Geoffrey Handley: ITC pay rates unrealistic and unsustainable

Adam Gifford, in his October 4 article IT contractors strike while money's hot, writes of the shortage of suitable candidates for IT jobs in New Zealand.

This may seem good news for those individuals outlined (i.e. qualified IT staff based in NZ) and is often percieved as a positive sign for the New Zealand economy. But, as one intimately involved in this area of the economy, I wish to take this opportunity to point out some serious negative implications which are often overlooked.

All the points Adam outlined explaining the increase in demand, while perfectly valid, do not address one of the most important issues at hand - the actual, as opposed to perceived, "value" of these qualified resources.

The "strike while the iron is hot" mentality is a very short-term attitude and does nothing positive in the long run for the NZ ITC economy. As Nathan Pattison is quoted as saying, "Intermediate contractors with only a few years' experience are getting $50 to $70 an hour". The issue here is that they are simply not worth $50 - $70 an hour.

Most would jump to use the laws of supply and demand to justify this remuneration. But they forget that we are in a very small, globally connected world - one of the many benefits that this advance in ITC has brought to us - and we are dealing with a global supply and demand issue. It is not just limited to NZ.

The three most pressing negative fallouts that have arisen from this situation are:


1) Increasing shift of ITC requirements offshore. This is nothing new of course; one can look back to the late 90s and early 2000s to see many articles written on the subject of outsourcing to India, China, the Philippines, etc. What we are seeing now, however, is that this trend has neither abated nor disappeared, and if these ridiculous rates continue so will the outsourcing. Additionally, this outsourcing is taking place on all levels - not just on low-level back-end coding work.

Additionally, the flip-side to this is "onshoring" or the growing trend of bringing qualified, passionate individuals from other countries to New Zealand to address the skills supply issue. However, this does have its own complete set of positives and negatives best left for a separate discussion!

It should be noted that in India, for example, the demand for qualified, experienced ITC professionals for outsourcing and onshoring engagements has been huge over the last decade, However, this economy has not rushed to seek any short-term gains by increasing the hourly rates of those professionals. Instead, as India clearly appreciates first-hand the nature of this globally connected economy, they have instead rushed to increase the number of top notch ITC graduates they produce (through a variety of industry-led and government-led initiatives) in order to meet this growing demand and ensure competitiveness. This is the lesson we should be learning.


2) A continued unrealistic set of expectations will in turn create an unrealistic sense of self-importance which has no place in the ITC world, or any other industry for that matter.

Young graduates are coming out to the real-world workforce, armed with nothing more than good grades, 4 years of education, a complete lack of commercial reality and of course their very own myspace page, expecting, even demanding, unsustainable wages.

Additionally, as Adam points out, in the past contractors were brought in to add demonstrable value. But for some companies this situation has changed and contractors are now brought in to "fill seats". This statement in itself is a warning sign.


3) Many talented graduates will not have the ability to join exciting and innovative ITC teams to develop not only their own skills but perhaps the next Google, Trade Me or Hyperfactory. The reason: their passion for development will have been displaced by their passion for immediate financial gratification.

We all know that the ITC world is not based on the immediate or short-term. At $70 an hour, I am not seeing much passion out there.

I have been in the very sad position recently of having to bid farewell to a very talented bright young ITC graduate. It wasn't because he didn't want to work for a world-class, innovative company with a great team and work environment (recently voted one of the 10 most exiciting ITC companies in NZ to work). Rather, his passion had changed from code to cash.

The NZ ITC industry is at an exciting time and will continue to flourish. Unrealistic short-term increases in remuneration are not an indication of this growth and excitement, nor are they sustainable.

* Geoffrey Handley is based in Shanghai, China, and is Co-Founder and New Business Director (Asia Pacific) for The Hyperfactory.