Information Technology Recruitment Ltd

May 2009

Few would argue that the contract market has declined over the past six months. However this is the third recession we have worked through at ITEC Contracting.

There are various reasons for this. First, many companies are now focussed on maintaining cashflow in the light of declining revenues. Once in this mode the obvious three candidates come into play - being reduction in spending in IT projects, Advertising and Training. While there are compelling arguments as to why expenditure should be expanded in these areas in a recession, pragmatism will generally override most rational thinking.

Secondly, many companies are trying to avoid staff layoffs for a number of good reasons - probably with the view that they can work through the recession and come out the other side reasonably intact. A number of measures such as reduced hours can be implemented, however this strategy is very hard on cashflow, and typically involves trying to run a company on revenues that are too small  for its staff budget. This approach does maintain staff morale.

Thirdly, in recessionary times, most companies are run by the CFO, rather than the marketing division. Being naturally conservative, CFO's generally will not approve expenditure unless it has a definite payback in less than a year, and then only if the expenditure is absolutely necessary and near unavoidable.

Against these three factors it is little surprise that hard times have hit the contacting and IT markets. We are also seeing long term "embedded" contractors being eased out of companies, as a further cost cutting measure.

The positive side is that the recession seems at best to have bottomed out. The indicators are now all pointing the right way, the question is just how much and how fast.

In line with the the budget reduction measures above, many companies have frozen headcount, this means that there is no hiring of permanent staff underway except to cope with attrition. It does mean for contractors, that any new projects will have to be done using contract resource - whether this be from a supplier, through and agency, or direct engagement.

Engaging through an agency, such as ITEC Contracting, does have an number of advantages over the other two methods. An agency contractor, will be a significantly lower cost than that of a services company - meaning that the Return on Investment for a project is reduced, and the chances of the project being approved is higher. Secondly, a company can get a bigger view on the market, rather than just using contractors of whom they already know (and get some specialist skills on board), and given the large number of contract candidates seeking work, ITEC Contracting is ideally placed to reduce the candidate list to a useful working number, without compromising quality. Thirdly, many are finding that use of ITEC Contracting also allows them to negotiate rates, that may be cheaper than those that can be achieved on a direct basis - given that that ITEC Contracting's margins are relatively. low at 15%.

We expect the IT spend to increase as the pressure comes on for projects to provide new or replacement functionality. The big mistake of the last three recessions has been to freeze spending for an extended period, which just results in substantial spending further down the track - usually with few options as to timing, and imposing a lot of pressure on the company and its strategies.

If you would like to find out more about ITEC Contracting, and how we can help you achieve your objectives, give us a call on (09) 489 9267 or mail richard@itec.co.nz

November 2008

The contract market has definitely declined off the back of the so-called international financial crisis. So-called because in our view it is a bunch of poor banking practices coming home to roost. New Zealand does not have these issues, to anywhere near the same extent as other countries and there is no need for a slow-down here, unless a company is heavily dependent on overseas partners and their financial success.

That being said we can expect interest rates to drop in NZ to around 4.5-6%,  the dollar to drop to around 53c USD and the price of petrol has dropped substantially. The effect of the interest rates drop will mean more consumer spending ability, freeing up money currently being sucked out of the system, for which there has been no corresponding increase in income.

Last time we saw these sort of numbers and trends in New Zealand, we started into a boom. The only thing that is holding this back at present is business confidence - if this lifts then we expect the contracting market to improve.

The election of the National Government and inclusion of the Maori Party has signaled the end of a very divisive period in New Zealand, and the subsidence of these issues from inter-party bickering into positive progress and discussion is long overdue. We can expect sound financial management from this national Government and actions which will be more in tune with what business expects of the national economy, and this can only be beneficial for New Zealand business.

The temptation to operate in a counter-cyclical way will be too strong for many New Zealand businesses, and once this mentality sets in, then we can expect good growth.

At present there are large numbers seeking work (as opposed to being unemployed) in the project management areas, but less so in the developer and technical  - this applies on the permanent and contract side of the IT scene in Auckland, in our experience.

May 2008

As of mid-April, ITEC vacated our premises in Worldwide Tower after the landlord elected to move his serviced officer operation to another building. Suzan McCall is working at 369 Queen St (opposite Turner St) Richard Gladwell is working from his home office in the interim. Other than that there is no change in the service offered, in fact it will be improved with better telephone facilities, and our Directors are spending more time on the road travelling to candidates for interviews and client meetings. This enables us to move more quickly in an active contract and permanent recruitment market.

