December 24, 2013, 8:36 AM — The tech industry is seeing a shift toward a more independent, contingent IT workforce. And while that trend might not be bad for retiring baby boomer IT professionals, it could mean younger and mid-career workers need to prepare to make a living solo.
About 18% of all IT workers today are self-employed, according to an analysis by Emergent Research, a firm focused on small businesses trends. This independent IT workforce is growing at the rate of about 7% per year, which is faster than the overall growth rate for independent workers generally, at 5.5%.
The definition of independent workers covers people who work at least 15 hours a week.
Steve King, a partner at Emergent, said the growth in independent workers is being driven by companies that want to stay ahead of change, and can bring in workers with the right skills. "In today's world, change is happening so quickly that everyone is trying to figure out how to be more flexible and agile, cut fixed costs and move to variable costs," said King. "Unfortunately, people are viewed as a fixed cost."
King worked with MBO Partners to produce a recent study that estimated the entire independent worker headcount in the U.S., for all occupations, at 17.7 million. They also estimate that around one million of them are IT professionals.
A separate analysis by research firm Computer Economics finds a similar trend. Over the last two years, there has been a spike in the use of contract labor among large IT organizations -- firms with IT operational budgets of more than $20 million, according to John Longwell, vice president of research at Computer Economics.
This year, contract workers make up 15% of a typical large organization's IT staff at the median. This is up from a median of just 6% in 2011, said Longwell. The last time there was a similar increase in contract workers was in 1998, during the dot.com boom and the run-up to Y2K remediation efforts. Computer Economics recently published a research brief on the topic.
"The difference now is that use of contract or temporary workers is not being driven by a boom, but rather by a reluctance to hire permanent workers as the economy improves," Longwell said.
Computer Economics expects large IT organizations to step up hiring in 2014, which may cause the percentage of contract workers to decline back to a more normal 10% level. But, Longwell cautioned, it's not clear whether that new hiring will be involve full-time employees or even more contract labor.
"There are a lot of different variables that go into the decision to use temporary, rather than permanent, employees, and one of them is the outlook for sustained growth," said Longwell.
IT hiring has slowed after the past several months, according to recent reports.
Jeffrey Leventhal, the CEO of Work Market, believes that demand for independent employees will only increase. That's based on Work Market's own surveys.
Work Market is a contractor management platform and marketplace for connecting workers to assignments.
About 95% of Work Market's jobs are for on-site work and are aimed at helping companies create networks of talent near a facility. The company now has about 15,000 people working on assignments, with more than 60% of them in IT areas. Many of the jobs require delivery, repairing, installing and moving, said Leventhal, and contract workers need professional and general liability insurance -- something the jobs service provides.
King said the good news, particularly for people with skills, "is there is a lot more opportunity to find part-time employment and set up your own shop and work as a consultant and contractor than there has been in the past."
But what if you want to keep working full-time?
King said young workers, who may change jobs frequently, already have back-up plans for independent work, but mid-career workers may not be as prepared. He recommends having an action plan. That may include thinking about how to earn a living as a solo worker, and developing networks outside the office. A lot of people are already moonlighting on part-time job services to "get a sense of what's going on," he said.
But there will also be full-time opportunities for younger workers as baby boomers gradually leave the workforce.
In California, for instance, Ron Hughes, the chief deputy CIO of the state's Department of Technology who recently spoke at a Gartner Data Center conference, urged younger workers to consider working for state IT shops.
In Hughes agency of 750 employees, 53% are already eligible for retirement, and in the mainframe group, a subset of the overall number, 73% are eligible to retire.
"The opportunities are going to be phenomenal," said Hughes.
Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is email@example.com.
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