The IT Downturn of 90/92 – What it Was Like

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Most of current contractors got into contracting since the mid-nineties, which means that most of them don‘t remember the ferocious downturn of 1990/92. What was it like then? We will publish a 2-part article describing what it was like for contractors and IT employees then, and the lessons for now and how it is likely to turn out.

No Bread, No Butter

What was it like during the 90/92 period? Well I remember that he main skill, at the time, was Cobol/CICS/DB2, but these contracts dried up completely. Most of those that were involved in the bread-and-butter skills were out-of-work, whereas those with niche skills had a much better chance of being employed.

How did IT workers see the future then? Well, that downturn didn‘t affect employees very much. It was mainly contractors who bore the brunt of it. Contractors, and industry analysts, were saying that the game was up for them, that they’d had it very good for a long time, but that now the game was over.

There was talk that the big banks had got together to destroy contracting, by agreeing not to take on any more contractors.

Dutch Auction

There were agencies bidding down contractors. There was one particular one which would phone up contractors saying that they had a role for them and asking them what was the least that they would take. They would then call them up a day later saying that they were perfect for the role but that someone was offering to do it cheaper and asking them to bring down their rates. Many contractors told them ‘˜where to go‘ at that point, but many were getting desperate and would take anything they could get by this stage.

I, myself, went two long periods without work and when I got roles they were at reduced rates and away from home, adding to my expense.

Even though my income was less than my outgoings, I kept telling myself that I had to knuckle down and that it wouldn’t always be like this. I had bought a second property during the just-ended property boom. My mortgage rate on both properties went up to 15% when it was 8% when I bought my second property.

The Deadwood Stage

Most of my friends then, as now, were without work – many of them for a while. I well remember one of my friends, who was working, telling us all that the recession had been good in some ways as it had shaken a lot of the deadwood out of the market. None of the rest of us, who were listening to him, were working and that was like a punch in the solar plexus.

First Major Downturn

The 90/92 downturn was the first major downturn in the software industry. Prior to that, many companies didn’t have computer systems, or small numbers of them, and saw new systems as a way of cutting the cost of some labour that was still being done manually.

Now, computer systems are now being written, not to save costs from replacing manual labour, but to enhance business opportunities. In a downturn the business opportunities are not there anyway, and so the new systems, like the marketing budget, are shelved till those business opportunities reappear.

As a result, the software industry and the employment prospects for those employed in it, have become extremely cyclical. I’m afraid that being a lifetime contractor is going to have some very sticky patches ahead, as well as some good times.

Read the coming second part of our article to find out where we think the market will go from here.

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