Offshoring shrinks number of IT jobs, study says

But, in time, companies will run out of jobs to offshore.

The number of IT jobs at large corporations is decreasing significantly, and the decline can be largely attributed to offshoring, but the trend might come to an end within 10 years as companies run out of jobs suitable for moving to low-cost countries, a new study says.

The Hackett Group, a management consulting firm, examined services occupations in the bull's-eye of offshoring -- finance, human resources, procurement and IT. What it found is that, by 2016, the number of jobs available in these fields in the U.S. and Europe will have declined to about 4.5 million from 8.2 million at the start of 2002.

This estimate of the decline in jobs is specific to 4,700 U.S. and European companies with annual revenue of $1 billion or more, Hackett said.

Of the 1.8 million IT jobs at the companies represented in the report, Hackett said about 270,000 jobs in the U.S. and Europe will be moved offshore between now and 2016. The losses will be split evenly, with the U.S. and Europe each losing about 135,000 jobs, according to Hackett.

By 2016, if Hackett's estimates hold, the 1.8 million IT jobs in North America and Europe at these large companies today will have declined to about 1.5 million, despite the fact that many of the companies will grow.

The decline is almost completely attributable to offshoring, according to Hackett, because the number of jobs lost to productivity improvements tends to be roughly offset by the number of new jobs created through growth. "The net change is about equal to the decline due to offshoring," said Erik Dorr, senior enterprise research director at Hackett.

To some extent, this decline in IT jobs reflects decisions to buy IT capacity in the form of cloud-based services. But the IT industry, which has been seeing employment growth, will still move some of those jobs offshore.

As bleak as these numbers may seem for U.S. IT professionals, Michel Janssen, Hackett's chief research officer, said U.S. companies are doing what they need to do to be globally competitive.

"If you didn't have this productivity improvement, we would be seeing actual drops in profits, which would be a bad thing for everybody," said Janssen. The profits, however, don't necessarily translate into new jobs, he said.

What will ultimately deter outsourcing will be the decline in the types of jobs that are suited for offshore work.

"You can't offshore everything," said Jansen. "You can't offshore the CIO."

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

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