IT staff shortage means banks pay a premium

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A study by Forrester Research, the technology research specialist, forecasts a looming IT skills shortage. Starting as soon as 2006, it says businesses could suffer staffing deficiencies caused by a decline in the number of students studying IT-related courses at university and an acceleration in the rate of retirement of existing IT staff.

Forrester surveyed technically-focused universities in the UK, Holland and Germany. It found the number of students enrolling for computer science courses fell between 5% and 40% between 2001 and 2005. An additional survey of 48 companies across Europe found 52% expected to lose more than 10% of their IT staff to retirement in 2006, compared to 42% of firms in 2005.

Richard Peynot, a senior analyst at Forrester, and author of the report, says shortages will hit the financial services industry even sooner. "It's already begun," he says, "Information technology was deployed in banks earlier than in other industries, with the result that people in banks are older and are retiring earlier."

It's a trend confirmed by IT recruiters. Georgina McGowan, a consultant at recruitment firm Robert Walters, says some banks have as many as 60 or 70 vacant IT positions. In their desperation, she says they are prepared to pay recruiters fees 5%-10% above the market average for finding scarce staff.

Michael Lappin, managing consultant of the financial markets IT division at Mantis Partners, says staff shortages have become more acute over the past year. "Shortages have come into focus since demand picked up again. We're working with several banks that have between 20 and 40 vacancies. There's a real need for programmers who actually know something about the industry."

Business-facing staff required

Forrester forecasts that future IT staff shortages won't be for programming staff, but for people to intercede between techies and the business.

"The financial sector is already massively outsourcing technical jobs and operational positions," says Peynot. "The challenge in future will be to find people with a good understanding of banking products and processes who can manage the outsourced functions."

Pay for these positions is likely to rise, says Peynot. By comparison, he says pay for technical roles is likely to remain static due to the negative pressure exerted by low offshore salaries.

Offshoring and outsourcing could act as a release valve

Not everyone is prepared to concede that banks are on the verge of acute IT staff shortages. Axel Kieran, a consultant at Celent, the banking IT research firm, says skills shortages are not an issue.

In an effort to reduce fixed costs, banks are increasingly outsourcing IT development work, says Kieran. "Five years ago most banks were designing systems in-house. Now they're only using in-house people as integrators."

As a result, he says, banking IT staff who reach retirement aren't being replaced: "There's more reliance on external resources and consultants who are shared between several banks."

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