SKILLS GAP - Ready to hang up your tools
The IT skills gap just isn't getting any smaller and as companies delay technological development to pay for it, the services sector is the only one to reap any reward.
The skills shortage, like the poor, is always with us - and it'ss delay technological development to pay for it, the services sector is the only one to reap any reward. getting worse. The latest picture of doom and gloom is painted by research company IDC in a white paper entitled IT skills shortage: the impending impact on businesses in Europe. This was produced for a high-level pow-wow on the subject in Brussels last month, organised by Microsoft and other IT heavyweights. It was attended by bigwigs including Jacques Santer, president of the European Commission and Martin Bangemann, European IT commissioner.
IDC believes that of the 9.1 million IT jobs available in Europe last year, 320,000 were unfilled - just 3.5 per cent. But the total number of IT jobs is set to rise by about 50 per cent by 2003, reaching 13.4 million.
By contrast, if current levels of investment in recruitment and training are maintained, the pool of available labour will grow by just six per cent a year to about 11.8 million. This will leave a shortfall of 1.6 million skilled IT staff across the Continent, or 12 per cent of the total required.
In the US, shortages of this magnitude are already being recorded. A survey in January by the IT Association of America and Virginia Polytechnic and State University found that 10 per cent of IT positions were vacant in large and medium-sized companies.
Estimates for UK growth are slightly lower than those for Europe as a whole, but still significant. A survey for the Computing Services and Software Association calculated a growth in IT vacancies in the UK from the current 1.07 million to 1.34 million by 2002, a rise of 25 per cent over four years. More than two-thirds of UK IT jobs are now in outsourcing and software development.
In Britain, there are acute shortages of product skills in databases such as Oracle and MS SQL server; other Microsoft products such as VBasic and Windows NT (especially the later versions); and AS/400, PC operations and Unix.
There is also a lack of skills in core application packages, especially SAP (which has even founded an MSc course at Sheffield Hallam University to try to educate some more staff in its R/3 software).
According to a survey of UK employers conducted this summer by Information Builders, the general skillsets most in demand include simulation, financial and business applications, computer-aided drafting, networking and telecom and security.
Project management skills are also in short supply in the UK, with top exponents of the genre commanding salaries of #100,000 a year. Contract project managers with as little as one year's experience can demand #400 a day, while #900 a day is a common average for the more experienced managers.
Combined business and technical skills - the so-called 'hybrids' who have been the Holy Grail of IT recruiters for more than a decade - are also in great demand, as are the dual skills required for migrating from mainframes or other proprietary environments onto client-server systems.
Ironically, the Information Builders survey found that the most significant cause of the skills gap was the high level of salaries among IT staff, leading to a lack of money for training and re-skilling. Other key factors included the fast pace of change and the year 2000 problem (see chart, page 43).
This accords with IDC's analysis of the adverse effects which the widening skills gap has already begun to have on European businesses. Wage costs have risen by between 12 and 60 per cent in the past 12 months, depending on skills and location.
This ties in with research in the UK by Computer Futures, which found that salaries in newly-filled positions rose by six per cent between the first and second quarter of this year.
Lack of skills, combined with the cash drain of salary and fee increases, is causing upcoming IT projects to be deferred. This is potentially damaging to the organisation, because it does not get the benefits the new systems could have brought, which could reduce its edge in increasingly competitive world markets.
Time-critical projects such as year 2000 conversion and European economic and monetary union (EMU) will inevitably have to take precedence (although there are fears that many companies on mainland Europe will not be ready either). That means the projects likely to fall by the wayside are the innovative ones, such as the development of e-commerce.
IDC estimates that by 2005, there will be a billion users on the internet worldwide, so European companies will be in trouble if they miss the boat.
It also believes IT professionals spend almost two-thirds of their time helping users to utilise IT more effectively. Fewer staff means less help, so users work less efficiently as a result.
Also, in recent months, an increasing number of European businesses have turned to offshore resources from countries such as India and Russia, not just having project work done in the host country, but even importing skilled staff on a contract basis.
The result of this trend will be a net exporting of jobs from Europe, which could have adverse long-term effects on unemployment rates and balance of payments.
It all looks pretty bleak, doesn't it? Well, not necessarily, at least as far as dealers, resellers and other IT service companies are concerned.
IDC's figures demonstrate that most IT professionals are employed by user organisations, not specialist IT companies. Of last year's 9.1 million IT jobs in Europe, only 812,000 were in IT companies, so the bulk of the skills problem is going to affect user companies.
Of course, resellers and other IT companies are still going to be competing with user organisations for skilled people. But they are likely to be in a stronger position, because they are generally seen by IT professionals as more attractive employers. A specialist IT firm can usually offer a more structured career path to IT professionals than a user organisation, where they may soon find themselves hitting their heads on the promotion ceiling.
