IT sector leads the way out of recession

Nowhere in the UK are business professionals more confident about their prospects than in the IT sector, where profit, turnover and sales forecasts are all unmatched.



The resounding vote of confidence from tech-centric firms emerged in a survey of 1,000 businessmen by the Institute of Chartered Accountants in England and Wales (ICAEW).



Its quarterly Business Confidence Monitor (BCM) shows professionals in IT are more positive about the next 12 months than their counterparts in every other major sector.



And while confidence among all professionals rose to its highest level since January, indicating the "recession is at an end," confidence among IT types hit a two-year high.



The brighter outlook for IT, first seen earlier this month , has left some in the sector scratching their heads, including one expert who says it will not grow until late 2010.



"I have to admit that this [the BCM research] doesn't match with our own findings," reflected Richard Holway, a director of IT analysis firm TechMarketView.



"We still find most CEOs extremely cautious about the near term outlook … [but] if confidence is returning, then you can be sure that growth is not too far behind."



Asked how IT bosses became more positive over the last three months than their equivalents in key sectors, including finance and engineering, the ICAEW explained.



"In terms of why we believe IT is the most confident, we think this is because firms are looking at ways to make their business more efficient at the moment to save costs.



"In doing so, many are investing in their IT systems to make the savings they need and to drive efficiency," a spokesperson for the BCM said.



Agreement came from a director of an IT services and recruitment firm, who said for helping outfits transform, or enable restructuring plans, IT was a unique function.



But Michael Izza, the ICAEW's chief executive, warned against "underestimating" the challenges facing businesses, which were still in a "very tough environment."



Not only do concerns remain about the recovery's strength, but wages are also likely to be squeezed, while "no planned recruitment" signals that business is still nervous, he said.



Much of the surge in confidence, which leaves "no doubt that the UK economy is on its way to recovery," was because firms have taken the "right" steps, albeit unpopular ones, to cut costs.



The IT sector is a case in point: its leading players have firmed up their bottom lines with mandatory sabbaticals, reduced working hours, 'take it or leave' pay cuts and redundancies.



Contract staff, who are the easiest and less politically-sensitive workers to dismiss, absorbed the bulk of these measures from as early as June 2008, seven months prior to the recession.



This upset such freelance workers, and hurt the balance sheet of their recruitment agency, but the early decisiveness on the part of IT leaders helps explain their fresh optimism.



Matthew Smith, a director of Harvey Nash, said: "From meeting with CIOs, the main message is that the bulk of redundancies, downsizing or restructuring has actually taken place.



"A lot of them are now looking to the future, and are assessing their IT hiring needs, both for their IT department and in the light of the [recent] restructuring."



Many organisations are currently operating a "minimum level" of IT staffing, he said, making them ready to recruit upon an upturn in business or the economy.



The increasing trend for enterprise to use technology to "embed" their workers in various non-IT functions of their business may also trigger uplifts in IT recruitment.



Similarly, businesses or their consultants offering a 'make do and mend' approach, or a 'save money now' service, are reporting continued success, TechMarketView said.



However, the analyst argued that any new IT project, package or staff commitment would be "still very difficult" investments to get executive approval for.



IT recruiters cited some key exceptions, although they hinted it was too early to say whether such projects were why demand for contractors had spiked over the last few weeks.



"If a demand for IT expertise is driven by a transformational business project, typically contractors will be more involved. By their nature, transformational projects are one-off pieces of work and the skills or competences required tend to be specialist," said Harvey Nash.



Mr Smith added: "So there will be an increased demand for contractors around transformational/change projects, though I'm not sure whether there will be a general increase in demand for IT contractors across the board, because there is [currently] enough of a permanent resource to fulfil that need.



"Of course, as soon as demand exceeds the supply of full-time IT skills there will be a significant uplift for contractors, even from projects which wanted a permanent worker who could not be sourced."



The current focus on cost efficiency has also fuelled demand for business intelligence consultants and architecture expertise, said Richard Horrocks, director of Hays IT.



The 'hottest' contract skills, according to the recruiter's database, are .Net, SharePoint, SQL and C#, signalling the software market is proving more resilient than the hardware market.



"We have seen an increase in project management and software development positions," Hays IT added in a statement. "Small medium enterprises are using the current market conditions to hire talent that would have proved difficult to attract in boom times."



The Management Consultancies Association, whose member firms represent 70% of the UK consulting sector, said its temporary IT professionals were also reporting stronger demand.



"Although management consultancy as a whole has seen some contraction in the first half of 2009, more of our member firms than not have seen an increase in demand for IT consulting," the MCA said yesterday.



Alan Leaman, chief executive, said there was, then, "some causes for optimism" for IT consulting, but cautioned the experience of the best and worst performers was "quite polarised."



Yet like IT contracting services, he said IT consulting was one of the "earliest victims" of the downturn, meaning "it is now pretty well placed to be an early mover in the recovery."



"From talking with members," Mr Leaman added, "a number are committed to the sorts of investments that they need to make themselves as efficient as possible and therefore ready to meet the challenge of any improvement in the economic position."



"But there will continue to be a premium on the quality of service that IT consultants offer. We don't expect any retreat from this emphasis, which will work to the benefit of companies with solid reputations and a track-record of achievement."



However, the pay expectations of freelancers in the IT contracting space might need to remain on the ground until the newly found confidence has bedded in.



Mr Horrocks said: "Although there are general indications of some optimism within the IT sector, pay demands remain balanced because people are aware it is generally a more competitive environment for jobs."