IT services sector hiring slows to pre-pandemic levels

The IT services sector’s hiring rates are slowing to pre-pandemic levels.

According to figures from tech research and advisory company ISG, employee growth at IT services companies in the most recent two quarters of this year would equate to a 10% annual increase if they continued. This is a similar rate to pre-Covid employee growth of 8%, but is way below the peak of 26% in the third quarter of last year.

High demand for IT services during the pandemic spurred a major recruitment drive, said ISG in an advisory to IT services firms. “The IT and business services sector has generated more than $9bn of actual contract value for five consecutive quarters,” it said. “To support this surge in demand, providers accelerated their hiring engines in a big way – for both entry level and lateral hires.”

The sudden acceleration in recruitment has led to a situation where over a third (35%) of employees at IT services firms have been with their employer for less than a year.

The fall in recruitment rates could signal three trends, according to ISG. It said IT services firms could be anticipating slower growth, are struggling to fill roles in a tight labour market or are confident they can hire what they need at short notice.

ISG said the tight labour market continues to be positive for the IT services sector. “Enterprises need tech talent now, and are increasingly tapping into IT services to find it,” it said. “This, in turn, is leading to significant interest from enterprises in providers that are best at managing and growing their talent pipeline.
 
“Providers that can hire and retain talent – especially in areas like apps, industry-specific business process work and product engineering – will be well positioned to capture a share of the solid demand we’re projecting over the next several quarters.”

Figures on IT and business process services spending released last month by ISG revealed that global spending on IT and businesses services over the past three months was lower than the same period last year, as a result of economic concerns.

It found that $23bn was spent during the third quarter of 2022 – 3% less than the corresponding period in 2021.

The signs were there in the second quarter of this year, when, although investment in global IT and business processing services grew year on year, the market failed to grow quarter-on-quarter for the first time in six quarters.

ISG measures IT and business process outsourcing contracts signed for more than $5m.