The contract market seems to improving after several months of stagnation. With the recession in full flight the old maxim of the first items to feel the financial controller's chop being IT, training and advertising is once again proving accurate. However the dependency of most organisations on their IT systems has meant that the opportunities for cutback are quite restricted, and project deferral is more common. The permanent market is highly active with low unemployment (3%) and around 70% of those employed estimated to be seeking new jobs, or certainly open to a good offer. For the first time in a long while we are seeing candidates getting multiple job offers within a period of a couple of weeks of entering the market and usually for substantially increased salaries.

Clients who are seeking to hold salaries to 2007 levels are finding it difficult to recruit staff and usually this will lead to an increased demand for  contractors to fill the gaps on a temporary basis. However there still seems to be a real shortage of good contracting candidates in the development and application support areas, and surplus in project management.

There seems to be a large number of candidates seeking work for senior positions and this is further indication of economic slowdown which may not be reflected in the general economic statistics which are being reported.

As we move further into the year and the prospect of a National Government becomes more of a reality, the market is expected to improve, as it will when interest rates begin to drop. Certainly the contract market will improve when business confidence indicators rise, as has always  happened in the past.

July 2007

After passing through a strange period since the last quarter of 2006, the contracting market has settled back into a period of growth, similar to the same period last year. The main driver in the market seems to be business confidence coupled with a low unemployment rate, which means that good permanent staff are hard to find. IT management seemed to have been instructed to replace contractors with permanents early in the year, but as this proved difficult in a competitive market a number of positions went unfilled. As pressure for resources came on the market moved to one where contracting positions came available once again.

There is still a big difference between companies who will move quickly through the resourcing process for permanents and those who don't. The faster ones will usually get the staff they seek, the slower ones continually miss out.

The contracting opportunities seem to be across the board - but mainly at a technical level (ie software development). We are seeing some movement in rates, with contractors sometimes taking the opportunity to take advantage of the tight market. It is a moot point as to whether this is a good strategy, as with business confidence delicately poised, it is usually the more expensive resources who get shed in any sort of a downturn. However once embedded in a project there is often not too much scope for change.

It is somewhat surprising to find out of work contractors holding out for high rates and particular work content, as in our view, while the market is improving it is not buoyant, and we would have thought that some compromise on rates would have been a better move. Not that there is any harm in testing the market!

Our recommendation is to get into a contract and take the longer term rather than a higher rate, and to stretch the term to six months - through to February 2008.

Due to an unfortunate combination of factors this website suffered a serious crash in March 2007, and all the subsequent commentary was lost, below we have provided the best available copy.

July/August 2004

The contracting market continues to be rather fickle, but now that most organisations are in the "meat" of the year there is some solid project work underway.

The trend we are noticing is for a higher standard of contracting skills being required in terms of specific industry/application experience, or in the case of developers, being very up to date with the current technology.

At ITEC Contracting we have continued to use and enhance our process of assessing contractor skills, and even though the questions appear quite simple and subjective, it is proving to be a very accurate tool and predictor of contractor competency and marketability.

There is some upward pressure on rates, and it would seem that this is a trend that has set into the market - with those who have excellent skills for a project proving to have the negotiating edge.

We are being contacted by contractors who are having difficulty finding on-going work, usually at a project management level. We strongly recommend that you work over your personal contacts. Many contractors are finding work in this way - our policy is that we won't try and do what you can yourself, as this isn't really adding any value on our part.

May 2004

After being relatively flat for a few weeks the market started to pick up around the end of March and has gained more momentum since Easter and the end of the school holidays. This pattern is normal, and the gut feeling is that the contracting market will be short of good contractors later in the year.

There is no doubt that most companies are now very conscious of "right-sizing" and staying within head-counts. This means that projects are being increasingly resourced with contractors who are released at the conclusion of the project. The fact that most projects are controlled and managed by user departments who are reluctant to gear up with permanent IT staff unless they are confident that the support and enhancement work can be sustained in the medium to long term.

There have been two major projects collapse in the Auckland region which has put a number of contractors into the market unexpectedly. however interestingly most seem to have been reassigned within a few weeks - indicating the strength of the current upswing. In previous years this type of collapse would have had an effect extending for several months.

