Green shoots? – What’s ahead for contractors in ’24 &’25

Last month I wrote a blog and did the podcast on how the UK and Australian ICT industries were showing signs of green shoots and predicting an increase in the use of contractors.

And whilst that’s interesting to know, what’s happening here is much more important to us. With that in mind I went out to my top 20 ICT leaders in NZ, CIOs, CTOs, Chief Digital Officers and Practice Managers of IT consultancies to get their views and to find out if there were signs of ICT Contractor growth in 2024 and 2025.

I’ll admit to a bit of scaremongering to set the scene. Basically I’m looking for them to kick off some projects before we lose all the good people overseas so, I gave them some information I gleaned from NZ Statistics.

• Record numbers of New Zealand workers are crossing the Tasman in search of better economic opportunities.
• In 2023, 53 percent of New Zealand citizen migrant departures were to Australia. That’s 27,000 people, double the numbers of 2022.
• In total 420,000 Kiwis are employed in Australia. That’s 13.5 percent of the current labour force in New Zealand of 3.07 million.

The questions I posed were:

1. How likely are you to increase your use of IT contractors in the next 12 months?
2. What types of ICT projects are you most likely to engage contractors for in the coming year?
3. What are the primary reasons for choosing contractors over permanent staff for ICT projects?
4. What do you believe are the most critical changes needed in New Zealand’s IT industry to reduce the outflow of skilled professionals to Australia?

I’m very grateful for the time taken and the considered responses I received. Here’s the synopsis of the results:

1. How likely are you to increase your use of IT contractors in the next 12 months?

Given the options 58% said very likely, 19% said likely, 5% unsure and 18% unlikely, this was a promising start. I wanted to know why.

Well, it was no surprise that economic uncertainty took it’s toll last year and continues to be an issue, but interestingly, in the vast majority of cases, IT budgets have not been reduced. 55% expected their budget to increase next year, 35% expected it to remain the same and 10% (so 2 out of the 20) are having to tighten their belts.

Those increasing talked about pending projects, which we’ll discuss next, and the two reducing said it was down to economic instability, company finances and a reduction in head count.

When it comes finding skills for critical areas the response was that it hasn’t been the highest priority recently with economy related challenges having an impact on need and the availability of contractors not adding any pressure. But, not surprisingly, over the next 6 to 12 months our ICT leaders are planning ahead and anticipating difficulty in finding qualified experts. Without exception they acknowledged the loss of highly skilled people overseas and considered that it would be a major issue in securing contractor services when the demand returned.

This led nicely to the second question.

2. What types of ICT projects are you most likely to engage contractors for in the coming year?

It is very close  between increasing cyber security protection and increasing operational efficiency as the number 1 priority.

First up, cybersecurity, protecting information is more important than ever. Keeping systems locked down tight, keeping both customer and company data safe and compliance with regulation still remains #1.

But it is closely followed by operational efficiency, digital transformation to make companies run better and smarter. This includes using AI for automating tasks or analysing data. There’s a heavy emphasis on data and analytics fuelling efficiencies.

Then we have cloud computing finding the best cloud solutions that offer flexibility, cost savings, and security.

And finally, there’s the customer experience. That’s not just the customer of course, it includes the end user, keeping the tech side of things smooth makes everyone productive.

3. What are the primary reasons for choosing contractors over permanent staff for ICT projects?

The number one reason was flexibility. ICT projects can be very specific and for a finite time span requiring a particular set of skills. Contractors are perfect for this of course.

Secondly, cost effectiveness. One CDO factored in the cost of a permanent employee, including the cost of replacing them for their BAU (Business as Usual) work with a new hire, the training for both employees, the overheads  of permanent employment and the business risk versus a contractor, and it was a no brainer, the contractor option was their first choice every time.

Thirdly, the access to specialised skills, experience brought in, fresh perspectives and green field thinking.

Lastly, was speed when dealing with tight deadlines, the speed of onboarding rather than going through the permanent hire process, and the relative reduction in hands on management required. In short, there’s always a place for great contractors.

I put the cat amongst the pigeons with my next question.

4. What do you believe are the most critical changes needed in New Zealand’s IT industry to reduce the outflow of skilled professionals to Australia?

The answers include, and I quote, “Money, pure and simple. We’re never going to compete with AU if we can’t pay NZ IT folk an equivalent of what they can get there. But it’s also all wrapped up in the general cost of living, lack of good housing etc. but of course there isn’t much the IT industry here can do about that”.

One answer to that was to “Implement innovative compensation models like equity sharing to give employees a stake in company success”.

From a different angle, from an IT consultancy perspective, having their clients sign off on projects: “Spending and investment and pushing Go on projects would help – instead of what’s been happening over the past year with so many organisations pressing pause on projects, which of course has a negative knock-on effect. Now that it appears the worst of the recessionary times is easing, perhaps the fear factor many organisations are feeling will also start to ease?”

One really well thought out response was about fostering startups with world class ambition to service on a global scale.

Examples of cities such as Berlin, Medellin, Shenzhen, Montreal and Singapore were cited as places where tech hubs have created an environment where the most talented individuals feel they can build world-changing companies and work on globally significant projects. We’ve had successes such as Xero and Rocket Lab, companies that have set audacious goals and excite and attract top talent. How do we encourage more like them?

I think I’ll expand on this in a separate discussion after doing some research on Callaghan Innovation and the tech start up community to find out if we are doing enough.

Wrapping Up

Concluding today’s discussion, I’d like to thank all the contributors to the straw poll I conducted. It was great to get your feedback. In summary, I’d say that the future for an ICT contractor is strong, and whilst we are still waiting for those elusive green shoots of a recovery, it’s the first day of Spring and I don’t think they are too far away.