Nearly Half of Organizations Cutting IT Staff This Year

July, 2009

(IRVINE, Calif.) Mirroring the economy as a whole, layoffs among IT workers are accelerating, with almost half of all IT organizations reporting that they are budgeted for fewer staff members this year than last year, according to Computer Economics, an IT research and advisory firm.

Computer Economics 20th annual IT spending and staffing study shows that 46% of all IT organizations plan to reduce headcount this year, compared to 27% that are increasing headcount. Another 27% of IT organizations report their staffing levels will remain the same as last year.

Moreover, IT organizations that are adding workers are doing so only modestly compared to those that are reducing staff. At the 75th percentile, organizations are reporting 1% increase in headcount, while organizations at the 25th percentile are reducing IT staff by 10%. At the median, staff growth is zero percent.

“Last year at this time, we reported that IT organizations were focused on reducing capital expenditures but resisting layoffs,” said John Longwell, director of research for Computer Economics, Irvine, Calif. “That’s not the case this year. However, we don’t think IT layoffs at the typical organizations are any more severe than in other parts of the labor force.”

Some sectors are showing continuing growth in IT staffing. For example, nearly 63% of survey respondents in the healthcare provider sector reported they were increasing IT staff this year, while nearly 50% or organizations in the utilities and energy sector are growing staff. In those sectors, median staff levels are up a modest 2% this year over 2008.

Retail is suffering the most job losses. At the median, budgeted IT staff levels are down 8% over the prior year, while only 12.5% of retailers plan to increase staff. Other sectors showing staff level declines at the median include discrete manufacturing, down 5%, process manufacturing, down 3%, and insurance, down 3%.
In related findings, the study shows:

  • Most organizations are showing improving IT staff turnover rates. IT staff turnover rates declined to 3% this year at the median, an improvement from 5% median turnover last year.
  • The use of contract or temporary workers for staff augmentation is unchanged from last year, indicating contract workers are not taking the brunt of the layoffs. The typical IT organization relies on contract workers for 5% of its full-time equivalent (FTE) headcount, the study shows. Large organizations, which make the greatest use of contract workers, do appear to be increasing their use of flexible labor force strategies. Contract workers now account for 10% of FTE headcount at the median for organizations with at least $1 billion in annual revenue, up from 5% last year.
  • IT organizations are cutting training budgets, possibly in response to improved retention rates and reduced spending on new initiatives. The typical IT organization, at the median, is budgeting $1,422 per employee for training, down from $2,500 last year.

The annual study is based on an in-depth survey of more than 200 IT executives who provide detailed breakdowns of their budgets, staffing, and technology adoption plans for the 2009-2010 period. The survey sample includes a roughly equal number of small, medium, and large enterprises. The respondents are stratified according to 12 industry sectors to provide a representative sample of IT organizations across all industries.

A free copy of the study’s executive summary is available on the Computer Economics website.