Three Ages of Contracting – Is IT Contracting entering 3rd Age of Prosperity

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Three Ages of Contracting
Three Ages of Contracting

There appear to be three ages of contracting.

First Age of IT Contracting

In the first of the three ages of Contracting companies took on extra IT Contractors during an economic downturn. In the 2nd IT Contracting Age, companies terminated IT Contractors en masse during economic downturns.

Now, in the third of the Three Ages of Contracting, it appears that companies are hoarding contractors during downturns.

So, in the first of the three ages of Contracting the reason that companies took on more IT staff and IT Contractors during a downturn was because most companies didn’t have IT systems.

They saw IT as a means of cutting costs.

Transaction Processing

In those days it was mainly Transaction Processing systems that they put in place.

Indeed in those days IT was called DP – short for Data Processing.

Just as later on Finance Directors would see outsourcing as a way of cutting costs during an economic downturn (even though there were extra costs in the beginning), they saw IT as a way of cutting long term costs.

Cost Saving

IT was a way of cutting staff costs.

If you processed your transactions by computer rather than manually then that would, in the long run, save you a lot of processing costs.

Could you imagine how many people that the banks would have to employ if all their systems were purely manual?

This meant that when an economic downturn came it was actually GOOD for those who worked in IT. They called it DP (Dat Processing) then.

However, after a while most companies had Transaction Processing systems. And even when they replaced them it wasn’t saving them anything normally in staff costs. It just made them more efficient and up to date.

Second Age of IT Contracting

Then Began the Second of the Three Ages of Contracting.

This was when companies wanted new projects and systems to extract business information from their existing systems.

This was the new Information Age in Business and many Management Information Systems were created to help run the business more efficiently.

Contractors Suffered

However, when an economic downturn came along, as in 1991/2 and 2001/3 then IT Contractors suffered very badly.

They suffered much more than others in the economy.

The reason was that companies used IT to grow their businesses. If there was no new business about then there was no point in new systems or major upgrades to capture it.

Finance Directors saw IT Contractors, along with the advertising budget as low hanging fruit. They could easily be picked off to boost the companies’ bottom lines in an economic downturn.

IT Contractors usually got whacked in the first year of an economic downturn and permies in the second year.

Dog Not Barking

So, why did this not happen this time after the credit crunch?

This is the dog that didn’t bark in the night.

There was a huge credit crunch and major retailers said that this was the worst situation for them that they can remember.

Top Stock Market guru, Warren Buffet, said that the credit crunch economic downturn will go on for years with sloer growth than normal.

Contract Market Up and Up

Yet, in the worst of teh downturn, ReThink Recruitment sent out a Press Release saying that IT job ads, in the Financial Services Sector, for God’s sake, were up 36% in the final quarter of last year, year-on-year.

That’s in the sector that should have been hit most.

Also there has been a glut of Stock Market reports from IT agencies all saying that they are booming and they see no signs of any change in their current trading.

Indeed, one of the agents who read our website articles, RC, has said that his agency saw no effect at all on his IT Contractor market caused by the credit crunch.

Why?

So, why is that?

This dog should really have been barking by now.

IT Contractors should be getting terminated left, right and centre.

But the opposite is happening.

Recruiting Contractors

Companies are taking on even more IT staff and contractors.

Haven’t they heard of the credit crunch?

So, what are they doing?

Is this a tsunami that’s going to hit them suddenly and catch them all unawares and so leading to mass terminations of IT Contracts?

Surely not!

Even my 10-year-old son has heard of the credit crunch.

Although I did see my Jack Russell Terrier burying a bone yesterday.

A ReThink

Rethink have come up with a proposed explanation.

Their Press Release stated ‘organisations increasingly view IT as key to stealing a lead on competitors. So, they continue to put in place new systems in response to compliance and regulatory issues’.

Is that it then?

Is IT seen, now, as so key to the success of an organisation that they dare not cut IT staff? That’s even during a downturn?

Perception Change

It seems to me that this Third Age is more a change of perception.

Perhaps they’ve learned from past mistakes. The learned that those who continued to spend on IT during theprevioust savage downturn, when so many IT Contractors were being laid off, got off to a flying start when the downturn was over. They had a real commercial advantage on those who stopped spending on IT.

A study, a few years ago, showed the that companies got a Return On Investment (ROI) of $4 to every dollar they spent on IT (maybe we’re asking for too little).

IT Best Return on Investment

Also, even more importantly, the survey found that IT had the best Return On Investment of any spending that companies made.

Just savour that statement for a moment.

Companies can’t spend money on anything that will give them a better return on their money than spending it on us.

Just repeat that at your next renewal discussion.

Information Age

In the previous downturn of the early Noughties, the Internet Age and the Information Age was all a bit new to companies.

They could take a couple of years off from new IT Development and then start it up again when the downturn had ended.

It looks like they were wrong last time.

They found themselves a couple of years behind their competitors when the tides of the downturn ended.

Perhaps companies now see downturns as a good time to prepare for the future, for when business picks up – and IT appears to be at the centre of that strategy.

Very Good News for IT Contractors

So, if this is the case, it is very good news for IT Contractors.

If this is true, and it is only conjecture at the moment (although seemingly borne out by the facts so far), then this is fantastic news for the future for IT Contractors.

It will make IT Contracting a much safer profession (tempting some risk averse permies in unfortunately) that won’t see IT Contractors making a pile and then losing it all in the next downturn.

However, it is still to early to say, for definite, if this is going to be the case, but the signs are very hopeful so far.

IT Contractors Raking It In

The Third of the Three Ages of Contracting really could be THE Age of the Contractor.

Can you imagine years of being able to pile it up both through good times and bad times in the economy?

Don’t let the youngsters know.

There’s still very few of them taking IT related degrees due to the fallout from the last downturn.

So, there won’t be a whole host of them flooding the market for years to come yet.

Touch a little bit of wood – and then look forward to a lucrative career in IT Contracting for years to come.

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