Contractors cash in on busy UK market

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British IT consultants got a hefty pay rise last year

By Tash Shifrin | London | Monday, 26 March, 2007

Pay for UK IT consultants has shot up 17% over the past year, fuelled by soaring demand for skilled and experienced professionals to meet public sector outsourcing needs and integrate systems after a huge wave of merger and acquisition activity, new research has revealed.

Average pay for IT consultants rose from £41,500 (NZ$113,000) in 2005 to £48,383 last year, with many consultants earning considerably more, the research by SkillsMarket and the British Association of Technology Staffing Companies (Atsco) found.

Demand for external consultants has hit record levels due to an unprecedented boom in merger and acquisition activity and the continuing outsourcing of IT development in the public sector, Atsco says.

Public sector spending on external consultants hit £2.8 billion last year, up 33% on the previous year.

Atsco chief executive Ann Swain says “Demand for consultancy skills has surged on the back of the recent M&A boom. Post-merger integration of IT systems can be a hugely complex task, and companies rarely have the resources to manage the process internally.

“Consultancies have embarked on aggressive recruitment drives in recent months to cope with the volume of M&A business, but skills are now in very short supply.

Rival consultancies are locked in a bidding war for skills, which is creating a wage spiral.”

Swain says IT services firms such as LogicaCMG had “told the market that if they cannot get the staff they will have to turn work away”.

Consultants could also offer a “technological advantage over in-house managers” because of skills and a successful track record gained from previous employment in similar projects, she says.

But she warns that “Companies have to be careful not to hollow out too much of their IT skills base.”

Concerns over the cost to the public sector of hiring consultants — highlighted in a recent National Audit Office report — was not enough to stop the trend, Swain says.

“The primary driver of this growth is the scale and complexity of public sector IT programmes, which cannot be managed in-house, and often involve multiple consultancies working on the same project,” she says.

“The public sector is putting more emphasis on transferring skills to project teams in-house, but for the smaller public sector agencies, in-house management is unlikely to be a viable option.”

A prime example of a large, complex public sector IT project in the UK is the National Health Service’s National Programme for IT.

Regarding Swain’s comments on mergers and acquisitions in the private sector, the possible acquisition of ABN Amro by Barclays Bank has been identified as a deal that will have significant IT implications.

Additional reporting by David Watson