The Shrinking IT Contract Market: What’s Behind the Decline and What It Means for Businesses
In recent years, the IT contract market — once booming with opportunity — has experienced a noticeable decline. As a specialist recruitment agency, Henley Morgan has had a front-row seat to this shift, particularly within the SAP Business One and wider ERP technology sectors. While demand for IT expertise remains high, the appetite for contract roles has waned. But why is this happening, and what does it mean for both candidates and hiring businesses?
1. Shifting Economic Conditions
The uncertain global economy, inflation pressures, and budget-tightening measures across industries have led many companies to rethink their resourcing strategies. Contract hiring, once seen as a flexible and cost-efficient model, is now often being replaced with permanent hires as businesses seek stability — even in specialist areas like SAP Business One implementation and support.
2. IR35 and Regulatory Changes
In the UK, the introduction and tightening of IR35 legislation has made contract work less appealing for both clients and candidates. Many organisations are reluctant to take on the administrative and compliance burden, and highly skilled contractors now find themselves being forced inside IR35 — reducing the financial benefits they once enjoyed. This shift has had a direct impact on SAP Business One contractors who previously thrived on flexible project-based work.
3. Shift Toward Permanent Employment
As projects become longer-term and strategic rather than short-term and tactical, companies are favouring permanent employees. This ensures knowledge retention, internal growth, and a more cohesive culture. SAP Business One projects, which often involve ongoing process optimisation and support beyond go-live, benefit from having long-term staff embedded in the business. Candidates, too, are seeking job security, benefits, and clearer career progression — especially in uncertain economic times.
4. Remote Work and Global Talent Pools
The rise of remote working has opened up global talent pools. Organisations can now hire permanent staff in lower-cost regions or tap into international contractor networks — often bypassing the traditional UK freelance model entirely. However, for SAP Business One clients with region-specific needs or localised customisation requirements, on-site or hybrid roles still play a crucial part.
5. Impact on SAP Business One & ERP Contracting
In the SAP Business One world, we’re seeing clients prioritise permanent hires for key transformation and support roles. While short-term projects still require niche contractors — such as during major upgrades or integrations — these engagements are becoming less frequent. Clients want individuals who will stay the course through full-cycle implementations, rather than rotating in and out for specific phases.
What Should Businesses and Contractors Do Next?
For contractors, now is the time to evaluate long-term career goals. Consider whether a permanent role may offer greater stability and development opportunities — especially in niche areas like SAP Business One, S/4HANA, and analytics.
For businesses, it’s vital to reassess your talent strategy. While cost-saving is important, cutting off access to high-level interim expertise could slow project delivery or impact performance. A blended model — combining permanent staff with targeted contract specialists — may still be the most effective approach, particularly in SAP Business One environments where flexibility is sometimes essential.
Final Thoughts
The IT contract market may be shrinking, but it’s far from dead. It’s evolving. At Henley Morgan, we help both businesses and professionals adapt to this changing landscape. Whether you're looking to future-proof your SAP Business One hiring strategy or explore new career opportunities, our team is here to help.
Get in touch today to talk about how the changing market affects your goals — and how we can help you stay ahead.