Layoffs leading to more self-employment

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Recession and IT

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More: Recession and IT

Computerworld - There are signs that an increasing number of people who have been forced out of their jobs are starting their own businesses.

This new wave includes solo entrepreneurs such as Brad Dinerman of Ashland, Mass., who was laid off from his job in October as vice president of an IT consulting firm and then started his own IT consulting business.

Since taking that step, Dinerman, 43, has not taken a vacation and puts in irregular hours to meet client and business needs. But working solo is more emotionally satisfying. "It all ties back to me -- no one else is getting the rewards of the work that I've done," he said.

There are many others who are acting similarly. A quarterly survey of 3,000 job seekers conducted by Chicago-based outplacement firm of Challenger, Gray & Christmas, Inc., released Thursday, shows a near doubling in the year-to-year growth of job seekers turning to self-employment.

Of the survey respondents, 8.7 percent job seekers that gained employment in the second quarter did so by starting their own business, reported Challenger.

In the prior quarter, that figure was at 6.4%. The percentage of jobless managers and executives surveyed by Challenger who are heading off on their own isn't as great as in 2004, when it spiked above 12% one quarter, but it is evidence of growing entrepreneurship. The survey doesn't break out job categories.

However, Robert Goodearl, who runs RGood Software Inc. in Lincoln, Mass., says he saw evidence of increasing interest of IT professionals in self-employment at a recent meeting of the Greater Boston chapter of the Independent Computer Consultants Assocation that was held jointly with another professional IT organization. About 30 people attended, two thirds of whom were not members of either organization, he said.

"I have seen a lot of interest in people who are considering becoming consultants," said Goodearl. Some of them have been laid off, or are employed but worried about their future.

Another sign of increasing IT self-employment is the use of freelancers through services that use eBay-like job matching systems. One firm, Elance, now averages 25,000 job postings per month, 50% above last year.

When Dinerman was laid off, he immediately starting searching for a new job and found one at an insurance company. "I was miserable there," he said. He quickly left to start his own one-person operation, Fieldbook Solutions LLC.

Dinerman said a few clients followed him when they found out he was striking out on his own, and that gave him a start. But he said running your own business also meant having sales and management skill, as well as working with IT vendors to get partnerships.

Dinerman said he has not seen more competition from fellow independents, but he is "seeing lots of layoffs."

"From the people that I spoken to that have lost positions, I have seen very few of them try to strike out on their own. A lot of them want to be told what to do," he said. They don't want to function as their own sales and accounting department, he said.

Because his overhead is low, Dinerman says he can charge less than the larger IT consulting firms. He enjoys the independence and says that "if you are going to make that transition [to self employment], you need to have business skills and personality along with it, because without those you are going to strike out."