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As cloud grows, IT hiring flatlines

Dramatic growth of cloud-based services expected this year

February 18, 2011 06:00 AM ET

Computerworld - Corporate IT departments are increasing their spending on hardware and cloud services, but not on new hiring in this weak economy.

These trends are all revealed in government data, surveys and earnings reports. Cloud-based services, in particular, are expected to see spectacular market growth this year.

IDC is forecasting that public cloud services revenue in the U.S. will grow nearly 24%, from $14.2 billion in 2010 to $17.6 billion in 2011.

IDC's prediction is backed up by surveys of corporate IT organizations that are seeing accelerating interest in cloud services -- so much interest that one research firm compared it with the late 1990s' e-commerce fever.

Businesses are increasing spending on hardware as well and making up ground that was lost during the recession.

Dell this week reported a revenue increase of 5%, to nearly $15.7 billion, helped by sales to enterprises. IBM reported strong gains last month as well.

But is this spending helping IT hiring? Not yet.

According to U.S. government labor data, unemployment among IT professionals is exceeding other professions' levels. [See interactive graphic.]

Unemployment for computer programmers, for instance, finished at 5.7% last year, compared with 2.2% in 2007, according to government data.

"The nature of the way in which the economy is picking up is very different than it's been in the past," said Richard Pople, global IT practice leader at research and consulting firm Hackett Group.

Hackett is expecting IT employment in corporate IT departments to decline slightly this year, by 0.4%, after declining 1.1% in 2010 and 7.3% in 2009. Its projection is based on its annual survey of U.S. and European companies with revenues of $1 billion or more. For this survey, 185 companies responded.

Companies have been consolidating their IT resources, which is also spurring hardware buying. A goal is to make their IT organizations more flexible, and by doing so gain the ability to use resources globally, whether in the cloud or offshore, Pople said.

In the Hackett Group survey, IT firms were asked to rank their strategic priorities, and cloud computing came in at No. 4 this year, with 59% respondents citing it as a priority. Last year, cloud was ranked 10th out of 11, with only 27% of respondents identifying it as a critical priority.

Pople compared the rapid increase of cloud in this survey to what happened when businesses interest in Internet services took off. "We saw the same sort of shift in 1998-99, when companies were then trying to figure out how to leverage the Internet," he said.

John Longwell, vice president of research at Computer Economics, said he is also expecting IT hiring to remain flat this year, except at large companies, where he expects to see 2% staffing growth. Computer Economics defines large firms as those that have IT operational budgets of more than $20 million, which translates into a $2 billion manufacturing concern or $1 billion in the bank.

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