Falling headcount threatens revenue

Drastic downsizing in Australian enterprises over the past 18 months has pushed IT shops to crisis point with staff simply putting out fires instead of focusing on tactical operations.

Warning that revenue growth is directly linked to headcount, recruitment company Michael Page Technology claims a trend is emerging locally in which businesses could find themselves going backwards.

Associate director at the international recruiter, Lesley Bishop, said most clients -- which are all major employers -- claim the heavy retrenchments of the past 18 months are starting to have a negative impact on the growth potential of local operations.

"Unless the industry starts to recognise that headcount increases are pivotal to growth, businesses may start going backwards," she said.

Another emerging trend is demand for multiskilled contractors while the rest of the IT industry remains unemployed.

Bishop said companies are demanding a range of skills from contractors for specific projects, while those who aren't multiskilled remain unemployed.

This has been coupled with increased outsourcing and Bishop said instead of employing a couple of contracting professionals, companies are outsourcing specific projects so existing IT teams can "focus on their regular workloads".

Systems Administrators Guild of Australia (SAGE-AU) president, Andrew Hennell, said downsizing has led to a lack of growth, because "you generally lose more than just a staff member when services are outsourced", and this seems to be the trend.

"Many companies are finding that in-house staff not only bring those benefits, but also cost less in the long run; outsourcing projects so that IT staff can concentrate on their existing workloads is an admission that IT staff are under-resourced," he said.

"Once the vendor has delivered the product, it is your IT staff who are going to have to maintain it on a day-to-day basis; having a detailed knowledge of the product from inception is vital to avoid costly downtime and maintenance arrangements down the track."

Hennell said contractors apply a 'one size fits all' solution, but in-house staff have detailed corporate knowledge.

"IT can't be solved by a quick fix or an off-the-shelf solution, because companies need to develop their own IT to suit their own situations," he said.

Hennell said assigning appropriate IT staff resources is essential for IT systems' integrity and corporate growth.

He said outsourcing should only be considered as a stop-gap measure until IT staffing is at an appropriate level."

Unlike the private sector, one hot spot that has remained unaffected is local government where IT buying activity and staff numbers have actually increased.

Sutherland Shire Council IT manager, Sid Curry, said: "I know the industry is flat, but we are currently going in the opposite direction which makes it a good time for us to do deals with vendors; in fact we have just implemented a storage area network (SAN)."

Product boost

Bishop said there will be no drastic turnaround in early 2003; new products such as wireless and Bluetooth will drive employment.

However, Bishop predicts greater levels of outsourcing in the banking and financial sector. Product development projects will not be managed in-house, she said, pointing to more strategic partnerships with leading IT services businesses.

She also said firms should look carefully at retention strategies to prevent the next talent war when there is an economic turnaround.

"We witnessed this trend when Australia emerged from the last recession 10 years ago. When candidate shortages start to emerge, skilled professionals realise they are in a strong position to negotiate a better package.

"The knock-on effect is an explosion of employee churn, rising salaries and unsustainable bonuses. While we are far from this environment, the writing is on the wall."

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