IT sector stopped in its tracks as spending dries up

The IT sector has hit a wall, with many employers forcing IT workers to take leave over the Christmas break after a slump in IT spending.

The IT sector has hit a wall, with many employers forcing IT workers to take leave over the Christmas break after a slump in IT spending.

Paul Wallbank, owner of tech support site PC Rescue and SmartCompany blogger, says he is surprised by how much the sector has been affected.

“I thought for about 18 months we were going into a downturn, but I just did not imagine things stopping so dramatically,” he says.

“I’m hearing that companies are forcing two or three week shutdowns, and normally some never shut down over the Christmas break. What I’m hearing across the board is that contracts are just being cut.”

But Wallbank says the effects of the slowdown will affect the industry years from now.

“The most serious long term effect is that we’re going to have a massive skills shortage in five years time because of the downturn. In the dot-com bust, a lot of kids got the message that IT wasn’t a stable industry.

“And what is happening now is only reinforcing that. We’re going to see a lot of people moving out of IT, and a lot of kids who would have gone there are now getting the message that it’s unstable.”

It appears many IT firms have already stopped hiring, with the sector reporting a 7.64% drop in advertisements in November, according to the Olivier Job Index. The figure means advertisements for IT jobs have taken a 30.5% drop over the past 12 months.

IT graduate roles have fallen 20.4% for November, and are down from 51% in November 2007.

But contrary to reports that Ambition Technology is closing down for a week due to the slowdown, managing director Andrew Cross says the business is doing well.

However Cross does say that while projects haven’t been canned, clients are becoming more hesitant to spend.

“We have seen people just being cautious, and decisions that may have taken place in the past will happen in the new year. There’s a lot of wait-and-see. I think there’s a general lack of visibility in the moment.”

Peter Acheson, chief operating officer of IT recruitment firm Peoplebank, told The Australian that the next few months are going to be much quieter than usual.

“A number of large corporate and government organisations are enforcing annual leave on both their full-time staff and their contract staff. Forced leave, which this is, is symptomatic of a softer market.”

But not everyone is feeling the slowdown. Gary Cohen, chief executive of healthcare software group IBA Health Group, says his company is experiencing business as usual.

“I think it all depends which sector you’re in. We’re not slowing down but employing people. Revenue is increasing, we’re not seeing a slowdown in our contracts. So in our sector, and I hope it continues, it’s very strong.

“But there’s no doubt that other industries that are tied more to the finance industries and to the general economy must be affected.”

Tom Stianos, chief executive of technology and management firm SMS Consulting Group, says his company has not forced anyone to take leave, and that business is “normal”.

“Overall we’re pretty comfortable for where we are at this time of year. You expect to see a small lull for the Christmas period, but it’s pretty normal. Equally there are a number of new projects we expect to be gearing up for in the next few weeks.

“So far, it’s just been a normal year.”

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