Nearshore Americas

What’s Causing the Surging Demand for IT Contractors in the U.S.?

A confluence of new technologies and demand within specific industries has been good news for contract IT workers in the United States, but the drivers are complex and tie in to enterprise spending patterns as well as inflationary pressure within specific geographies.

“We will continue to see growth in the mobile application development space, and Big Data will push requirements for data warehouse architects,” says Rachel Grannan, Client Development Manager at Kforce, a professional staffing and solutions firm headquartered in Tampa, Florida. “Web commerce and the growth in electronic medical records are resulting in more data, and more complex data.”

In a recent salary survey, Kforce found that mobile application developers were seeing on average a 7.3% rise – and data warehouse architects a 7% rise – in year-over-year income. This is supporting an overall trend in which demand for contract labor is increasing.

“We are seeing a significant spike in contracts,” says Grannan. “Enterprises are more comfortable. Employers who come to us are looking for technology individuals for a minimum of six months, and usually longer.”

Grannan argues that companies are seeing the appeal in hiring technology workers on contract because there is less risk. Kforce will offer benefits and supplementary training, with the company’s clients able to hire on a project-by-project basis, or optioning to roll-over into a full-time offer.

“We are seeing more contract-to-hire,” says Grannan. “It’s a flexible model that allows for day-to-day assessments and can ultimately result in conversion to permanent employee status.”

Domestic Differences

The salary data within the United States for contract IT workers reveal inflationary pressure across the country. In major markets like New York City, Chicago, Boston, and San Francisco, a Data Warehouse Architect can expect to make over $140,000 a year. That same worker will make $90,000 in Madison and $93,000 in Columbus – much lower, but a decent salary given the lower cost of living.

“You will continue to see enterprise organizations that want to be in major areas like New York City and Los Angeles,” says Grannan. “But look at the Carolinas, Texas, even in Florida – you are seeing spikes in salaries in those areas, too. They have a limited talent pool, and as companies move to those areas there is more demand and less supply.”

Computer Economics, which provides metrics for IT management, has found that the median ratio for contractor over full-time IT staff has jumped in the United States to highs not seen since 1998. This is particularly true in large organizations, where contractors now represent on average 15% of IT staff. This could be due to attempts to mitigate the effects of the Affordable Care Act, which requires paying benefits to employees who work more than 30 hours.  But the rise may also result in a greater number of full-time hires as the economy stabilizes.

“You are seeing more economic stability, and more of a willingness to look for permanent opportunities,” says Grannan. “During the downturn employers were holding steady, but now they are opening up to hiring.”

A big boost is in Accounts Payable Analysts, who have seen their salaries jump by a solid 14.1% across the country. Wages here also diverge substantially by geography, from $61,000 in New York City, to $30,800 in St. Louis.

“This is because transactional roles are increasing year-over-year,” says Grannan. “The supply of qualified workers is diminishing – this is one of the highest requested skill sets in finance and accounting. Also, we are seeing upgrades to ERP systems, and there is a need for specialized Accounts Payable Analysts for those systems.”

Industry Calls the Shots

This demand is buttressed by strength in specific verticals, including some that have historically been off the radar when it comes to contract IT labor.

“We are noticing demand in manufacturing and other industries that we might not have seen previously,” says Grannan. “It is all part of an overall trend supporting greater enterprise activity.”

The pressure to shift to electronic medical records (EMRs) and web-based access to health information systems has also resulted in wage inflation and high turnover among IT workers in healthcare.  The Washington post reported that for CGI Federal, the lead contractor for the Affordable Care Act’s website, “turnover is high” and that people have been getting “poached by larger contractors that can pay higher salaries.”

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“There is certainly pressure in healthcare with system implementation and upgrades, as well as the rollout of EMRs,” says Grannan. “We are also seeing strong demand in financial services and professional services in the context of regulatory compliance.”

Some industries are quicker to embrace new technologies than others. In a recent list of the top seven contract skill-sets tracked by, for example, 3D printing topped the list, with demand driven by manufacturing and prototypes for medical devices. Not surprisingly, mobile app development also scored high – though in this example enterprises across industries are putting the call out for contract workers.

“I believe we will continue to see growth in the mobile development space,” says Grannan. “That is also driving more data, which explains why more data warehouse architects are needed.”

That makes sense. Earlier this year Pew Research for the first time put cellphone adoption at over 90% of US adults. And with 4G putting more data through phones and tablets, enterprises will need talent to make the most of it, whether as application developers or infrastructure specialists.

Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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