Analyst: 'IT departments remain cautiously optimistic'

In a Q&A, David Foote, CEO and chief research officer at IT workforce research consultancy Foote Partners LLC, evaluates the fallout from the turmoil in the financial sector.

David Foote

How many IT professionals have lost or are in serious danger of losing their jobs because of the Wall Street upheaval? People lose or quit their jobs for all sorts of reasons, so estimating how many have or will become unemployed based just on the turmoil in the financial services sector is hard to pinpoint.

So how has this affected IT jobs? Clearly, the pressure on corporate expenses from the financial crisis has gotten more acute in some industries, including financial services, airline, auto, housing and distribution. Bank of America, Citigroup and the other beneficiaries in the recent investment bank consolidations will be consolidating operations and analyzing their IT workforce “bloat,” with some reductions expected. If anything, I think more companies will now be examining mission-critical vs. non-mission-critical IT spending. IT workers in the former will be safer, including those supporting daily operation of core networks, strategic applications, disaster recovery and security. For financial and other regulated industries, add data processing, compliance systems and key risk management systems. For non-mission-critical projects and initiatives, unless the payback period is 12 months or even less, you may start seeing slowdowns or some outright IT spending holds in the hardest-hit industries affecting IT jobs.

But in broad terms, so far there isn't widespread worry. About 40% of companies have cut their 2008 budgets, and U.S. IT spending is projected to be a little more than 6% higher next year following this year's 5.5% rise, although that could change. Unless they've been in a merger or acquisition, very few are cutting people right now. Bottom line, considering tight credit, oil prices, and overall consumer confusion and pessimism, plus the lag time between business decisions and direct labor market effects, we won't see much IT workforce reduction or jobs shifted to outsourcing for the next few quarters. After that, thousands of permanent IT professionals will be incrementally cast off, but many will likely find new employment, join the ranks of the “partially employed” or return to school. This isn't a big deal, though, considering that the overall size of the U.S. IT workforce is approximately 4 million. Some independent consultants may suffer, but larger IT services firms will continue to hire to fill demand. Job losses will be industry-driven, surgical and well thought-out this time. Overall, IT departments remain cautiously optimistic.

The demand for IT pros with certain skills seems to exist. What will be some of the safe jobs and skills? In addition to areas I just mentioned, our research indicates that companies will be hiring and retaining architects, business analysts, project and vendor relationship managers, process and security experts, a variety of customer-facing jobs, and specialists in ERP and enterprise applications areas, especially SAP. Regarding skills, our data points to security, storage/SAN, business intelligence and data mining, database and data management, virtualization, mobile operations and IP telephony skills as remaining in high demand. Several point skills such as AJAX, PHP and .Net will be strong as well.

How difficult will it be for the newly unemployed to remain in the IT workforce? The good news is that since the last recession, employers have shifted more of their IT operations to third-party providers and consultants here and abroad. So we aren't going to see the kinds of across-the-board IT bloodletting we saw earlier in the decade, with IT pros leaving the profession in droves. Consulting remains a good place for experienced or hot-skilled workers to direct their careers in the short term and as a long-term career bet.

What about geography? Will that have a big impact on jobs and skills? Well, clearly the collapse of financial institutions has hit the New York metro labor market hard. IT-related hiring has been down lately in New England, South Atlantic and East South Central regions.

Copyright © 2008 IDG Communications, Inc.

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