After the initial uncertainty of the early pandemic, 2021 and 2022 brought one of the most competitive markets for specialized contingent IT expertise that I have ever seen. Conditions are shaping up to meet or exceed that level of demand in 2025 across many technology platforms, but especially in the SAP S/4HANA space. I anticipate significant labor compression throughout the ecosystem: adoption of S/4HANA is accelerating in both the public sector and commercial enterprise and across numerous industry verticals. We’re also seeing an increasing number of enterprises choosing RISE, opting for the public cloud, and going greenfield, so expertise in every type of approach is needed.
The convergence of these trends, in addition to the current macroeconomic outlook, is creating conditions I can only describe as a perfect storm. No one—not the hiring organizations and enterprises, their systems integrators, or IT staffing agencies—could have been prepared for how volatile the 2021 IT labor market was. But this time, we can see it coming, learn from our 2021 experiences, and prepare.
Next, I’ll look at the trends that are driving demand, then I’ll explore the lessons learned—and what to do to mitigate risk.
The typical technology adoption pattern we see is initial investment by the commercial enterprise with the public sector following suit several years later. The number of Federal, state, and other private sector programs we’re seeing coming together in parallel with this wave of enterprise investment is staggering—and at the Federal level, the scale of them is equally so. Commercial enterprise investment alone would be enough to create competitive conditions, but what the impact of significant public investment in parallel is difficult to gauge. It is simply unprecedented.
I have previously written about increased investment in S/4HANA in both Aerospace & Defense and Supply Chain & Manufacturing and how it is driving demand for specialized expertise. But momentum is expanding, and Baer is seeing accelerated investment in S/4HANA by state and regional utilities, retail, and consumer goods, among other verticals. Certainly, if you operate in any of these industries, you should have cause for concern, but the impact extends beyond them. There is always expertise that crosses industries, and when skills are in high demand in one, any other industry that requires them will find themselves competing for the best talent. And that’s a best–case scenario—you might find yourself competing for any available talent at all.
In September, the Federal Reserve Board lowered interest rates for the first time in more than four years, citing expanded economic activity and slower inflation. The rate reduction was sizable—a full half a percent—and projections suggest they may lower rates again before the end of the year. While it is impossible to say with certainty what the impact of this will be on the S/4HANA labor market, previous patterns indicate that lower interest rates spur technology investment. Typically what happens is that organizations who have been unable to innovate due to financial constraints can more readily access the resources they need due to lower interest rates.
Adding to the competitive market, we are already seeing the earliest S/4HANA adopters seeking the necessary expertise to upgrade. This is primarily because the technology was so nascent that SAP was not yet offering long-term support agreements, or because they want to take advantage of how far the technology has advanced in the past few years, particularly as it relates to industry content and BTP AI and automation innovations. Either way, it is driving demand.
From every angle, the 2021 specialized contingent IT labor market was one of the most volatile on record, especially for organizations at the beginning or in the midst of an S/4HANA transformation. It was truly a job seekers’ market: top talent could not only command top dollar, but they could also command the most interesting work—and they were willing to make multiple moves to get it. In the face of overwhelming challenges augmenting their internal staff, backfilling vacant positions, and identifying qualified contingent candidates, IT and human resources departments were often working outside their procurement organization's existing relationships with IT staffing companies. It was nearly impossible to meet demand.
Systems integrators (SIs) were in a similar situation. It seemed like every enterprise was rushing to find a partner to guide their transformation. But SIs fulltime staff were moving from program to program, too. They faced similar challenges in terms of augmenting and backfilling staff and accessing contingent resources.
The never-ending cycle of change put programs and timelines in serious jeopardy. No one wants a repeat of that.
Due to the convergence of these conditions, the 2025 S/4HANA contingent labor market will very likely kick into overdrive in Q1 and Q2. Competition for resources will be intense. Know this: your internal teams and your SIs are going to be stretched to capacity. Even offshore resources will become increasingly scarce. Not being able to access the expertise you need, when you need it, poses a significant risk to your program. But it’s only part of the problem.
How do you prevent sourcing expertise from becoming a full time job? How do you reduce interview cycle times and hire with precision? How do you ensure the most highly sought after S/4HANA talent is considering your project for their next assignment? Once you retain talent, how do you keep it?
When you’re undertaking a transformation in such a compressed market, the key differentiator that will enable you to access the talent you need, when and where you need it, is relationships—both your relationship with a recruiting partner and by extension their relationships within the contingent labor market. By proactively establishing a relationship with an enterprise performance partner vs. a traditional IT staffing agency, you’re going to be better positioned to weather the storm. An enterprise performance partner like Baer understands the S/4HANA technology and ecosystem based on a nearly ten year track record of servicing the S/4 implementation market.
When the labor market is competitive, we proactively identify and build relationships with proven expertise. We place with precision, both in terms of skillset and broader motivators, which means talent is more likely to stay for the duration of your program.
Unlike typical technology staffing companies, Baer is a true enterprise performance partner. We have a deep understanding of the scope of enterprise digital transformation and the highly specialized skillsets you will need at different stages of the process.
To learn more about how Baer can make a positive impact on your enterprise transformation, please reach out to Brian Trout, Executive Vice President, Sales, at btrout@baergroup.com, or John Wilson, Vice President of Strategic Accounts, at jwilson@baergroup.com.