Misreading Trends In Pricing
Is it really time to panic?
Yes,if you entered IT consulting in the late 90s with minimal skills and no sense of how the IT business cycle works. But for serious IT pros, the outlook is surprisingly cheerful, far better, in fact, than anecdotal stories would suggest.
My Web site, Realrates.com has been collecting data about consulting contracts and the rates they've commanded since 1995. The data for our Real Rate Survey is contributed by visitors to our site, some 10,000 of whom visit every week.
While our data during the past year confirms that there has been a significant decrease in people finding new contract positions,we received only 56 percent as many rate reports in the second half of 2001 as we had in 2000,it also shows that most of those who do find these new contracts are earning more, not less, than they were in the past. In fact, our data shows that consulting rates for most technical specialties are currently at an all-time high. (This is true even if we look only at data submitted by people reporting new contracts in the shell-shocked last quarter of 2001.)
Consider the following: Real Rate Survey data from 1998 showed Java architect consultants earning a median rate of $80 per hour. By the end of 1999, their rates had leapt to a median $90 per hour. Fast forward to the "IT Recession," and what do we see? The median rate reported to our survey by Java architects, some 46 of them, was $95 per hour!
The same is true for many other technical specialists. In 1998, people working with Oracle reported a median rate of $60 per hour. The median rate rose to $80 per hour for all Oracle contracts reported to us in 2001. Even when times were toughest, in the fourth quarter of 2001, the 19 people who reported getting Oracle contracts to us reported only a slight drop,to a median rate of $75,well above the boom-time 1998 figure.
Who is doing the best in these hard times? Our data suggests it is people aged 36 to 40 years old, with more than 10 years of experience. The healthiest industries for IT consultants were the utility industry and health care. In contrast, telecommunications was the hardest hit.
But even when individual computer consultants report that their rates have gone down since their previous contract,although only 29 percent of those reporting new contracts to us in the fourth quarter of 2001 saw such a drop,it is worth noting that the rates these consultants earned after the reduction are still high, compared with historical standards.
The median rate of all consultants who reported seeing their rates drop in the fourth quarter of 2001 was $70 per hour, after the rate drop. Even with the drop, this median rate is still $5 an hour higher than the $70 per-hour median rate reported by all consultants working back in boom-time 1999.
And there's more good news on the horizon. While the number of new contracts is down right now, another significant trend has reversed. At the height of the boom, back at the beginning of 2000, many companies fired their consultants and replaced them with salaried employees. In the second half of 2000, for the first time since beginning our surveys, we received many more reports of new salaried positions each week than we did of new contracts.
Now this trend is reversing. We're seeing more contracts than salaried jobs reported. Companies are prettying up their income statements by cutting salaried staff. Because the work doesn't go away when the people do, the relative increase in the number of new contracts proportional to new jobs suggests that companies are beginning to replace fired IT staffers with outside consultants.
If what happened in the previous recession is any guide, it is this new trend, still in its infancy, that will, as the economy recovers, lead to yet another surge in demand for IT consultants. That, of course, could benefit you, so long as you know how to price your talent accordingly.
Janet Ruhl: Misreading Trends In Pricing