Bad time to be an IT contractor - Barometer points to Stormy times

(By Richard Holway) Our trusty ITSA barometer has been pointing to bad weather ahead for over a year now but the barometer is now pointing to a really big storm.

I’m indebted to George O’Connor of Panmure Gordon for bringing to my attention that BP has this week written to its IT contractors telling them their rates are to be cut by 10%. Also ContractorUK - see Capgemini to cut IT contractors by 30% - says that Capgemini has cut pay rates for some of its IT freelancers by 15%, as part of a wider strategy to reduce reliance on contractors by a reported 30%.

"As the outlook for IT services worsens, Capgemini is looking to use offshore staff to preserve margins. The plan is to grow the group’s current offshore workforce of 25,000 in lower-cost locations like India to grow to 40,000 by 2010. Short-term the company is exporting 220 support staff offshore. Capgemini has no plans to grow its onshore workforce and would be “very restrictive” in its hiring other than for offshore posts."

Anyone (and that includes the established analyst firms) who still believes that IT, and even IT services, will continue to grow in these troubled times is living in make-believeland. We even expect HM Government, in the April Budget, to announce considerable cuts/savings in public sector IT spend as a result of the Martin Read Review (which we have assisted) . It’s not a case of LESS IT. It’s a case of as much (or MORE) IT but for much less money. It’s a buyers market. Tough, but we all have to learn to ‘lump it or leave it’.