Many companies are now engaged in strategic IT projects which will improve management and operational systems providing cleaner more cost effective supply chains, and better reporting of company performance so that better business decisions can be made.

At ITEC Contracting we are introducing a system of contractor assessment rating to ensure that the process we are using is objectively based, and that if we believe that people don't have the experience we believe is required for contracting, then it is unlikely we will promote them in the market.

February 2004

The market seems to have become quiet after a post-Xmas burst which ran through most of January. This calm-spot is not unusual for this time of the year and is caused by companies winding out their financial years, and not wishing to incur expense which will affect bottom line results, without producing any gain for the current financial year. The usual pattern is for this trend to reverse in early March as some gearing up goes on for project which will start in the new financial year.

There has been a lot of activity in extending contracts relating to existing projects to retain consultants into the remainder of the calendar year.

Contractors who are or will be coming available in the next two months are strongly advised to register this fact with ITEC Contracting as many of the contracts and project that we resource are filled without advertising. We are often in the position where a contractor is required at short notice for what may be a long term project. Our aim is to be able to provide a CV in our format of a suitable contractor within 60 minutes of speaking with the client. Most of the roles ITEC Contracting has filled this year have achieved this benchmark.

November 2003

After hitting its usual school holiday flat-spot the contracting market seems to have picked up as pre-Christmas project resourcing gets underway.

As for most of the year there seems to be a reasonable demand for development and business analysis skills, with work still being scarce on the project management and network/hardware fronts.

The velocity of the market seems to have picked up and for the first time for at least a couple of years clients seem to be able to make quick decisions on project resourcing, and as a result are getting some good quality contractors. We are also seeing contractors able to line up multiple projects, when they are seeking new project work.

It remains to be seen how long this situation will last as usually the contracting market hits another flay spot about a week out from Christmas, with critical work only being done over this time.

For 2004 we believe there will be a good amount of project work available as several ITEC clients have majors project commencing in the first quarter of the new  year.

Since the change in Immigration criteria we have seen a marked drop in the candidates entering NZ from overseas in the hope of picking up a job offer. Those immigrant candidates we are seeing seem to be of a higher quality than previously - so maybe the new policy is having the desired effect.

It remains to be seen if there are significant numbers of NZers returning home after a couple of years or more work overseas. To date this has not been a noticeable trend, and if this continues then we would expect to see some contractor shortages in 2004.

The tightening of the market has not seen a rise in contractor rates. We are advising contractors not to be too precious about the rates, but to put the emphasis on projects which have a real urgency to get the work done in a short space of time, and where there is the opportunity for high monthly billable hours. An extra 40 minutes billed per day equates to a $5 increase in the effective rate.

From what we understand of the salary levels it would seem that continued high candidate availability has meant that the usual economic laws have prevailed and that salaries have been held down artificially by employees who seek permanent residence first and a generous remuneration second. If the candidate supply starts to ease, then salaries may rise and this will flow into the contracting market - which has always maintained a significant differential over salaried rates.

Have a Merry Xmas and a Prosperous New Year!

July 2003

In the last few weeks there seems to have been a definite improvement in contracting activity and projects. We are now seeing the second phase of market recovery, where contractors move onto new projects having worked through a phase where the work content has taken second place to the need to earn money.

Most work on offer seems to be in the developer and technical support area (such as DBA's), and with Oracle featuring strongly. This may be due to the fact that many organisations have moved to a proper outsourcing model where senior BA's and project managers are retained on the permanent staff and contractors are bought in as required on a project by project basis.

The project roles that are being offered are generally filled very quickly, provided the contractor has a very close match to the requirements of the role and is within the client's perceived budget.

There was a big flat spot in the contracting (and IT market generally)  stemming from the combined effect of Easter and Anzac Day which gave unexpected time off for many decision makers and worked in well with school holidays. In this event decisions tend to be put off and the effect is a slow down in the IT market which catches up several weeks later.

It is uncertain whether the changes in the NZ Immigration Policy will have any effect. The previous change to increase the points threshold to 28 and to double the points for a letter of employment offer did have a positive effect, and hopefully this trend will continue.