There are often more opportunities to broaden their skills into areas such as consultancy and management. Staff are more likely to be trained in, and get experience of, up-to-the-minute technologies and it is usually more satisfying to be a fee-earner for the company, rather than a cost centre, as they would be in an user's IT department.
By about 2000, IDC predicts that the number of vacancies in the IT departments of user companies will exceed the total number of IT professionals employed by companies in the industry. This promises a bonanza of business to companies in the IT service sector, even after the millennium and EMU bubbles have started to burst.
Moreover, when IDC says 9.1 million IT jobs, it doesn't actually mean 9.1 million people. Instead, it means 9.1 million equivalent jobs - this could be one full-time person, or two people spending half their time on IT, or five people each spending 20 per cent.
Most small firms don't need, or can't afford, a full-time IT professional, so someone - an administrator, an accountant, or one of the directors - does it part-time.
The most surprising of IDC's figures is that more than 75 per cent of IT jobs are actually in small user companies of less than 100 employees (see chart, page 42). From this we can deduce that most of the IT skills shortage must be affecting SMEs.
IDC predicts that small businesses will increase in importance across Europe in the coming years. Their technology needs will become more complex, too, particularly as they embrace technologies such as the internet and find themselves integrated into electronic supply chains. SMEs have traditionally not been well served by the larger IT service providers and could offer a substantial opportunity to PC resellers.
It's not just small companies that will need help from resellers and solutions providers. The rapid pace of change and the uptake of internet-based technologies, is already leaving user firms of all sizes gasping for breath. If they are suffering 12 per cent staff shortages, they will need even more outside help and they will look to IT services companies to provide it, especially if those companies have captured the cream of the skills pool with better career prospects and a more challenging work environment.
The Information Builders' survey asked user companies about the effects of the skills shortage (see chart, right). Most responses involved buying in skills from outside, whether through the use of contractors, buying in consultancy, buying training or outsourcing areas such as support - all potentially very lucrative markets for resellers.
The first stage in plugging the skills gap will involve teaching some technical IT knowledge to students and trainees. But even if European schools, universities and employers were to train up the 1.6 million extra IT experts required by 2002 - which seems unlikely - they would still lack the soft skills which can only be gained through years of experience.
IDC's white paper lists the soft skills required at each stage of the system lifecycle, from planning to network management. Those most often required include project management, interpersonal and communication skills, the ability to prioritise, and understanding business issues.
Companies will be crying out for these soft skills and in many cases the only place to get them will be from IT services companies such as outsourcing suppliers and value-added resellers. Many user firms have already been driven to outsource their IT functions because of the difficulty or expense of recruiting people with the skills they needed.
More will undoubtedly follow as the skills gap widens. It's yet another example of the way the skills crisis is working in favour of IT services companies.
HOW TO RETAIN SKILLED STAFF
There's nothing like a prolonged skills shortage to set people's feet itching. Here are a dozen tips on how to persuade your employees that the grass in still greener on your side of the fence - without actually paying them any more money.
Ensure they have varied, stimulating and innovative work to do. Employment gurus call it a 'horizontal career path' - moving from project to project without necessarily being promoted - rather like being a Cabinet minister.
Give them responsibility and control over their own destinies.
Listen to their problems and issues, so they don't regard resignation as the only solution. Regular appraisals can be a two-way process.
Lay on good facilities and benefits, such as childcare, sports facilities, gym membership and flexitime working.
Encourage teleworking, either full or part-time.
Arrange foreign trips, secondment to offices or partners overseas, or just locate in a pleasant environment.
Offer a choice of flexible benefits - car, pension, health plans and so on - up to an agreed value.
Share options can be an effective form of 'golden handcuffs'.
Try recruiting older staff. Not only will they be calmer, more experienced and more likely to listen to what colleagues and customers are saying, but they are likely to stay longer too.
Alternatively, try recruiting school leavers instead of graduates - they won't be so impatient to start climbing the career ladder into management positions, so they'll stay longer in fee-earning jobs.
Don't forget the importance of good training and prospects.
Finally, identify your best and most valuable staff, and work hardest to keep them.
A CALL TO ACTION
In September, the skills conference in Brussels issued a call to action signed by Baan, CAP Gemini, Exact, ICL, Lernout & Hauspie, Microsoft, Sage, SAP and Wang. It demanded the following:
Technical literacy must be integrated into the educational curriculum, from primary school to university.
Schools must be better equipped and teachers properly trained in IT.
Schools should partner with local businesses to offer practical training.
There should be better adult IT training, for new entrants to the job market and for the long-term unemployed.
Industry must put investment in people on a par with capital and R&D investment.
Companies must make alliances with schools and universities so academics gain knowledge of what the important issues are in business IT.
Industry must donate equipment, teaching materials and employee time to assist with educational projects.
Steps should be taken to encourage more women, disabled people and people from ethnic minorities to take up careers in IT.