The early 2023 saw many of the biggest names in the tech industryincluding Microsoft, Amazon and Meta, announce tens of thousands of job cuts.
This is against an economic backdrop of high interest rates and rising inflation, prompting tech companies to find ways to cut operating costs as their customers also look to tighten their belts.
Lots of tech companies cutting jobs have now gone on huge hiring sprees during the coronavirus covid-19 pandemicas the world massively shifted towards remote working and social distancing forced people to rely on digital services and apps like never before.
While the Covid-19 virus remains a permanent presence, the restrictions it imposed on the movement of people are no longer in play – in most parts of the world – leading to a decline in consumer dependency and companies with regard to some of them. technology company services.
Music streaming service Spotify released a memo on January 23, 2023 stating its intention to cut its employee base by “approximately 6%” due to the growth of the company’s operating expenses exceeding its revenues in 2022, the Company CEO admitting to growing the company too quickly.
“Like many other executives, I was hoping to ride out the strong tailwinds of the pandemic and believed that our vast global business and lower risk of impact from a slowdown in ads would isolate us,” the Spotify CEO said. , Daniel Elk.
“Looking back, I was over-ambitious investing ahead of our revenue growth. And because of that, we’re reducing our employee base by about 6% company-wide.”
Silver lining to the cloud of job cuts?
With so many tech companies seemingly facing the same economic challenges and having to cut permanent staff, what does this mean for the job prospects of the IT contractor community, given that the job market will be now – apparently – flooded with new entrants?
Research published on January 16, 2023compiled by IR35 insurance provider Qdos, suggests 2023 is a year entrepreneurs are already feeling worried aboutthanks to the fallout from the UK government’s about-face on the repeal of the IR35 reforms and the current cost of living crisis.
“Entrepreneurs have been confronted with it recently, but with [the Qdos research showing] 80% [were] able to secure a position outside of IR35 last year, the self-employed can look to the future with some confidence – for the first time in what seems like a long time,” said Qdos CEO , Seb Maley, to Computer Weekly.
“Economic uncertainty, while worrying for many businesses, could – in my view – be a catalyst for demand from entrepreneurs.”
Speaking to Computer Weekly, Matt Collingwood, chief executive of IT recruitment consultancy VIQU, said that while headlines about mass layoffs could indicate the IT market is in the doldrums, demand for underemployed contractors and permanent staff remains supported.
Matt Collingwood, VIQU
“Yes, some major tech companies have made layoffs, but I don’t think you can take that as a fair indicator of the IT market as a whole. Big Tech Companies Normally Pay Ridiculously High Salaries – [and] I’ve spoken to engineers who were earning triple or quadruple the salary or rate of an average professional with their skills,” he said.
“When you are transporting this expensive personnel, it is only natural that some must be cut in the event of global uncertainties and upheavals.
He added: “It might be an unwanted disruption, but these laid-off professionals are not leaving these companies without a new job or a new contract.”
To back up the point, Collingwood cited the job search experience of a former Meta staffer who he says is still working through his layoff period but has already secured five job offers.
Terry Payne, global managing director of digital-focused staffing firm Aspire, said it’s also worth noting that during times of economic instability, demand for IT contractors typically increases.
“Increasingly, companies that want to stay competitive are realizing that their technology capabilities are critical to operating with greater efficiency and seizing new opportunities,” he told Computer Weekly.
“There is an abundance of highly skilled workers available and, as previous recessions have taught us, freelancers and contractors provide vital support to businesses and the economy during difficult times.”
Dave Chaplin, CEO and founder of contractor compliance firm IR35 Shield, supports this view: “In general, large companies don’t want large numbers of permanent employees because they incur huge ongoing costs. In the current economic climate, without any certainty, companies would prefer to hire contractors “as needed” without these ongoing costs.
“Businesses will always want and need entrepreneurs. The ups and downs of the economy simply dictate how much they will have to pay to access top freelance talent. Typically, an entrepreneur can demand twice as much at the height of an economic boom than at the bottom of a recession.
It’s time to rethink expectations
For this reason, IT contractors may also need to consider lowering their daily rates in the current economic climate, advised Juliet Eccleston, CEO and founder of business networking and SEO hub AnyGood?
“We are seeing continued investment in strategic programs [including tech-related ones] in large organizations – many of whom have laid off – which is fueling demand from contractors. There is however increased tension in the desire for higher rates due to the cost of living being tested by rising business costs,” she said.
For this reason, she said, it is important that IT contractors are “aware” of the economic environment in which they offer their services.
“Rates should be fair, but I don’t see organizations accepting high rates just to keep people safe. Rate discussions should be considered with all aspects of the proposed contract. In particular, the possibility of securing a long-term contract on a major program may be a better long-term business decision, given the continued economic outlook,” she said.
“I believe that IT contractors who have in-demand skills – at least in the UK – can be optimistic, and for those who feel unsure, my advice would be to invest in developing in-demand skills to stay competitive.”
Meanwhile, Collingwood added that IT contractors may have to be willing to accept shorter contracts than before, as the economic situation means that many recruitment companies are taking a much shorter-term view of planning. IT projects.
“Previously, clients would talk to me openly about their project plans for the next six to 12 months and the resources they needed. Typically, they now choose to only reveal their immediate plans or needs for the next three months,” Collingwood said.
“Yes, there is some uncertainty which impacts long-term planning, but it does not impact the need for permanent employees. I would just say that companies are looking for more trust in the people they employ than in 2021 and 2022.
“Previously, they were content to grab every possible resource, but now clients are looking for more assurance that they’re making the right hiring decisions. As a result, the time from hire to placement has slowed for both contract and permanent hires. »
Learn new skills to stay relevant
Collingwood, Payne and Eccleston’s optimistic stance on the market is also reflected in the findings of the European Labor Market Report Winter 2023 by contingent workforce management software provider, Magnit.
The 16-page report says economic turmoil in the UK market, in particular, has translated into ways demand for temporary IT workers is expected to remain high as employers will need to “increase their agility in these circumstances”.
Dave Chaplin, IR35 shield
According to Magnit’s findings, data analysts, cloud computing engineers, artificial intelligence (AI) architects and expertise related to managed services are likely to be the most in-demand contractors in the UK.
“The threat for any entrepreneur is that their skills will become obsolete,” said the IR35 Shield chaplain. “Unlike a business, which pays to train its staff, an entrepreneur has to invest in their own personal development in their spare time just to stay up to date.”
And with the emergence of tools that can write code for themselves, such as the ChatGPT pre-trained chatbot, it’s important that IT contractors give serious thought to developing skills that will ensure they remain in high demand, although some of the work they do is now done by AI.
“The skills that will outlive AI tools are those associated with thinking strategically and planning what to build, rather than how to build it,” Chaplin continued. “The software systems graveyard is home to an abundance of software products that never got into production properly, simply because the requirements were wrong.”