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Is FDM's combination of training and IT services the solution to the UK's skills headache?

The UK’s IT sector is dogged by two seemingly contradictory problems.

On one hand, there is a severe shortage of appropriately skilled IT professionals, or at least according to the government’s IT skills authority, eSkills. “Finding insufficient applicants with the appropriate skills, qualifications or experience is still a very common issue” for businesses despite the recession, eSkills noted in a report published earlier this year.

On the other hand, many IT-trained graduates are struggling to find employment. In July 2010, the UK’s Higher Education Statistics Agency reported that 17% of computer science graduates were still out of work six months after leaving university – more than for any other subject.

Whether it is a failure on the part of universities to give students the vocational experience that employers want, or on the part of businesses to hire and invest in university leavers, clearly something is amiss with the career development process for IT professionals in the UK.

That may explain the growing popularity of companies such as FDM Group. FDM is an IT services company that operates its own training academy. FDM Academy offers employees a 12-week training course with a nominal fee set at £20,000. In place of paying back this fee, enrollees sign a two-year contract to work for FDM, which hires them out as contract staff to customers including HSBC, Credit Suisse and RBS. They are paid a salary during that time that starts at £21,000.

FDM runs courses in six standard areas – much of its work is focused on the development languages Java and .NET – but also offers bespoke training courses based on the needs of clients.

According to FDM’s CEO, Rod Flavell, the combination of the course and the work placement gives students the kind of vocational experience that employers want. “If you are a bank, you don't want somebody who just has a conceptual understanding of Java,” he argues. “You want somebody who understands things such as [development tools] Hibernate and Struts, and Agile development methodologies. They don’t teach you that at university.”

The company is accredited by the Institute of IT Training but there are nevertheless some considerations that students must weigh up before enrolling in the FDM Academy. For example, if they break the contract, they are obliged to pay back the cost of the training. The precise training they receive may be tailored to the needs of FDM’s customers, and there is no guarantee of a job after the two years.

Not everyone considers FDM’s offer to be worthwhile, but plenty do. The company will have hired nearly 600 inductees by the end of the year, which Flavell says makes it the largest IT graduate employer in the UK. Next year, FDM Group plans to hire 1,000.

Meanwhile, revenues are growing too. The company’s turnover was £83 million in its latest financial year, up from £52 million the year before.

That growth is now backed by private capital. FDM Group was publicly listed until the start of 2010, when Flavell and his management team (which includes both his current and former wives) successfully negotiated a £28.4 million buy-out deal with private equity firm Inflexion.

Flavell says that Inflexion was persuaded to invest by a number of characteristics. “Private equity firms like stable management teams, and our group has been running the business for 12 years. They like a stable cash position and they like annuity revenue streams. We ticked all those boxes.

“Obviously what they now want is growth,” he adds.

If FDM Group achieves its ambitions and delivers that growth, others will surely follow suit. That will mean that some responsibility for the development of the UK IT sector’s skills base will pass into commercial, profit-seeking hands.

That may be an uncomfortable idea for some, but as long as FDM Group and others like it are transparent about the precise terms of their offer, and potential employees are clear about what they are getting into, it need not be disastrous.

Plus, as Flavell puts it himself, “Somebody in the UK has to grow an IT services business, don’t they?”