Candidates gain upper hand in recruitment

April 2007

Hand catching an earth globeEmployers are finding it increasingly difficult to find job candidates with the right IT skills, putting the candidate in a strong position. JM, a recruitment consultancy based in the City, looks at which areas of IT are currently in strong demand and short supply.

In 2006, IT recruitment became a seller's (candidate's) market, and this looks set to continue in 2007. Furthermore, the signs are that 2007 is shaping up to be as buoyant as 2006.

Despite recent interest rate rises, business confidence appears to be high and organisations are almost universally in growth mode. Intense skills shortages have led to massive increases in salary levels in certain areas and also the return to guaranteed bonuses and sign-on bonuses.

Likewise on the contract/interim side, there has been a sharp increase in daily rates. Just as in 2006, talent attraction and retention is one of the major inhibitors of client organisations being able to achieve strategic corporate objectives.

Within the technology function, the following areas are all exhibiting strong demand and limited supply.

Programme/project management

There has been, and will continue to be, an exceptional demand for good programme and project managers with excellent business engagement and stakeholder management skills, particularly where technology is being used to drive fundamental business change within complex organisations.

There is increasing willingness for our clients to consider candidates with experience gained in other industry sectors and also those with non-technology backgrounds.

As cost containment continues to be a by-word in all industry sectors, there is repeated demand for candidates who have worked in sectors where costs have been tightly reined in and business case justification is very tightly controlled, especially retail and manufacturing.

Out sourcing/offshoring/shared services

Strategic sourcing/smart sourcing/outsourcing has continued to be a big focus in this area as lower margins and increased competition place emphasis on cost reduction.

There are several key trends, namely: the migration of application development into the off shoring space; the continued outsourcing of business processes to low-cost centres (call centres, HR support functions, accounting and payroll etc.); the emergence of China and Puerto Rica as new competitors to India; and the reverse offshoring of Indian IT service provision to Eastern Europe, especially Prague and Budapest.

Major recruitment issues centre around the shortage of executives with the knowledge and skill sets to manage the offshore vendors. However, we are now also witnessing a contradictory trend i.e. many companies are bringing outsourced functions back in house - this is mainly a result of companies outsourcing for the wrong reason e.g. technology is a problem, therefore outsource the technology and outsource the problem.

This approach has seen companies who have done this not only lose the capability to correct the problem but also, sometimes, to exacerbate the problem itself. Outsourcing and offshoring only solve business problems when the rhyme and rationale of going down this route is fully examined and justified.

Vendor management

As most major corporates now outsource several support functions, it is of increasing importance for technology executives moving up the career hierarchy to have experience of working with, and then managing, third party vendors.

This means that individuals who have worked on either side of the fence are in particular demand as they clearly have an understanding of the commercial imperatives which govern the behavioural traits of the other side.

Change and transformation

In most organisations, 'change is the only constant' and change continues to be an area where there is tremendous demand for executives who are familiar with the IT - and typically HR - areas being used to drive through the wider corporate change agenda (particularly culture change).

For most executives, their capacity as individuals to be ‘change agents’ is limited to the first two years of them joining any new organisation (before they become part of the status quo).

There is a big demand within change to find individuals who are willing and able to move between industry sectors as people without industry backgrounds are comfortable with asking the obvious questions that confront long-held orthodoxies.

Risk and compliance

Clearly the regulatory, compliance and risk management area is at the top of everyone's agenda within financial services. In 2006, there was a frenzy of activity to
secure the services of experienced executives at all levels.

In 2007, the emphasis is on the practical implementation of the theoretical directives and working through some 'test cases' to evaluate what MUST be done versus the 'nice to have but not critical'. The large accountancy firms and their consulting arms, together with the Big 4 consulting houses, continue to compete with the City for talent.

Business engagement

It is hard to comprehend in 2007 that some technology functions still complain that many technology executives are unwilling and unable to engage proactively with the business side.

Now that the typical profile of a CIO is to come from a business as much as a technology background, there is an overwhelming desire on the part of CIOs to have multiple levels of engagement with the business. They require all members of the technology management team to be more visionary and evangelical about the business enabling capabilities of the IT function.

Telecommunications and network infrastructure

VoIP is a hot topic in the financial services community and there are now several major implementations within the City. The fact that there have been no major 'problems' reported in the press shows that these have bedded in well.

Also broadband continues to be a massive area of expansion, both on the business and retail sides. There will be continuing demand for candidates at all levels with knowledge of, and experience in, implementing and managing these technologies.

New electronic channels

The success of internet retailing (e-tailing) has finally given credibilty to the long-held claim that the internet is a viable way of conducting profitable business (firmly based on 'old economy' business plans routed in revenues/profitability forecasts rather than number of hits on the website).

Consequently there will be a great emphasis on recruiting individuals with knowledge of how to exploit the technology as a front-end and link it in successfully to established supply chain models. Individuals with retailing and travel industry backgrounds are of particular interest to the banks.

