In a survey conducted by specialist IT agency ReThink Recruitment, IT directors are recalling projects outsourced to locations such as India because of quality and control issues.
There has been, according to the survey, a mild slackening in demand for UK contractors, but indications suggest that IT departments are now in a race to secure and retain key skills.
“High-end development work and new build systems are coming back to the UK,” explains ReThink Recruitment’s managing director Jon Butterfield. “Offshoring projects are absorbing a huge amount of management time.”
The survey confirms that IT skills are still in high demand and, despite the economic uncertainty, IT directors are very confident about the future, with 69% of those surveyed planning to increase or maintain contractor levels in the next 12 months.
Wage inflation
According to Butterfield, there has been serious wage inflation, particularly in India, which is making IT directors think twice before offshoring: “We are seeing projects return to the UK because programme managers, system architects and business analysts need to work with the managers in the UK.”
Some low grade work is still being processed in locations like India, but even system testing has been brought back to the UK for many projects. It is still cost effective for low grade batch programming to be conducted in India, but the savings on high-end work are turning out to be a false economy.
“Most corporates want to see an impact from their IT projects in a short timescale,” continues Butterfield, “and this is just not happening with many offshored projects.”
Spiralling costs
IT directors appear resigned to the increasing costs of IT personnel, with 22% predicting a rise in contractors’ rates and only a tiny proportion, 5%, expecting a decrease in rates.
“Demand for contractors is stable and consistent,” says Butterfield, “with quality being the major requirement of corporate clients.”
Clients seeking to negotiate contractor’s rates down face a challenge as many of the key skills are in short supply. There certainly appears to be no return to the bloodletting of the post dot com and Y2K years previously experienced.
Lack of business skills
What many offshore suppliers lack is business acumen
Jon Butterfield
“What many offshore suppliers lack is business acumen,” states Butterfield. “The suppliers can’t relate to what a retail bank or major insurer based in the UK actually need and this shows when projects are completed.”
According to the survey, 74% of IT directors are concerned about attracting and recruiting high quality candidates to fill their IT roles. Skills shortages are still high on the agenda with workers having project management skills in desperately short supply.
A stable market
Despite the woes impacting on other sectors of the economy, Butterfield is confident that IT recruitment and contracting are stable: “We have found demand for IT contractors and permanent staff to be consistent and stable, despite the economic downturn.”
Butterfield’s stance is supported by the survey, which shows that 58% of IT departments expect to increase their workloads in the next 12 months and just under 50% expect their IT budgets to increase.
Published: Wednesday, September 17, 2008
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