a 55% drop in tech startup funding in the US during Q1 for example), their recruitment has been impacted and hires have become more selective and targeted on specific aims. Meanwhile, sectors that are very dependent on consumer demand like retail and FMCG have also been less active.
Other sectors, however, have been very resilient and shown little change. Public sector bodies and higher education institutions, for example, have key strategic digital transformation programmes and requirements and this has seen them continuing to recruit. Financial services has remained busy too, with the big players bulking up in their core businesses, although at the challenger end there has been something of a tightening.
Overall, there are four notable trends that are worth calling out:
A feature that we predicted six months ago was a shift (relatively speaking) from permanent to contractor hires. In fact, we are only just beginning to see early signs of that now – another indicator of just how resilient the market has been. However, what we have been seeing among contractor hires is that employers are bringing resource in for specific and defined tasks – and when those are complete, they’re more likely to let the contractors go rather than finding something else for them to work on.
2. Demand for a new wave of digital leaders
An area of strong demand is for digital leaders and executives. For larger enterprise clients in particular, there is a need for a new wave of digital leaders who can drive the business forward on its digital journey as they pivot to product-led, cloud-based environments and systems. Organisations need leaders with the agility and adaptive skills to navigate changing operating models, technology disruption, economic challenges and unpredictable world events. They need to find the "Ted Lassos" of technology in a world where the only constant is change.
3. Generative AI disruption?
On the change and disruption front, we can’t write this without at least mentioning generative AI such as ChatGPT. The impact this could have on what people do vs machines and therefore on hiring needs is simply an unknown as of yet. But it is certain to be a disruptor. We encourage every CIO, CTO and CDO to explore generative AI as fully as possible and assess what potential it could hold for their business. One study from Github, Microsoft and the Massachusetts Institute of Technology (MIT) found that Copilot for Github increased developer productivity by 55.8% for example.
4. Salary heat beginning to cool
Another hot area, of course, has been salaries. It’s very much the topic of the moment on the wider macro-economic stage, with the Bank of England highlighting salary increases as one of the principle drivers of national inflation. Last year’s Digital Leadership Report found that over half of digital leaders were concerned that salary increases in tech were unsustainable.
Six months ago, we expressed the view that tech salaries would likely begin to plateau. There are signs that this is beginning to happen, even if the trend is still upwards. Certainly, salaries and contract rates haven’t gone on increasing at the dizzying speed of a couple of years ago. This moderation is good news for employers who are having to watch budgets and expenditure extremely closely.
A fair outlook
The market is in a fairly healthy place, and we expect this to continue through the second half of 2023. Indeed, with hopes that inflation will finally begin to fall and cost pressures reduce, we may see a renewed acceleration in activity as optimism picks up.
While skills shortages remain an issue, particularly in areas such as cloud/DevOps, engineering, data analytics and product specialists, it is a good market for both recruiters and candidates, with opportunities on both sides.