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In its pre-six-monthly market analysis report, the research company, Ovum, called talks of a rebound in the European IT market in 2003 'misleading' and expressed concerns that IT industry decision makers would base business plans for 2003 on 'over-optimistic forecasts.'
Julian Hewett, a Senior Analyst at Ovum, said: "Ever since the downturn began, it seems the recovery has always been 'two quarters away'. It seems to us that the industry is living in denial."
Ovum cited two claims by industry giants over the past year to illustrate its point.
The first was from Oracle's Financial Chief, Jeff Henley, who announced at the end of the first quarter its revenues had fallen 10 per cent. Speaking at the time of the announcement, Mr Henley said: "I am more pessimistic for the full year than I was at the start of the quarter."
The second statement was from EDS, which recently issued what Ovum called: 'a shocking profits warning.'
When EDS issued the warning a spokesman for the US outsourcing giant, said: "discretionary spending has just come to a screeching halt."
"Does this sound like a recovery in 2003?" asked Mr Hewett.
"At Ovum, we are revising our estimates for the European software market in 2003 downwards. We now expect market growth will decline about four per cent in 2002 and be flat at best in 2003," he added.
Nick Wells, founder of the IT statistics website, Jobstats, said: "Things will probably not get better this year or next... There has been a steady stream of happy noises from spokesmen for IT companies saying that the downturn is temporary and that this quarter will be down but the next quarter will be up. The numbers paint a different picture though with profit warnings and revised forecasts down."
Jobstats says the proportion of positions for both freelancers and permanent staff are rising; mainly because of the dip freelancer premiums (the extra pay freelancers receive compared to employees) have taken over the past two years.
However, Mr Wells warned the constriction of IT worker usage would grow in the short-term across some sectors before a general improvement is seen in the industry.
He explained: "In the City both Credit Suisse First Boston and JPMorgan Chase have announced substantial job cuts and the IT departments will certainly be taking their share of the pain. The finance sector is also a major employer of IT workers and there has been a drastic shrinkage in revenues over the past two years. Another major employer of IT workers has been the telecoms industry and the telecoms companies have been bleeding all over the floor. The big software houses also face difficult times ahead. Logica and CMG are to merge soon and the industry analyst, Ian Spence, predicted there would be 5,000 job losses following the merger."
Mr Wells said he expected many companies to shed permanent IT employees in the run-up to Christmas to save paying them annual bonuses.
"Up until now the bonuses have been able to take the strain and that coupled with the savings made by cutting freelancers' rates and laying them off have shielded permanent staff from the pain of pay cuts. If the pain in the City carries on much longer though expect to see pay being cut," he added.
"The justification for pay cuts is that rates rose dramatically in 2000 and the companies see it as taking back the excess money they paid them then. To cut the pay of people who are already getting a fair market price for their labour is foolish and they risk losing them to other companies by doing this.
"Long-term it's a strategy for loosing the gold and keeping the bronze."
According to the most recent market figures from Jobstats, the average rates for freelance IT workers are £19 per hour whilst the rate for employees is currently £36,400 per annum.
| The five most popular skills | | Role | % | Freelance rate (£) | Employee rate (£) | | Management | 31.6 | 21 | 41,600 | | Support | 25.2 | 15 | 33,000 | | Analyst | 18.5 | 19 | 36,100 | | Design | 17.6 | 30 | 38,900 | | Finance | 17 | 31 | 45,500 |
| The five most popular locations | | Location | % | Freelance rate (£) | Employee rate (£) | | London | 28.1 | 23 | 43,700 | | City | 5.7 | 31 | 48,300 | | Berkshire | 4.2 | 14 | 39,800 | | Surrey | 3.9 | 15 | 36,700 | | South East | 3.2 | 28 | 40,100 |
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Richard Powell, © Shout99.com 2002
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