The impact of the IT skills shortage on business – and what the sector is doing to stem the flow

Skills shortages have always been an issue in the IT sector, and the problem shows no sign of decreasing anytime soon. Analyst firm IDC predicts that by 2026, over 90% of organizations will feel the pain of the IT skills crisis.

The growing demand for IT skills (according to analysts at Gartner, 79% of CIOs and senior IT leaders plan to increase their IT staff numbers this year) continues to outstrip supply. This means that getting the right people with the right skills into the right roles has never been so difficult.

“We see the stakes of the skills shortage growing and getting worse,” says Gina Smith PhD, Research Director for IDC’s IT Skills for Digital Business practice. “Why is that? It’s because technology is arriving at a faster and faster pace. There’s always been a skills shortage but the gap is widening as we have so many types of technology and hundreds of apps to deal with. There’s simply so much to learn.”

What skills are we missing?

Many consultancies and analyst firms have undertaken studies on where the skills shortages lie, and unsurprisingly have come up with similar results.

The areas recruitment firm Harvey Nash UK & Ireland are seeing the greatest shortages are everything to do with data. “It’s engineers, analysts, big data specialists, and software engineers,” says Andy Heyes, MD at Harvey Nash.

These skills also made the top five ‘difficult to hire’ in Gartner’s CIO Talent Planning for 2024 Survey, where they were joined with cybersecurity, blockchain, AI, machine learning (ML), and generative AI – some of the most critical technologies needed for business success, respondents noted.

The impact of skills shortages on businesses…

Given how critical IT and technology innovation is to the modern world of work, skills shortages could prove damaging to business growth and competitive advantage.

Of course, the impact will vary depending on the sector as Duncan Smorfitt, technology market director at recruitment firm Robert Half, points out. He notes that firms providing customer products could see lost revenue from a lack of sales, while those providing services could find their reputation damaged due to a poor user experience.

Mbula Schoen, a senior director analyst within Gartner’s CIO Leadership of Information Talent and Organisational Dynamics team, adds that innovation is also being stifled as many projects and programs will have to be put on hold or delayed if they haven’t been able to get the skill sets needed.

IT skills shortages are already negatively impacting businesses. This year IDC reported that over half of IT leaders questioned globally said a lack of skills is causing product delays, quality problems, missed revenue goals, and declining customer satisfaction. It predicts that by 2026, the problem will have led to $5.5 trillion (£4.2 trillion) in losses caused by product delays, impaired competitiveness, and loss of business globally.

…and their staff

But we also cannot overlook the impact skills shortages have on existing staff. As organizations try to do more with less, workloads increase, pushing some employees towards burnout or to look for a new job, perhaps even outside of the industry.

“With our latest research showing that significant numbers of IT staff are looking to move in the next 12 months, the risk of a talent drain that further exacerbates skills shortages increases,” says Hayes.

Ways to get the skills you need

As the IT skills shortage continues to widen, organizations are employing a wide range of approaches to get – and keep – the skills they need. Both Gartner and IDC found that the top solution globally, was for businesses to cross-skill and upskill employees, and one of the most successful ways to do so is through experiential learning.

“This can be a game, a hackathon or virtual lab – anything where they have to show what they know, as opposed to classroom training followed by a multiple-choice test,” says Smith.

There’s a lot of excitement around sandboxes and simulations, she notes, with Microsoft and Amazon being examples of companies that have “created free simulations within Minecraft where you can go in and ‘play’ a role”.

This new approach to learning is also helping organizations overcome employees’ resistance to training, with many citing the length of traditional courses as too long, their options too limited, and there isn’t enough alignment between skills and career goals.

When it comes to recruiting, organizations are widening their net through diverse hiring and by removing barriers for women in tech and disabled workers.

“One of the things we’re seeing is organizations looking at hiring individuals with ‘adjacent’ skills, and then investing a little more time in training,” Schoen says. “For example, they might take someone with a maths degree and train them to code, because the skills are near neighbours.

“We’re also seeing organizations remove what we call ‘artificial barriers’. Meaning that where a specific job would always require 10 years’ experience in the past, they’re now re-evaluating and considering changing this to five or six years then investing time in making sure they get that individual up to speed. Essentially, they’re now hiring for potential, not just skills,” Schoen notes.

In this highly competitive market, a really useful tool is for organizations to design an IT-specific employee value proposition (EVP), particularly those in the public sector.

“A conversation I have with public sector organizations is that they’re struggling to get talent, particularly because they’re not offering the same level of remuneration as the private sector, and also because some perceive IT teams within government as bureaucratic or boring and there’s nothing interesting going on there.

“That’s far from the truth though, as they’re heavily investing in digital. We see similar issues with financial services, where it’s perceived to be boring and have too much compliance red tape,” Shoen says.

“An IT-specific employee value proposition is about branding your IT department as innovative and doing cool stuff that IT professionals are on the lookout for. Things like flexible working, for sure, but also opportunities to learn new skills and an innovative work environment.”

This can also help organizations showcase the role or department’s alignment with a recruit’s career goals.

“It really is an employees’ market right now, so you need to showcase what you can offer,” she concludes.