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Salary Survey Commentary for July 2008

Overview

During the second quarter of 2008 the credit crunch seems to have spread its tentacles to include an IT recruitment crunch. The number of jobs advertised during this quarter is down by 7.7% compared with the first quarter of 2008. From 153,596 jobs to 141,810. This is the single largest quarter on quarter fall seen since the start of the decade. Job boards continue to be the main media for recruiting IT people, with magazines and press being somewhat marginalized to regional advertising in local press, but with high worth management and director roles continuing to be advertised in the quality press and business magazines. Looking back to the 1990's IT recruitment in business magazines was totally dominated by recruitment consultancies, with over 90% of vacancies being advertised by them.

The internet has not had any major impact on this relationship. However it is noticeable that the percentage of jobs placed by consultancies is down quarter on quarter. Since the last quarter the percentage of jobs advertised by consultancies has dropped from 96.4% to 93.7%. In total 5,032 consultancies advertised jobs in this quarter, down by 6.3% on the previous quarter. Meanwhile 4,083 companies advertised directly, virtually the same as in the previous quarter.

Advertised salaries in the first quarter 2008 are up by 3.2% compared with the average twelve months ago. However as we reported in the previous quarter pay increases are starting to slow down. This trend has continued with salaries going down, albeit marginally, with a 0.1% drop quarter on quarter. Within these figures there are wide variations dependent on skill sets, location and business sector.

For contractors the outlook is not too good. The number of contracts on offer fell for the second successive quarter. This time by 11.7% compared with the previous quarter. This level of decrease has not been seen for over five years. Contract rates are also starting to be affected by the reduction in demand, with rates seeing zero growth since the start of the year.

Skills Summary

SQL again remained the skill most in demand, but with quarter on quarter demand declining by 4.2%. However SQL Server bucked all the trends by recording an increase of 2.4% in the number of vacancies. In general the top ten skills cover products used primarily by developers. This includes development software such as C# and .NET where demand has been down by just 1.8% and 0.5% since the previous quarter. Having enjoyed almost non stop growth for three years demand for SAP saw a reduction in jobs on offer of 23.6%, relegating its league table position down to 19th.

The contract market also has SQL as the skill most advertised for, but here the number of jobs on offer was down by 12.2% compared with the previous quarter. The remaining skills making up the top ten are for C, C#, Oracle, SQL Server, .NET, Java, ASP and Unix.

Regional Summary

The turmoil in the financial markets seen in the first quarter continued right through the second quarter and seems to have had a major impact on recruitment in London, with the number of jobs advertised in Inner London falling by 7.9% and Outer London by 11.9% compared with the previous quarter. Since the end of 2007 the London area has seen vacancies fall by over 26%. Recruitment in Scotland is also severely affected with a fall of 16.2% and in the south jobs are down by 9.3%. The only region with an increase in jobs is the East Midlands where job counts are up by 4.4%. In the regions outside the capital cities and the south demand is down by an average of 5.2%.

Contract vacancies are down in all regions and generally reflect what is happening with permanent recruitment. The Inner London and Outer London area's are recruiting 10.1% and 12.1% less contractors than in the previous quarter. Other regions are seeing a mostly double digit decline.

Industry Summary

The main influence again came from the financial sector, which combined with financial software houses account for a substantial portion of IT recruitment. Compared with the previous quarter job counts in finance are down by 5.6% and in Software houses by 8.2%. This remains significant in that finance accounts for 29.2% of all jobs advertised. Software houses/consultancies are the biggest employers with 51.3% of recruitment emanating from this sector. The media sector is the only area with 2.3% more jobs advertised. Other sectors such as Retail are down by 16.1%, Public Sector by 9.0% and Manufacturing by 5.8%.

For the second successive quarter contractors working in finance continue to see cutbacks in the wake of the credit crunch. During the first six months of 2008 job vacancies have fallen by 25.9%. This quarter the number of vacancies advertised is down by 10.4%. The largest fall seen in this sector since 2001. To compound the problem contract vacancies in software houses are down by 11.6%.

