Recruitment in a shrinking market

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The beginning of a new year is usually a time for optimism. We resolve to forget the bad things that happened in the past and look to the future instead. However, considering that 2001 was an annus horribilis for many of us in the IT sector, people seem to be offering a cautious welcome to 2002. 

As if the appalling events of September 11th and its aftermath weren’t enough to cause us to rethink our priorities, then the lingering threat of recession certainly was. For many, 2001 was the year in which the good times seemed to end. For the first time in a decade, the spectre of recession haunted us, as IT companies began to lay off employees and in some cases, close their doors forever.

Even those of us not directly affected by the IT slowdown felt its indirect repercussions as organisations began to introduce strict retrenchment policies including pay cuts and recruitment freezes. The effect of all of this on the recruitment sector has been substantial with the balance of bargaining power shifting back from the employee to the employer. So what areas have been hardest hit by the downturn, how have recruitment agencies reacted to it and are there any signs that 2002 will see things improve?

The first signs of economic difficulties became obvious early last year, while the fallout from September 11th helped increase the uncertainty. Nearly every business in the IT sector has responded to the downturn by tightening their belts and for most, such prudent behaviour has been enough to stave off the worst. As ElanIT Resource manager Tom Clancy notes, it’s been those companies who have the closest links with the US who have suffered the most damage. ‘Those most affected by the economic slowdown in IT has been the IT companies that have their headquarters in the US or have primary markets based there,’ he says.

Global economy
However, now that we’re all linked in a global economy, what happens on one side of the Atlantic can’t fail to have an impact on this side of the water, even on those companies that don’t have direct dealings with the US. Dominic McMahon, general manager of System Dynamics, says: ‘There’s been an impact across the board from Q2 onwards and confidence has been low ever since. The downturn in the US economy, combined with the terrorist attacks in New York and Washington, has led companies everywhere to batten down the hatches.’

The demand for both permanent and contract employees has shrunk and employers shy away from recruiting. The worst hit areas in IT recruitment include: marketing, technical support, graduate developers, PC networking, C++ developers and those unfortunate enough to work in Internet development. However, it’s not all bad news. Core business areas such as CRM, ERM did suffer a temporary lull last year, but have picked up considerably since then, while those engaged in euro-related work were in constant demand in the last 12 months. 

Contractors hit hard
According to those working in the contracting sector, contractors have suffered more than those in permanent positions. Dominic McMahon says often contractors were the first people to be laid off when things started turning sour. 

‘Contractors have been an easy target for those companies involved in cost cutting and the impact on the market has been significant because Ireland is a relatively small market,’ he says. ‘Contractor rates have decreased slightly and contract terms are shorter than in the past; people don’t know how things are going to turn out, so they’re playing safe.’ 

Steve McNally, IT contracts manager for Eden Recruitment, agrees that contractors have had a hard time of it recently. However, he believes that contractors will be well placed when the economy does pick up again. ‘In the last six to nine months, contractors have been hit very hard and have either had to greatly reduce their rates, some by as much as 50 per cent, or been forced to take up permanent posts. However, it is expected that there will be a significant increase in demand for contract staff as the year progresses. Following the large number of redundancies in recent months, the contract market will be strengthened as employers will not be in a position to recruit permanent staff so soon after the lay-offs and work will still need to be done.’

Employers call the shots
There may be a silver lining in the economic storm clouds for contractors, but what about those who are looking for a permanent job in the IT sector? Not long ago HR managers were finding it difficult to recruit experienced personnel, but that situation has changed. As Caroline Kelly, manager of the IT Division at Richmond Recruitment, puts it: ‘It’s not an employer’s market entirely, but the employer definitely holds the aces at this point in time. The recruitment process has become somewhat easier for them because they can recruit at their own pace. In recent years, many companies were bending over backwards to meet candidates demands and were often forced into holding first and second interviews on the same day with a job offer by the following day’.

Furthermore, Desmond Ryan, a business development manager with Mark Mitchell Sales and Marketing, notes that with a large number of lay offs, there’s now a lot more candidates out there looking for gainful employment. ‘With a considerable number of redundancies over the past six months, an employer looking to recruit staff is now in a much better position than previously because they now have a greater pool of qualified candidates to choose from,’ says Ryan. 

An even bigger bonus for employers is that the slowdown has put a stop to spiralling IT salaries and extravagant benefit schemes. ‘There has been a marked realignment of employee expectations recently’, says John Tormey, manager of Computer Staff Recruitment’s Technology Division. ‘People are still changing jobs but job security is replacing the ‘quest for share options’ that existed over the past three years. Employee expectations are now much more realistic in relation to salaries and benefits. Many of those who lost their jobs as a result of the much publicised company failures have accepted positions that they would have rejected with disdain in 2000. Most are happy just to be employed.’

Those who have been able to hold on to their jobs in the current climate seem more inclined to stay where they are, so retention is less of a problem than it was. However, businesses that have had difficulties during the downturn may still find it hard to retain experienced employees. Tormey says ‘For any organisation whose business has suffered badly as a result of the downturn, staff retention is still a problem because, despite the extent of negative sentiment in the market, there has always remained a demand for experienced and talented IT professionals.’ 

This view is echoed by Lisa Howe, senior consultant with Allen Recruitment, who says: ‘An economic slowdown and publicised redundancies always lead to insecurity in the marketplace and, with the effects of September 11th, this has led to people re-assessing options both personally and professionally. IT candidates are now expressing a clear preference for more stable organisations that can offer security and stability.’ 

In the midst of the IT boom, it seemed that you couldn’t move for recruitment agencies clamouring for your attention. All claimed to be able to solve companies’ recruitment problems, but some seemed more interested in making a quick buck than offering a good service. ‘The recruitment market, perhaps more than other industries, has mirrored the economics of the country over the past number of years,’ says Desmond Ryan. ‘With the boom, the number of agencies grew considerably, initially bringing healthy competition to this marketplace. As the frenzy increased, however, this led in certain cases to a decline in levels of service and in customer satisfaction. This tarnished the industry as a whole, with even the most reputable firms having to battle against this negative publicity.’

Closures
As the slowdown continues to bite, some recruitment agencies have been forced to downsize and to reduce their fees, while others have disappeared altogether. According to Steve McNally this may turn out to be a good thing, for both the industry and for its clients. ‘There have been a number of recruitment agencies that have gone bust, as there has simply not been the demand or business available to keep everyone afloat,’ he says. 

‘On the positive side however, the agencies that do remain are of the highest quality and calibre. The pressure is high for everyone at the moment, but when the market does recover they will find themselves in a stronger position than before and from a client’s point of view they can only benefit, as they will be working with recruitment staff of the highest standard.’

Economists have suggested that the economy is likely to pick up slowly during 2002 and those working in the recruitment market are already seeing some growth in demand for certain types of employees. Areas expected to be big this year include software engineering, financial software development, and IT sales. For those working in the recruitment market and for those looking for gainful employment, this can only be a good thing. 

‘Already in 2002, we’ve seen a significant pick up in business,’ says John Tormey. ‘Projects are being given the go-ahead and if business continues at the pace that we’re currently experiencing, the reality will be very positive for IT professionals.’

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