Architecture

There is a huge demand for all kinds of architects - technical architects, functional architects, solutions architects - and a large shortage of experienced and #commercially focused' practitioners.

The long-standing comments of clients is that this is still one of the major areas where technologists produce fantastic theoretical designs which are not routed in commercial realities.

It is all well and good to have an all-singing all-dancing technical design for a system to support a new business opportunity but if this wipes out the incremental revenues generated by the business opportunity then it does not make commercial sense to enact it. This capacity to link technical capability with real business pay-back is one of the major areas where there is a massive shortage of skilled staff.

Service 0riented Architectures (SOA)

SOA is an approach that has gained acceptance and become almost an industry norm but where practical experience of having 'been there, seen it and done it' is still limited. SOA is a method of building IT business processes through linking together a number of 'business services' into a complete business workflow.

Each service is a stand-alone work stream that is loosely-coupled and yet highly inter-operable. The cost advantages of such an approach are obvious and can reduce replication internally. Some work streams are so standardised that they are 'generic' and can be purchased externally e.g. validating a customer payment.

Products such as iBOLT are already widely used and will become even more widely used. Bespoke services can then be created from existing application functionality or from new functionality written in any preferred development framework (.NET, Java etc.).

SOA is particularly amenable to iSeries technical environments and there will be increased demand for individuals with good technical and business experience in this area.

The CIO agenda 

It is currently rare to find an IT director on the board of major plcs. Where IT is represented, it is frequently in combination with another functional area, typically HR or operations. Because of this, and interestingly, some board level IT directors do not come from technology backgrounds themselves.

With IT budgets once more growing enormously it will be fascinating to see if 2007 starts to witness a trend for IT to gain board level acceptance as a functional area in its own right (a trend that characterised the halcyon days of the dot.com boom era).

Also within major corporations, there is a definite divide between those companies that still view IT as a utility which has to be made super efficient and cost effective but is nonetheless a reactive service provider that is consulted after the business decisions are taken.

This is in stark contract to those organisations that view IT as a proactive business partner that is consulted before business strategy is devised. Clearly IT as a function in isolation will make it to the board (though this is still far from being guaranteed) in the latter type of organisation only.

There is currently no real trend regarding the positioning of IT within major firms. The 'efficient utility' epithet still characterises the IT function within many major firms. 2007 could well be a year in which IT is once more seen as being strategic rather than tactical.

One of the first indicators of this trend will be for the strategy consulting firms to rebuild their technology consultancy practices. It must be noted that, as yet, this trend has not materialised.

The trends noted above are generic across all industry sectors. Given that JM has a strong client base in investment banking and investment management it is worthwhile mentioning some of the trends that we are noticing within this very buoyant sector.

Investment banking/ investment management

There continues to be large growth in IT expenditure in these areas. Investment management houses in particular are all forecasting massive increases in IT headcount and budgets.

This will obviously create upward salary pressures and increases in interim/contract rates across all areas, particularly for experienced architects, analysts, service delivery managers and vendor managers.

High speed networking skills are in short supply, VoIP implementations are ongoing and, on the database side, Oracle has usurped, and will continue to usurp, Sybase as the financial services database of choice.

Basel II regulations have been wide ranging and had profound effects on the industry, whilst the first notions of Basel III are now being discussed. Delays to full implementation and standardisation of Basel II directives (caused at least in part by US lobbying) mean that skills in this area will be at a market premium for some years to come.

And the major Swiss banks continue to use the evading tactics of a country that is 'European Union' when it suits them, and most definitely not European Union when it doesn't.

From a technology perspective, Markets in Financial Instruments Directive (MiFID)  is starting to have an impact but only from a reactive stance. Most MiFID initiatives are firmly under the umbrella of the business and will not become IT imperatives until certain trading issues have been resolved - typically this takes years rather than months.

Specialist trading areas, particularly in derivatives and exotics, continue to pay enormous premiums for experienced executives. Good Java and C# skills are in short supply. Within the investment management area in particular, there will continue to be a large move towards algorithmic trading to exploit markets where technical platforms permit STP and automated trading.

Because there has been a lack of graduate recruitment over the last four years to six years, there will be a massive upturn in recruitment activity focused around candidates with two to three years experience in all technology development and support areas.

On the infrastructure side, there is a large move towards shared services and, concomitantly, outsourcing and offshoring. Investment banking in particular has lagged behind other industry sectors in the take-up of these business models but continued focus on cost-cutting, despite the bull market, means that there is now a new emphasis on rationalisation and consolidation.

Interestingly this now means that investment banks are willing, and in some cases eager, to hire candidates with retailing, manufacturing and fmcg backgrounds, where supply chain optimisation is far more advanced.

It seems as if 2007 will have much the same profile as 2006: continued growth in all areas, enormous pressure to reduce costs, new business opportunities fundamentally supported and often enabled by technology, upward pressure on salaries and interim/contract rates and a severe shortage of appropriate skills.