A lens over the NZ ICT Sector

I went down various rabbit holes looking for ways to compare the New Zealand IT sector with Australia, using the great data from our ICT Employment Trends Report and couldn’t really find a suitable way to compare apples with apples despite our proximity.  There are so many interesting factors that the New Zealand supplement, born of a timing issue over the ANZAC/Easter period, may need to become a more regular feature.

I am keen to know what you think.

There is so much more to New Zealand than great food and wine, the backdrop to Middle Earth, world-class actors, musicians and film makers, fabulous scenery and amazing contrasts – it has a vibrant ICT sector as well.

The latest ITCRA Trends Report New Zealand Supplement (see note) delved into the sector and found a strong industry making a significant contribution to the economy … however there are ‘dark clouds’ on the horizon for the ‘land of the long white cloud’ (apologies for the pun!).

Ever the optimist, I’ll start with the good news first:

New Zealand’s IT exports have grown at 14% compound annual growth rate (CAGR) over the last 6 years and during 2009 to 2013 the sector grew from $1.1 billion to $6 billion[1].  The IT sector is a key driver of economic growth, sitting proudly as the nation’s third largest exporter, now contributing over $7 billion in annual revenue. The New Zealand Hi-Tech Trust boasts that the industry employs more than 40,000 people and the sector is growing at twice the rate of the economy[2].  That’s a pretty strong statistic.

And now the not so good news:

Despite the industry driving the economy, this may not continue as it faces significant skills shortages and a slowing pipeline of ICT graduates coming through. Consequently resources are often sourced offshore, including Australia, to fill the gap.

When I delved further I found that some of the hardest to fill roles were in Computer Systems Design.  This was due to the lack of candidates with suitable qualifications, experience and attitude[3].

Compounding the current shortage is a weakening pipeline of quality ICT talent. IT is the least popular field out of 11 main post-school areas in the latest New Zealand census and it has been in the position for over a decade[4].  Ironically ‘engineering and related technologies’ was one of the most popular fields but unfortunately it appears that the skills learnt here don’t align to current market needs.

On a positive note, the New Zealand Technology Industry Association appears to be on the front foot undertaking research into this matter and working with the Institute of IT Professionals New Zealand and NZRise (a group of NZ-owned IT firms) to address the skills shortfall through immigration and new skills searching techniques[5]. The Ministry of Education is also looking into how qualifications are viewed by employers.

ITCRA has also been engaged in the review of the courses as part of the Mandatory Review of Information and Communication Technology (ICT) Qualifications at levels 1-6 in consultation with IT Institute of Professionals and the New Zealand Qualifications Authority.

Similarly the sector has earned international recognition at the recent 2014 New Zealand Hi Tech Awards (organised by the NZ Hi-Tech Trust) when the judges including Apple Co-Founder Steve Wozniak, Google’s Director of Engineering Craig Nevill-Manning, and Senior Vice President of Cisco, Howard Charney noted the record number and quality of entries.

Having been fortunate enough to travel to New Zealand several times, I have seen and been impressed with the IT sector’s tenacity, innovation and energy. Although currently facing an ICT skills shortage, I believe this will be successfully addressed.

New Zealand is blessed with a strengthening economy, a growing ICT services export sector and a history of being first to address societal change, which means they have the right fundamentals to continue on their ICT growth trajectory.

Let’s ensure ICT contracting and recruitment companies are at the centre of this growth and deliver on quality talent and amazing business partnerships.

NOTE: ITCRA Members can access the full report here
Or the Q1 Employment Trends Reports can be purchased here.

[1] http://www.mbie.govt.nz/what-we-do/business-growth-agenda/sectors-reports-series/pdf-document-library/ict-report-2015.pdf

[2] http://www.hitech.org.nz/about-the-awards/

[3] http://www.mbie.govt.nz/what-we-do/business-growth-agenda/sectors-reports-series/pdf-document-library/ict-report-2015.pdf

[4] http://www.stats.govt.nz/~/media/Statistics/Census/2013%20Census/profile-and-summary-reports/quickstats-ed-training/qs-ed-training.pdf

[5] http://www.nztech.org.nz/nztech-addressing-the-skills-gap/

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What on earth is going on in the market?

After travelling the countryside meeting ITCRA Members in March all I heard was that business is booming … and then I see the statistics that tell me another story of the market flattening out. How does that work?

From one perspective I read we have a “softening in job ad numbers ….following 10 consistent months of growth”[1]. As this was a comment on the total employment market I decided to check the IT view. So I dived into our own BurningGlass ICT Job Ads Index (which tracks the number of ICT related occupations advertised) and here I see it falling during the last two quarters. Again confirming a downturn.

Yet from another (more positive) perspective, the ABS is spruiking that “total employment surged in March”[2], supported by Seek data presented at ITCRA’s CEO Circle, showing an increase in IT job ad volume of 14% in the last 17 months.

This view of a strengthening market is also supported by ITCRA’s SkillsMatch data outlined in ITCRA’s latest ICT Employment Trends Report Q1 2015 (Jan – March).  Our report shows an increasingly competitive market as reflected in the number of days to fill contract roles. Back in September 2014 it averaged 17 days in New South Wales – now it is 45 days. The same shift is occurring in Victoria where it has gone from 16 to 42 days over the same time period.

And now, for another twist in the data, one would think that if it is harder to fill contract roles then hourly rates would increase – but the opposite is happening!

Hourly rates dropped across permanent and contract roles nationally (except for contracting in Queensland, which increased from $82.11 to $89.00). Victoria and Western Australia saw the most significant drops. In Victoria hourly rates dropped from $162.80 in December to $112.10 in March, and in WA it plummeted from $121.24 to $78.50 per hour. Ouch!

