PSLs Dumped

There is yet another instance of an agency Parity which says it intends to dump its low margin business and move on to concentrating on higher margin business.

Indeed, it has already brushed aside two major PSL contracts with the resulting business decline, but it has managed to increase both margins and swung into profitability again.

Major Blow

The system  of getting agencies to bid against each other for business, to get on a Preferred Supplier List is a major blow. Client companies have worked it out to keep both IT Contractor rates and agency margins down.

Already Spring and Lorien as well as other previously low-margin agencies have begun  concentrating on business that is more profitable.

Good News

This development bodes well for IT Contractors as it serves to bring rates out of the straitjackets client companies slotted them in.

The downturn caused the supply of contractors to be greater than the demand, but client companies were able to sway the market to their own prices. IT Contractors were forced to take contracts at any rate and agencies had to take business at any rate.

Boot Shifting

Agencies have started the new phenomenon of doing away with these straitjacket rates and margins. 
Client companies will have to follow suit or reconcile themselves to deal with the smaller desperate agencies and contractors who are not able to command better rates.

Though the differential in rates of the top 25% of IT Contractors and the worst 25% of IT Contractors is not a substantial one, there is a significant difference in terms of ability and productivity.

Failed Projects

Companies that continue  with PSLs will be left with all the duds, whilst the higher rate payers are sure to get all the cream of the contractors. The projects of those continuing to use PSLS will invariably get delayed and won't work A hard fact to digest but that's the way the market works.

IT Contractors will be pleased as it will remove a barrier to their rates rising in the coming years.