In-Depth

Careers: IT Hiring Forecasts Still Too Close to Call

There’s little agreement about the prospectus for IT hiring—but there’s also little doubt that outsourcing is a hit

• By Stephen Swoyer
• 11/02/2004

Just as there’s been little consistency in political polling on the eve of this week’s Presidential election, there’s also little if any agreement among research firms on the prospectus for IT hiring.

Some research heavyweights report that IT skills could once again be in short supply within three years, causing wages to spike—perhaps even dramatically. Still others point to distressing news on the outsourcing front, along with a surprising sloughing of technology jobs here in the U.S.

First, the good news: Research firm META Group predicts that salaries for information technology workers will increase by up to 15 percent by 2007.

META Group describes a kind of positive feedback loop, where IT workers --especially those who were forced to take pay cuts or endure other indignities during the protracted economic downturn—may test the waters of an employee-friendly job market, causing employers to offer ever more attractive compensation packages to hire and retain IT talent.

"CIOs must begin to work more closely with human resource professionals to implement strategies that address human capital management trends and innovative retention programs—an area in which IT has historically been reactive rather than proactive,” said Maria Schafer, senior program director with Executive Directions at META Group, in a statement.

META Group’s research follows on the heels of a survey from IT staffing firm Robert Half Technology that found that CIOs are increasingly talking up employee-retention strategies, perhaps in expectation of just such a trend.

That said, Robert Half concedes that CIOs aren’t interested in retaining just any IT workers. Instead, they were typically very specific about the kinds of employees they want to keep.

“These are positions that can directly save costs or increase profits—infrastructure security, database security—those are very important positions, I think people will do anything to retain those kinds of people,” explained Jeff Markham, a division director for Robert Half, in an interview earlier this year. This isn’t to say CIOs are convinced we’re in the midst of a bust-to-boom economic revitalization, either: “Most just think that we’re just getting back to normal business numbers; this recovery seems to be more getting back to normal staffing levels, versus hiring for growth in 2000,” he suggested.

Of course, for every optimistic IT hiring projection, there’s a more pessimistic projection. Consider a report late last month from employment services firm Challenger, Gray & Christmas, which found that companies cut 54,701 jobs in Q3 of this year—a 60 percent increase from Q2, and a 14 percent year-over-year increase. According to Challenger’s data, tech companies have announced 118,427 job cuts—or about one-sixth of the 724,320 total announced job cuts through the end of September.

More sobering news came courtesy of market researcher International Data Corp. (IDC), which says that the worldwide market for offshore IT services will nearly triple by 2008, growing from $7 billion in revenues last year to $17 billion over the next four years. That’s good enough for a five-year compound annual growth rate of nearly 20 percent, according to IDC researchers.

Not surprisingly, IDC says that U.S. companies will continue to outsource in a number of key areas—with custom application development, application management, and systems integration topping the list. Where are most of these IT tasks going? To the usual suspects of China and India, IDC adds the Philippines and Central and Eastern Europe.

More ominous, however, is the fact that organizations appear more willing to outsourcing non-traditional activities as well. "Customers' continued need to look to offshore as a resource from which to procure IT services as part of their overall sourcing requirements is not only growing as a share of the total IT services market, but it is also expanding from traditional IT services, such as application development and maintenance, to areas traditionally limited to being delivered locally,” said David Tapper, director of IDC’s Outsourcing, Utility, and Offshore Services practice, in a statement. “These services range from application and infrastructure management to IT consulting.”

IDC and other researchers say companies find outsourcing irresistible because it’s a proven way to cut costs. Many IT professionals, not surprisingly, take the opposite view. Some, such as Bob Dust, an IT administrator with a U.S.-based developer of training software, say that offshore outsourcing looks better on paper than it works in practice. “We did a make-buy analysis” before outsourcing development work to India, he confirms. “Based on that analysis, we felt it would be faster and less expensive to develop off-shore. We were wrong on both accounts. The quality that we got was well below what we would have produced in-house. The time that we spent re-engineering their architectural design cost us more than we saved, not to mention the time to market that we lost.”

And few IT professionals buy the argument that the offshore phenomenon creates, on balance, as many new jobs as are lost. “I do not accept the fact that has been presented that outsourcing creates jobs, only that I have seen many co-workers laid off due to outsourcing,” says IT pro Mark Gebert. “Almost all of my acquaintances have found new employment; most however ended taking a position that typically was lower paying, and less responsibility to just gain employment.”