In-Depth

Offshore Outsourcing Failures Boost Some IT Salaries

Networking, messaging, groupware, and applications development skills still in high demand

• By Stephen Swoyer
• 12/14/2004

Some technology skill areas may actually be getting a boost—compensation-wise, anyway—from the failure of offshore outsourcing ventures

After months of speculation about the inevitability of the offshore trend in outsourcing, some impact was inevitable. But few IT professionals could have expected this: Several technology skill areas may actually be getting a boost—compensation-wise—from the failure of offshore outsourcing ventures.

That’s the conclusion of a new study from salary researcher and management consultancy Foote Partners LLC, that found premium pay tied specifically to information technology skills was also boosted by employers concerned about retaining skilled employees—and staving off cut-throat competition for top IT consulting talent. All told, Foote Partners claims to have surveyed 45,000 IT workers and 1,860 North American and European employers.

"Our research has found unmistakable evidence of a turnaround in pay for several skills over the past six months, in particular those associated with networking, messaging, groupware, and applications development," said David Foote, president and chief research officer for Foote Partners, in a statement. "Overall, our findings indicate the reemergence of talent wars, but on a smaller scale than in the past and more industry focused, particularly the IT professional services business.”

It’s encouraging news, to be sure, but Foote believes it’s even better than that. “This is very positive news indeed for tech workers wondering what to do about their careers, and an indication that offshore outsourcing will no longer be the dominant theme in IT employment trends.”

Of course, not every technology skill area is in the black. In fact, Foote found that pay for 150 certified and non-certified skills dropped an average of 4.2 percent and 0.5 percent, respectively, in 2004. During the same period, however, pay for networking skills increased by 6 percent, compensation for messaging and groupware skills was up 4.5 percent, and application development and programming skills salaries grew by nearly 4 percent.

“The remarkable part is that, at this time last year, these same skills groups were registering annual declines of 6 percent to 12 percent,” Foote notes. “It's a complete reversal and a clear signal that businesses are once again investing in their full-time employees.”

Now that the economy is showing signs of improvement, employers are more attuned to the risk of losing workers—especially those who weathered pay cuts and stuck by them during lean years, Foote says. Similarly, many first-time offshore outsourcers are reporting less than encouraging experiences: “[O]ffshore outsourcing has proven to be far riskier and tougher to succeed at than had been anticipated, in part due to employee retention issues, especially when workers tasked with knowledge transfer and vendor management are involved,” he comments. “IT decision makers have lately become somewhat less inclined to play the offshoring or outsourcing card when under pressure.”

IT services firms are also driving up pay, aggressively recruiting consultants from among the ranks of IT professionals. Networking, information security, application development, Web services, and systems integration are among the skills most in demand by IT services firms.

Foote predicts that 2005 could be a banner year for IT professionals in certain skill areas, thanks to a flood of planned upgrades and systems enhancements that were delayed in 2004 as IT shifted resources to meeting the requirements of Sarbanes-Oxley and other compliance regulations.