IT skills shortage to drive margins and pay explosion: Peoplebank boss

Stan Beer
Friday, 01 June 2007 09:26

IT People - Recruitment

The boss of one of Australia's biggest IT recruitment agencies has hinted that margins for recruiters and pay rates for IT workers are set to explode in the  face of an increasingly tight skills market.

"This is probably the only industry where the supply and demand curve is upside down," says Leon Lau, CEO of  ASX listed IT recruiter Peoplebank. "You would think in a skills shortage market where clients are screaming out for good quality people, they would have to pay more. The reality is that the margins are still being pushed back.

"There is beginning to be a realization now that clients can't continue to push margins with agencies because they can't get the people now. You don't have to be Einstein to understand that if an agency has got two or three jobs and one candidate that can fill those jobs, the agency can have a say in where that person goes. If the person can go into client A which is a low margin or client B which is a better margin, you can bet your bottom dollar which way the agency is going to push the candidate."

Mr Lau sees demand and the IT skills shortage continuing for some time yet.

"I see IT demand continuing for another two or three years," he says. "We're not educating people at a greater rate than we're using them so the skills shortage is going to stay."

As rival recruitment firms like Candle look to grow their business through diversification away from ICT, Peoplebank, one of Australia's largest specialist IT&T recruitment companies is sticking to its roots, according to Mr Lau.

Peoplebank in terms of straight sales volume, sits slightly behind major technology recruiters Candle and Ambit. With around 100 staff in all the major capitals, aside from Darwin and Hobart, and about $140 million revenue, Peoplebank has built its success primarily on the back of Australia's biggest IT user sector, Government.

"Canberra is our largest operation, two thirds of our revenue comes from state and federal government (sector)and we're the number two supplier to the Federal Government behind Paxus,"says Mr Lau. "We've had between 30% and 40% compound annual growth over the last three years."

Going forward, where is the growth going to come from? Consolidation is the short answer, according to Mr Lau.

"The recruitment sector will probably accelerate the pace of consolidation and Peoplebank will probably be a consolidator or consolidatee," Mr Lau says.

So Peoplebank may be acquired?

"If we don't meet our internal objectives and the board's objectives, yes that's highly likely," says Mr Lau.

Is it viable going forward to remain an IT specialist recruiter?

"Definitely. This business now with the larger pressure that contracting agencies are under from the client, the business now is all about scale and efficiency," says Mr Lau. "So there is an imperative to get larger."

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