As 2023 gets underway, the economic outlook remains challenging, with inflation and costs running high and the potential for a prolonged, if mild, recession in many major economies. Many listed companies have been downgrading their growth forecasts and some organisations, across various sectors, have announced job cuts or hiring freezes.
But what will this mean specifically for the technology talent and recruitment market? We saw boom conditions in 2022 with an almost unrelenting demand for technology talent as businesses pursued their digital transformation agendas. This was essentially a continuation of a trend seen since the pandemic kicked in - technology has been the lead sector in terms of job creation in a number of Western economies.
For instance, despite the recent layoffs across the sector, over 17,000 tech jobs were added last month in the U.S., and in the UK, 350,000 tech jobs have been created over the last three years with some 92,000 added between July-September of last year.
We also know from the 2022 Nash Squared Digital Leadership Report (DLR) that 56% of digital leaders are expecting their technology headcounts to rise in 2023, and over half (52%) expect their technology budget to rise.
Tech protected?
Quite simply, technology has become a core strategic enabler for businesses in the digital era. Pulling the plug on digitisation and technology-led transformation simply isn’t an option – it’s the key to generating competitive advantage, driving operating efficiencies (which themselves lower costs) and boosting productivity. As a result, technology is more protected as a jobs market than other sectors and specialisms.
We therefore expect the technology recruitment market to be resilient. That doesn’t mean there won’t be some adjustments, however. For one thing, it is likely to become a more mixed picture, very much driven by an individual organisation’s unique circumstances – so one business may be rapidly scaling up its technology resource to achieve a key outcome, while one of its sector peers next door may be holding steady.
Tech salaries have been on a dizzying rise in the last 24 months, but we anticipate this will slow down this year. Organisations are very conscious of the cost of living pressures their staff are facing, and will want (and need) to do their best by their people but, as the 2022 DLR found, a majority of digital leaders are saying that salary demands have become “unsustainable”.
Salary increases may therefore plateau, helped by the (expected) moderation in inflation during the second half of the year. In a somewhat tighter jobs market, candidates may in any event be less preoccupied with financial reward and place relatively more emphasis on other attributes such as job security, stability and continuity.
Shifts in the talent approach
A common feature of past recessions and slowdowns has been a shift in recruitment emphasis from permanent staff to contract positions. We haven’t seen evidence of this yet, but the balance could begin to tip in the coming months.
We expect to see businesses taking sensible steps to review their hiring practices and use of contractors, to ensure they’re taking a strategic rather than ad hoc approach. This might include reviewing the scope and activity of their own internal recruitment teams compared to their use of recruitment agencies and managed service providers (MSPs).
With regards to recruitment agencies, we can expect organisations to take a more structured ‘preferred supplier’ approach to ensure best terms and outcomes, rather than hiring different agencies as a one-off for different jobs. We also expect to see an increase in the movement towards direct sourcing of contractors, where organisations work through an outside partner to source contract talent. This can help to improve the quality of hires while also lowering costs/rates. It’s an area where we’ve been seeing growing demand.
Another shift we may see in relation to contractors is that businesses are reviewing their contingent worker strategy and looking to reduce costs. Utilising contractors is a way to make some quick and easy savings.
In addition, we anticipate a rise in interest in offshore capability solutions. This may be the outsourcing of software development to highly skilled but lower priced teams in offshore locations or the outsourcing of certain time-intensive, largely manual processes (data entry, reconciliations etc) to an external party.
People, flexibility, diversity
For candidates, we anticipate there will still be significant amounts of opportunity in tech this year, both on a permanent and contract basis. But it will be key for individuals to ensure they’re keeping their skillsets up to date and relevant, and that they’re prepared to be appropriately flexible where needed.
Flexibility works both ways, and will continue to be a key element for success for employers. Individuals want flexibility in how and where they work, with most candidates expecting to be able to work at least 2-3 days a week from home. Embracing the hybrid working model, whilst also finding ways to create a strong team culture, purpose and identity, will be a big differentiator amongst employers.
One area where we strongly encourage the industry not to ease off is diversity and inclusion. We have recently started to see early signs of improvement in gender balance in the industry (with the DLR finding that nearly a quarter of tech teams are now female, and 28% of new hires), and it would be a mistake to sacrifice commitment to this because of other pressures.
We need to keep the talent pipeline diverse and fresh all the way through, otherwise we will be taking a backwards step and storing up problems for the future. We saw this in the wake of the global financial crisis when, a few years on, there was a shortage of young, diverse talent at junior management level. Diverse teams are also more attractive to many new hires, especially the young generation of talent, so there is a clear business case too.
Shape of the market emerging
The exact shape of the technology talent and recruitment market this year is still emerging as businesses weigh up the factors at play. But there’s no doubt that it will continue to be an active landscape, driven by ongoing demand for technology talent, albeit with some shifts in emphasis and a degree of strategic rebasing.