Management

The revival for managers seen in previous quarters has now ended with the number of jobs on offer falling by 15.6% since the previous quarter. Down from 8,572 jobs to 7,214. Vacancies for the main job functions of System Development Manager and Computer Services Manager were down by 18.7% and 28.5%. Elsewhere jobs for Technical Support Managers are down by 17.6%, MIS Managers by 15.8% and Operation Managers by 10.8%. The only bright spot is an increase in the number of Software Manager jobs which is up by 4.0%.

Average salaries across the group are up by 3.1% compared with a year ago. Annualised salary increases for System Development Managers are up by 4.4% and Computer Services Managers by 3.2%. However as we noticed in the previous quarter there are signs that these annual increases will be overridden by more recent events with quarter on quarter salaries showing a drop of 2.0% for Development Managers and 1.7% for Services Managers.

System design, business analysts & project management

The number of jobs advertised this quarter was down on the previous quarter by 11.1%. From 34,851 jobs to 31,026. The main impact of this decrease were felt by Senior Business Analysts and Management Consultants where the number of jobs on offer are down by 17.8% and 16.7% respectively. Project Managers represent the largest job function in this group and here the number of jobs are down from 9,261 to 7,814 jobs, a fall of 15.2% on the quarter. Project Leaders form the next major job function and here the number of jobs fell by 15.5%. PRINCE, SQL and SAP feature as the main software skills being sought, but with demand for SAP Project Managers down by 19.4%. Annualised salaries are being affected with annualised increases across the group of just 2.0%.This is mainly due to the rate of increases slowing down to zero during the past two quarters.

The number of vacancies for contractors is down this quarter by 10.5% compared with the previous quarter. In particular the demand for Management Consultants in consultancies and finance fell by over 19% compared with the previous quarter. Demand for the key job of Project Manager is down by 6.2%. Rates are up by 1.4% on a year ago, but basically remain unchanged since the previous quarter.

System development & programming

This benchmark group of jobs represents almost 34% of all jobs advertised and as such is a key indicator of what is happening within IT recruitment. The trend here is that demand is falling, but not by as much as is being seen across other job functions. Jobs are down by from 50,224 jobs to 47,885, a fall of 4.4%. The main employer of developers continues to be software houses and financial organisations. It is here that demand has weakened with combined job offers down by 8.4%. The development group as a whole has seen salaries increasing by 4.0% compared with a year ago. However this does disguise the disturbing fact since the start of 2008 salaries being advertised have actually fallen by 0.8%. This general figure needs to be treated with some caution as salaries can vary considerably depending on location, business sector and software skills. Historically the finance sector has always offered the highest pay. This is still the case but the differentials are being eroded. Twelve months ago the difference in salary between finance and all other sectors was 20.8%. It is now down to 18.9%. However the spread of salaries based on geographical location is also substantial. This is shown in that a developer employed by software houses earns 29% more in London that in the North East. Interestingly jobs for new graduates continue to expand at a rate higher than for experienced staff, with demand up by over 9.3% on the previous quarter and by 14.9% since the start of 2008. The top skills being sought are led by SQL followed by C, C#, .NET and ASP.

For the third successive quarter demand for contract staff declined. This time there are 15.3% fewer jobs advertised than in the first quarter of 2008. Jobs in finance are again the problem with vacancies down by 23.8%. This is the largest quarterly fall seen since 2001. Difficulties in finance is also affecting recruitment in software houses with vacancies down by 10%. The overall result is that rates are now down by 4.2% since the start of 2008. Top skills required are for SQL, C, C#, .NET and ASP.

PC Support

Jobs for PC support people bucked the general trend with the number of jobs advertised this quarter up by 2.2% compared with the previous quarter. From 10,094 jobs to 10,197. The demand for the benchmark job of PC Support Analyst is up by 1.1%. Help Desk Support continues to be in demand with 8.9% more jobs available. Salaries are also up in this group with annual increases of 4.5%. However there are warning signs that this is being cut back, with salaries going down by 1.2% since the previous quarter. Top skills required are for Office, Windows XP, SQL and Exchange.