This data is also confirmed by research done by tech marketplace Gooroo, who found that tech salaries fell by 6% over the quarter nationally[3].  As we all know, this drop in rates feeds through to the contractors’ and recruiters’ hip pockets. In fact the Remuneration & Benchmarking and RIB Reports are indicating that margins are being squeezed and there is a renewed focus on cost containment.

Confused? Baffled? Me too.

So why are these anomalies occurring:

• Is the ITCRA data incomplete? Possibly, but it is the most rigorous we’ve ever published.
• Is the increase in ‘days to fill’ for contract roles a reflection of the market demand for the limited supply of Digital and Big Data skills? Likely, given the growth in this sector – but it is still not the most requested skill which remains the domain of SQL and JavaScript.
• Is the drop in contractor rates, despite the increase in demand, a result of the ‘new normal’ in which power shifts to the clients who can ‘set the price’? It certainly feels like that.
• Is the growth in contract roles for our ITCRA Members suggesting that employers recruit for permanent roles in-house and outsource contract roles? Again likely.
• Is the growth of online disruptive marketplaces already having an impact on recruitment sectors and margins? I hope not, but this disruption to our industry is something we can’t deny.
• Are we all referring to IT in the same way? Is Digital an IT or Marketing skill and is Business Analysis an IT or general management skill? This could impact the data but probably not enough to shift it dramatically.
• Is this just a Q1 peculiarity? We’ll find out as the year develops.

So, after sifting through countless charts and reports I might, for the time being, go with my gut feeling, which tells me that the market is busy in the contracting space but it is again becoming increasingly challenging to achieve positive outcomes based on traditional formulas and business models.

[1] http://www.recruitment-international.com.au/news/march-labour-force-numbers-reliant-on-participation-rate-21220.html
[2] Full time jobs drive employment improvement in March: ABS” Shortlist, 16 April 2015|
[3] https://gooroo.io/GoorooTHINK/Article/16283/Press-Release-The-average-tech-salary-in-Australia-fell-by-6-between-January-and-March-2015/18210#.VUAgSc6E2MM

“Courses on Offer” to reflect “Skills in Demand” – now that’s a thought!

I love it the when the data can show you what is really going on. This is how I felt when I looked at ITCRA’s latest data from SkillsMatch and Burning Glass. In my role, I hear about trends and insight left, right and centre, combined with predictions of what is and isn’t happening in the market. So, it’s nice to have the facts on hand.

Just some background for you … SkillsMatch and Burning Glass provide quantitative real time data sources on the ICT job market. Our SkillsMatch data captures the job placements from ITCRA Members, while Burning Glass provides an analysis of how many jobs are advertised (no double counting if one role is advertised in multiple channels) and itemises the skills employers are looking for.

Now back to what the data told us. We wanted to find out if there was really a skills shortage in three of the IT roles that are listed in the Federal Government’s Skilled Occupations List (SOL). This list shows occupations that are acceptable for immigration to Australia – you can imagine how important this list is. It protects the local talent pool when there is oversupply, while allowing foreign workers in when the local talent pool has dried up.

Did I mention this list can be a political mine field too?

The three roles we looked at were Analyst Programmers, Systems Analysts and Desktop Network Support roles.

Here’s what the data told us …

Systems Analysts are sitting pretty at the moment. Although a small market, those positions take over three months to fill, compared to the market average of on 10 days. Consequently highly qualified Systems Analysts (especially with SAP and SQL skills) can name their price. Lucky them!

For Analyst Programmers and Desktop Network support roles the news wasn’t as good. Although Analyst Programmers are in a much larger market with respect to the jobs filled this year, it takes only 10 days to fill the role. So the balance in this case is tipped towards employers.

Desktop Network support roles have seen a significant contraction since the GFC and never quite returned to strength. The ‘boom days’ of 2007 saw 1200 placements in a year and this has dropped to 200 placements to date (remembering that the data represents a15% of ITCRA Members). In this instance there are plenty of people with Desktop Network skills without enough roles to employ them all.

So in the first example we have a significant skills shortage. In the second two examples we appear to have an oversupply of skills.

So why are all three roles listed on the SOL when, based on this data, we only have a skills shortage in Systems Analysts? Clearly there are other factors at play – which is why the political minefield that is “skills shortage” can become so emotive when only one set of data is the driver.

And secondly, is readjusting the SOL the only answer here to the demand and supply skills gap? Are there other levers we can use to affect labour supply and demand?

And so once again I ask the question: let’s look longer term here. There appears, on face value, to be an oversupply of people skilled in Desktop Network and Analyst Programming. Shouldn’t we be looking to focus their attention in the skills the market needs? What transferable skills do they have that can be updated or tweaked for a different sector or role? (I don’t mean retraining to become Systems Analysts but to roles where their skills could be easily be upgraded).

Similarly, what about building a stronger base of Systems Analysts in Australia? Or perhaps a skills transfer, up-skilling program, skills fast track program could be created that would see those people with base level Systems Analyst skills accelerated to the level the market needs.

ITCRA is currently working with the IT Institute to review the courses available, the upskilling and skills transfer that could be considered and, accepting that the ITCRA resources are not the only factors at play in this discussion, it is early days yet.

I am proud to say however that we have real time indicative numbers to quickly identify market changes, we are working with disengaged talent, through The IT Institute, to have “courses in demand” to reflect “skills in demand”. Combined with the work of ITCRA Members to manage talent into roles and Burning Glass to identify where roles are on offer (and the qualifications required) I am hoping the formula provides for some strong outcomes.

So, tracking the career paths of the first 200 graduates from The IT Institute will be an exciting adventure!