Your Outsourced Future

Computerworld - Reader reaction was swift and scornful last week after we ran a story predicting that 35% to 45% of existing IT jobs in the U.S. and Canada will be outsourced, shifted to contractors or moved offshore within the next two years . So many jobs? So soon? No way. Headline-grabbing nonsense, this was.
That was my initial reaction, too. Analyst predictions tend to be notoriously off base, although we in the press cheerfully troop along and write stories about them anyway. As one reader put it, "I think that you guys are sometimes guilty of oversimplification of the issues." Indeed.
In 10 years, though, I suspect we'll see these painful outsourcing trends as the inevitable transition of a workforce in a maturing industry that plays a critical role in the emerging global economy. What IT is going through today mirrors what the automobile and electronics industries went through in previous decades, as once-valued, highly paid skills became commoditized, automated or more cheaply available elsewhere. New skills rise in value to keep pace with changing technologies, sharpening competition and shifting business needs. Outsourcing trends historically move in great waves, cresting in economic downtimes when cost savings become paramount.
Our government has certainly embraced outsourcing. Federal IT outsourcing is expected to hit $15 billion annually by fiscal 2007 -- a 127% increase over the $6.6 billion spent last year. That push is coming from two directions: a mandate to cut costs, and the increasing difficulty of replacing qualified technical and program management employees .
We can also see outsourcing taking hold in the bellwether financial industry. Megadeals are making headlines again, as they did in the early 1990s. J.P. Morgan Chase recently signed a seven-year, $5 billion deal with IBM. Bank of America inked a 10-year, $4.5 billion deal with EDS. Canadian Imperial Bank of Commerce signed up for $2 billion in IT services from Hewlett-Packard. And so on. When Gartner researchers surveyed 39 Fortune 500 banks a few months ago, they found half of them outsourcing back-office and operational tasks more extensively than ever. Intensifying competition, a depressed economy and the attraction of the pay-as-you-go model for IT services are a powerful trio of business drivers.
Offshore outsourcing is also rising, as the economic lure of cheaper programmer labor continues to beckon. The one wild card that may slow the trend this year is the threat of war with Iraq. Yet Forrester Research estimates that the $4 billion in U.S. wages that floated offshore in 2000 will become a riptide of