The slump in IT share prices is good news for employers, says MIP chairman Richard Firth. Firth was referring to the fact that the average loss so far this year in the JSE IT sector was -28.81 with companies ranging from -95% to -5%.
Firth maintains this is positive for the industry as a whole because the number of new listings raised huge capital from the market, pushing up salaries as players fought over the limited skills available to meet expected new business.
"Salaries have reached unsustainable levels," says Firth. "You can`t pay staff enough money to get them on board any more. With the bubble bursting, there is not going to be this huge revenue boost where companies can continue to pay unrealistic prices for people."
Firth believes the high salaries have fuelled the move to outsourcing, but that many service providers are going to burn their fingers. "There comes a time when you have to deliver and when staff are going to seek rewards over and above the inflated packages they`re already getting. If companies can`t meet these new demands, staff will move to other companies and the merry-go-round in the recruitment sector will continue.
"The good news is that service providers might now stop chasing stock market glory. Premature listings will slow and service providers will start looking at delivering better service to their clients."
In the software development sector there is going to be a further correction when the Y2K projects come to an end and Y2K programmers start looking for new jobs. "Although most companies have got new development work which is being held back until the Y2K threat has been dealt with, most strategies involve a shift to new technologies rather than enhancing existing legacy systems.
"Companies will need to re-train staff or run with an outsourced system strategy.
"Those companies who`ve grown too fast and desperately need programmers might well soak up the deluge," says Firth, "but good programmers are hard to find. MIP has grown from two to 40 programmers in three years, but we`ve sweated blood and tears to find the really gifted ones. There are thousands of programmers out there, but very few are really talented."
Those companies that just throw more and more programmers at a project may not do as well as they expect.
"There are companies out there who`ve employed up to 700 new programmers at a time. What is the quality of the applications they`re producing? It`s really very frightening to imagine in the light of the quality of programmers we`ve rejected," he says.
Individual contractors could be in for a wake-up call as well as the Revenue Services improves its systems, predicts Firth. Companies and contractors may find contracting no longer pays and permanent employment offers better value.
"The benefit of the slump is that new listings will slow down and companies will start to think of growing organically rather than acquisitively," he says.
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