IT Skills Volatility Stabilizing, Report Finds

A report by Foote Partners finds IT skills demand volatility is still high, but noticeably improving in late 2009.

Volatility in market values for individual IT skills and certifications, defined as incidence of gains or declines in premium pay earned by IT professionals for specific technical and business skills, remained high in the final three months of 2009 but showed notable improvement from the prior calendar quarter, according to the latest update of Foote Partners' IT Skills and Certifications Pay Index. Moreover, the company predicted high skills volatility rates through the first half of 2010, driven by increased talent demand by IT services firms.

"Skills pay volatility matters because it is one of the most useful pieces of information for analyzing demand and predicting the future," said Foote Partners co-founder and Chief Research Officer David Foote. "Along with a few other key benchmarks, we keep a very close eye on volatility because accurately forecasting the arrival of better times during an economic downturn is everybody's obsession."

Foote said the highest volatility in 11 years was recorded in July, August and September, and by year's end there was a 10-point improvement in the 406 technology and business skills his company surveys. Although that is a sure sign that stability is making a comeback, it is still nowhere near what could be considered "normal," Foote said.

Although down from last quarter's 39 percent volatility index, 28.6 percent of 406 technology and business skills either lost or gained market value from October through December for the 22,850 IT professionals earning skills premiums in the survey (2,000 public- and private-sector organizations). "Skills premiums" are extra cash paid to workers by their employers for specific IT skills they possess, which can be noncertified (experience only) or certified (credentialed).

"The volatility numbers tell me that the major decisions have been made and employers are now in an intensive 'tweaking' phase, shifting resources around, trying to get comfortable. They're not so comfortable. For example, whether to move up work budgeted and scheduled for later in the year or, conversely, move work out to a later time," he explained. "The problem with postponing projects is that skills we are forecasting to be in higher demand months from now will also be more expensive then, and that will affect their budgets. It's a chess game."

Foote said the search will be even more frantic this year for right-skilled IT contractors, consultants and even managed services that can be depended on to perform critical work-a boon for the IT services sector. The report predicts boutique SMB consulting firms in hot segments such as security will continue to experience acute talent shortages against a steady drumbeat of demand for their specialized services, which are generally regarded very highly for their quality, reliability, relationship management and competitive pricing (versus their much larger competition). Headcount growth in large systems integrators and services firms will be steady as the year progresses.

According to Foote, this increased demand by services firms has contributed substantially to the high volatility in premium pay for skills that we've been witnessing. "But as the economy continues to steady itself and hiring restrictions begin to relax, we will see skills volatility gradually subside to more normal levels," he said. "It's already started, as I've indicated, and I think we'll see lower volatility in the second half of the year."