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Cloud nudging up contractor pay - for the moment

Although the cloud may be generating marginal increases for certain contractors' rates of pay, it could have a sting in its tail.

Cloud impact on contractor pay: a short-term uplift and a medium to long-term flattening or depression

Daily rates for contractors are inching up thanks to demand for certain cloud-related skills but in the longer term the cloud itself will be the architect of a decline in pay.

Average rates for most skills - ranging from testing and development to application management - registered increases of less than one percent for 2013 compared with 2012, according to a study of the UK market by Pierre Audoin Consultants.

The research into the application and infrastructure services markets shows only IT consulting skills enjoying a higher increase, with a figure of just under two percent.

"In the short term, cloud is having an overall positive impact in the rates - it's pushing them up. But as cloud implementations actually increase, the activities that are being pushed to the cloud include things like deployment automation and testing, which then starts to drive the price down," said PAC UK director Duncan Brown.

"So it's a short-term uplift and a medium to long-term flattening or depression."

However, even the present increases, which result in an average daily rate of £432 ($645) for application management and £593 ($885) for IT consulting in the app services market, are not substantial.

"Although the absolute rates are going up, they're not going up very fast or quite often not going up in line with inflation," Brown said.

Against the lift provided by the cloud, the prospect of offshoring skills is helping keep a lid on pay increases, according to Brown.

"There is a dampening effect of the tendency to move the more junior or more commoditisable tasks offshore, and that is constant last year, this year and next year as well," he said.

The PAC research looks at the application and infrastructure services market from six perspectives, including platform, job function, industry sector and application type.

Directing apps to the cloud

When asked to define cloud skills, Brown said across all the research dimensions there is a drive towards directing apps or infrastructure - where PAC includes middleware, IaaS, PaaS and databases - towards the cloud.

"So when we were going out and asking people what skills are in demand and what's driving demand, quite often the demand is, for example, for testing. What's driving that? Well, more applications moving into the cloud," he said.

The roles that look least likely to be affected adversely by the cloud are project management and IT consulting, according to Brown.

"Those kinds of roles are able to withstand price pressures much more robustly than areas such as, for example, application development or testing because these are the kinds of thing that can be outsourced," he said.

In project management, daily rates range from £223 ($333) for a junior consultant to £1,019 ($1,521) for a senior manager in application services. Those figures contrast with testing in infrastructure services, where a junior consultant can expect an average of £152 ($227) while a senior manager can earn £785 ($1,172).

Pay rates worldwide

The PAC research, which has been conducted in Germany and France for the past 10 years, has been extended to the UK for the first time this year.

"The rates are not massively different between France, Germany and the UK because a lot of suppliers play into all three countries," Brown said.

He also believes the picture of pressure on certain contractor costs caused by the cloud and offshoring is consistent across the developed world.

Unsurprisingly, financial services records the highest pay growth rates with the government sector showing the worst.

In terms of platform, Microsoft skills command the highest rates of pay growth, but PAC describes the increase as "modest and below expected inflation".

About

Toby Wolpe is a senior reporter at TechRepublic in London. He started in technology journalism when the Apple II was state of the art.

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