In contrast the demand for contract PC support staff is down by 2.2%, somewhat less than the 21% fall seen in the first quarter of 2008. Rates have again remained static during this period. Top skills requested are for Office, Windows XP, Exchange, Windows 2000 and SQL.

Technical support

The number of jobs for this group decreased by 12.9% compared with the previous quarter. Down from 23,527 jobs to 20,366. System Administrators make up over 43% of all the jobs within this group. Recruitment by software houses is down by 11.7% and in finance by 4.2%. These two sectors respectively account for 47% and 32% of recruitment. The downward trend in recruitment from software houses also affected technical sales support with jobs down by 15.4%. National salaries for administrators this quarter averaged £37,940 up by 3.6% on last year, but with variations that show salaries going down in software houses by 1.6% in the last six months. Senior Administrators with substantial experience average £47,712. Annual increases across the group are being held at 1.9%, with just a 0.6% rise since the start of the year. Over 52% of all jobs advertised for Administrators are for skills in Unix, Linux, Solaris or AIX. The popularity of Linux is now on a par with Unix. The remaining top skills cover SQL, Exchange, TCP/IP and Oracle.

Jobs for contractors this quarter decreased by 7.2%, down from 4,869 jobs to 4,519. Rates for the group are down on a year ago by 1.1% and for System Administrators by 2.6%. Indications are that this trend may have some way to go with rates down quarter on quarter by 2.5%. Software skills required are for Unix, Exchange, SQL, Solaris and Linux.

Software engineering

The number of jobs for software engineers decreased by 13.1% compared with the previous quarter. Down from 9,893 jobs to 8,512. Vacancies for the main job function of Software Engineer are down by 14.6% and for Software Test Engineers by 14.5%. Salaries compared with a year ago are up by 1.6%, but remain unchanged since the start of the year. Software Engineers are now being offered average salaries of £36,068, with variations of up to £47,295 for Senior Software Engineers. The top skills in demand are for C, C++, Embedded software, Java and C#.

The demand for contract staff moved down for the second successive quarter, with the number of jobs decreasing by 29.6% compared with the previous quarter. From 1,937 jobs to 1,362. Rates of £37/hour for Software Engineers are up by 3.6% against last year. Senior Software Engineers with substantial experience are being offered up to £52/hour in Inner London. This could be short lived as this rate is already down from the £56 being offered during the previous quarter. Skills needed are for engineers with experience of C, Embedded, C++, UML and Linux.

Database administration

The number of jobs advertised for Database Administrators/Analysts fell by 1.5% compared with the previous quarter, down from 5,709 jobs to 5,584. This group of jobs is intended to reflect the design and administration functions related to large-scale corporate databases. In smaller installations the responsibilities may well be covered as part of system administration or even PC Support. Salaries for Database Administrators increased by 3.5%, compared with last year and are now being advertised at £40,482. For Senior Database Administrators employed in London this increases to £63,819. Software skills being sought cover SQL, Oracle, SQL Server, Unix and Access.

Quarter on quarter contract vacancies fell by 9.4%, down from 1,772 jobs to 1,605. For the second successive quarter the main impact came from a reduction in demand from the finance sector where the number of jobs is down by 15.1% compared with the previous quarter. Contractors are also seeing rates going down by over 2% on a year ago and by 2.8% since the start of the year. Top skills required are for SQL, Oracle, SQL Server and Access.

Networking & communications

The number of jobs for this group decreased by just 6.0% compared with the previous quarter. From 6,683 jobs to 6,282. Salaries for the group were up by 4.2% on last year, with pay for Network Engineers by 7.9%. Salaries for this job role now average £29,678 nationally, with up to £40,043 for more experienced engineers working in London. Network people have enjoyed constant above inflation increases. This is rapidly coming to an end with salaries now starting to fall quarter on quarter by 1.8%. The top skills being looked for are Cisco, Firewalls, WAN, LAN, and Exchange.

The number of jobs for contract network people fell by 8.4% compared with the previous quarter. As in the previous quarter the main reason for this is the reduction in demand from the communications and software house sectors where vacancies fell by 8.9% and 9.2% respectively. Rates for Network Engineers are up on a year ago by 2.7%, but quarter on quarter there has been virtually no change. The top skills required are for Cisco, Firewalls, LAN, WAN and Exchange.

