Are we about to see the best Talent Market in a decade?
It’s amazing what difference a month or so makes in the tech talent space. Not long ago most of us were still doing a daily commute into our offices. Now our commute is from the kitchen to wherever we have set up our home office. A very short trip.
This situation is unprecedented in our lifetimes but the broader economic downturn we are experiencing is not. In fact, over the past 20 years, there have been two major market downturns that have significantly impacted the technology sector. They were the Dot-Com bust of 2000 – 2002 and the GFC in 2008 – 2010.
When I sat down to write this article I wanted to test a hypothesis that I have formed over the past few weeks. That is that the COVID-19 crisis is driving a short-lived, but a significant structural change in the market for IT professionals. I jumped online to try to find some data to support this supposition but all the information I found was only up to mid-March when things were still buoyant and we hadn’t entered into lockdown. So the following is based on anecdotal evidence I have uncovered from both candidates and clients that I have spoken with over the past 4 weeks.
The first thing to note is that there are a lot of quality candidates on the market who weren’t there a month ago. I know this based on the increased number of new LinkedIn invitations that I have received and the volume of ad responses. Talking to candidates, it has become clear that the larger corporates have cancelled or put on hold a lot of technology projects which has resulted in a high number of staff from vendors and contractors being pushed into the market.
These candidates cover the full breadth of the SDLC from Project Managers through to Engineers and Testers. It would appear that these corporates are keen to try to retain their core IT workforce so the cuts seem to have focussed on external resources.
The number of opportunities in the market has also decreased, with Shortlist citing a 70% drop in Job Ads in April. Compare this to the LinkedIn end of March report, which highlighted a 17% increase in advertisements for Software Developers over the previous month. Demand from March to April has literally fallen off a cliff.
It’s still too early to determine the impact this oversupply will have on wages for IT professionals. But based on previous recessionary events (Dot Com Bubble Burst and GFC) it is expected that permanent salaries will plateau and contract rates will decrease. This presents a significant opportunity for ScaleUp and Mid-tier Technology businesses. One of the key issues that I have experienced when recruiting in the professional services and ScaleUp segments has been that my greatest competition for candidates has been my client’s customers! In many cases, I have lost good candidates to offers from large corporates, particularly in the banking and financial services sectors, who were offering salary packages significantly above what some of my clients could pay. I don’t see this being the case in the short term as most large corporates don’t seem to be actively recruiting.
However, the medium to long term trends in the Australian technology markets are still that there will be a shortfall of 100,000 IT professionals by 2024 (Deloitte Digital Pulse). What this means is that once the market comes back the excess supply will be absorbed very quickly and I believe that we will be back to pre-COVID-19 crisis talent challenges within 6 months.
So what is the opportunity that the current situation presents to ScaleUp and mid-tier technology businesses? Firstly, this is a “window” of opportunity. Prior to the current crisis, there was a supply shortage of quality technology talent but there wasn’t necessarily a shortage of talent. They were just all gainfully employed. The current situation has just released a volume of candidates onto the market who, if everything had remained the same, would not have been considering a role change.
So how long will this window of opportunity be? Mark O’Connor, from Preceptor, who is a veteran of the past two significant recessions believes that it will be 4 – 6 weeks before things start to pick up. Based on what the Prime Minister, Scott Morrisson, advised on the 17th of April, the minimum amount of time before restrictions may be eased is 4 weeks. Allowing for a lag between this and an increase in economic activity I would say the window is 3 – 6 months. The key factor will be when the corporates turn the projects tap back on and the large professional services firms need to ramp up their consulting stocks.
The key question then is, how do you make the most of this situation? I don’t propose that you rush out and hire all of the available talent, however, there are a number of things you can look at to position yourself favourably for when you can hire, such as;
- Review your current recruitment practices. Are there things that you have been doing that have not been adding value, and even may have been detracting from candidate experience?
- Are you clear on where the capability gaps you have within your current team are?
- Do you have a considered and articulated Employer brand supported by role-specific Employee Value Propositions?
- Are your team leaders and managers comfortable and competent with recruiting?
- Are you leveraging technology as well as you can?
- Do you have a plan and supporting processes to establish relationships with the talent you may want to attract and hire in the future?
If you can identify what talent you need, establish an initial relationship with them and have an effective and efficient recruitment process in place you could be in a prime position to take advantage of a once in a decade talent market opportunity.