March 2003 

The IT Contracting market was fairly steady through the last quarter of 2002 and did not fall away in the Xmas New Year period as sometimes happens. Currently we are experiencing strong growth in contracting, as projects which have been under-resourced obtain, more budget. As yet, we are not seeing new projects start, however this is expected to change as the year progresses.

Most of the work underway at present, is either of a short term urgent nature, or medium to long term projects and system integrations/implementations. The resourcing process for these medium-long term projects is a little more leisurely with the clients seeking a very good match with their perceived skill requirements.

Rates are proving to be a little more negotiable than has been the case previously - however there is still the trade-off for a long term contract at a lower rate as opposed to a shorter term contract with a higher rate.

A lot of the work that we have underway at present is for end-users who are comfortable with running their own contract teams and are able to engage good quality contractors at a rate considerably less than they would be charged by a software house or outsourcer. In this situation they are less interested in the "value-add" from the software house or outsourcer, and are prepared to take a higher level of project risk.

Most of the work that is being handled in this way is for Software Developers or Business Analysts. There is still a shortage of work for Project Managers however even this situation, which was very apparent last year, is easing.

The reason for the pick-up in contracting is the realisation that there is a lot more flexibility in resourcing options and it is usual for contractors to be engaged for three month periods, even though the clients have the expectation that the projects will run for six to 12 months. The option of being able to terminate projects or adjust resourcing levels in a project at short notice and without internal pain is now seen as a better option, than trying to run teams of permanent staff to achieve the same ends. In companies where the IT function has been pushed into the user area/responsibility this trend is even more apparent.

The indications are that 2003 will be a good year for contracting, with much of the deferred work from last year being undertaken by necessity.

October 2002

The IT contracting market continues to improve as would normally be expected for this time of the year. In the contracting and consulting market resourcing company revenues generally peak at this time of year - indicative of the resourcing patterns. Sometimes there is a fall off pre-Xmas however when the market has been slow to build then the Christmas slowdown is usually minimal. Most of the contactors on the ITEC Contracting team are on projects that will run through Xmas and into March 2003.

The pool of people working in the IT industry in Auckland seems to have settled into two groups - those working on contract and those working on a permanent basis. There does not seem to be a transient "temporary" market working in between the two groups and IT professionals have made the decision to work on one basis or the other - and have faced up to taking the good times with the bad.

Most of the comments that we made in July are still applicable three months later. Rates do not seem to be on the increase, and in our view it is still better to take a less than optimum rate and work a little longer ($5 per hour = 40 minutes per day of billable time). For this reason many contractors prefer projects which have plenty or work and billable time available, rather than those which offer only limited work.

The NZ economy seems to be insulated from the overseas downturn and companies here seem to be quite prepared to undertake strategic IT system initiatives and projects which will yield a short term gain. The thinking is that contractors should be used on these projects, and this allows the profit gains to be made without increasing overheads, if permanent staff are employed to undertake the same work. With this strategy companies can take the advantage while the favorable economic conditions continue, but  have held down overheads if the cold international winds blow though New Zealand.

We are seeing increasing numbers of good contractors coming into New Zealand - either NZers returning home or those from UK, Europe, USA and Australia.

July 2002

The IT contracting market has improved, however there is still considerably more contractors than the amount of work available.

The project work that is on offer is generally of a long term nature (six months plus).

Rates have dropped by about $10 per hour for new projects. Those on existing projects are holding their rates set last year - and do not seem to be subject to rate reductions by clients seeking to meet the market.

No large contracting projects have yet got underway, however there are a few looming and these should have a positive effect on the market in the latter half of the year.

Most of the project work on offer is pitched at the technical and developer level, still with Oracle being predominant.

With the drop in rates some clients seem to be more predisposed to taking on contractors instead of permanent staff - preferring the flexibility to (a) grow quickly (b) pick up some excellent technical skills at a reasonable rate and (c) have the ability to downsize at the end of a project without having to layoff permanent staff to maintain profitability.

Selling cycles remain quite long, however most clients seem to be serious about resourcing as opposed to "just having a look" in the market without any project budget.

In summary there is probably about the same amount of work about as last year - however there are a lot more contractors chasing the work that is on offer.

Richard Gladwell

July 2002

May 2002

The general IT work situation in NZ, is not crisp. While there is increasing interest from clients to initiate new projects, the selling and consulting cycles are still long. Many organisations have head-count freezes