Operations

This group covers operations roles that are predominantly mainframe job functions. The exception to this are Hardware Service Engineers, which covers all aspects of hardware support, including peripherals. Quarter on quarter the number of jobs advertised in this group went down by 15.0%, from 1,776 jobs to 1,510. The decline is mainly due to a reduction in demand for Hardware Engineers with jobs down by 16.9%. Whilst salaries are up by 4.4% year on year the quarter on quarter picture shows pay down by 0.9%. Top skills required are for Office, Unix, Windows XP, Oracle and Exchange.

The number of jobs for contract staff this quarter went down by 20.4%. However this figure needs to be treated with caution, as the numbers involved are low. Hardware engineers represent 71% of the jobs in this group and here rates are averaging £22/hour. Up by 6.5% on last year. Main skills required are for Office, Windows XP, Exchange, TCP/IP and EPOS.

Internet Design

The number of jobs on offer within this group rebounded from the previous quarter decline with 2,330 jobs advertised compared with 1,794 jobs in the previous quarter. The main job function of Web Designer accounts for 70% of the jobs advertised in the group and here 31.7% more jobs were advertised. Even jobs in the distressed finance sector are up by over 30%. Average salaries on offer for Web Designers range from £25,357 in the manufacturing sector to £33,593 in finance. The main skills being requested are for HTML, Photoshop, Flash, Illustrator and Dreamweaver. The job functions in this group can also be associated with other design and development jobs where similar software skills are requested.

Summary

The consequences of the credit crunch on IT recruitment that started within the finance sector during the last quarter of 2007 has rapidly expanded into all sectors and geographical regions during the second quarter of 2008. With daily reports of redundancies in finance, construction, retail, consultancies etc. it is inevitable that IT recruitment would also suffer. Historically the first indicators of a recession in IT is a reduction in the number of contract vacancies. This was the case in the early 1990's and during 2001, although this latter downfall was predominantly due to a lay off following Y2K development. The figures this quarter show contract vacancies disappearing at the fastest rate since 2001. There is also evidence from employers that recruitment is being frozen and that contractors are being offered rates no better than their permanent colleagues.

The downturn is also having an effect on the profile of advertising. The number of consultancies that advertised jobs during this quarter is, not surprisingly down. The advent of the internet was thought to herald a more open view to recruitment. At one stage it was thought that the dominance of the consultancies would be somewhat weakened. So far this has clearly not happened. Despite this there has been a steady increase in the number of companies advertising vacancies directly on the main job boards. Data from www.jobadswatch.co.uk shows that the number of jobs and companies advertising directly has continued to climb. This may be due to employers perceiving a better response from jobseekers searching through individual companies, rather than via thousands of consultancy jobs.

The credit crunch also comes at a time when the activity of outsourcing shows no signs of slowing down. The Asian economies have invested heavily for many years in graduate training across a wide range of IT, electronics, science and engineering disciplines. The net result is that countries such as India have been able to benefit from Britains lack of investment in IT training and secure outsourcing deals worth billions of pounds. However some recent reports have suggested that life may not be that straightforward. India currently has around 10 million students attending university, but only a fraction of these attend the more prestigious and internationally recognised institutions. The highly regarded world leading Institutes of Technology has only 10,000 students between them. They are highly sought after with the majority leaving to work in America. As some companies are discovering this leaves a rump of graduates with unsubstantiated qualifications. A recent McKinsey report suggests that only a quarter of India's technical graduates were suitable for employment in India's IT industries. Even so this will not prevent India from attracting half the world market for offshoring services by 2010.

In summary the IT recruitment market is in a very fragile position. It is essential that the UK retains a strong and highly qualified IT base. Fundamental to the technical skills is the requirement for sound business and communication skills. IT people in the UK that can achieve this and remain up to date with the latest technology will always be in demand and hopefully help to reverse some of the outsourcing due to take place over the next few years.

Commentary by : George Molyneaux Research Director for Salary Services Ltd. - www.salaryservices.co.uk

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