Offshoring blamed in part for IT's jobless recovery

TechServe says only 600 IT jobs created in U.S. in Nov.; consultant says back office IT jobs in U.S., Europe will be cut in half by 2014

WASHINGTON -- The latest government labor report shows lower-than-expected job growth in the U.S. last month, along with a rising unemployment rate, and experts say that IT workers were not immune from that trend.

TechServe Alliance, an IT industry group based in Alexandria Va., said that its analysis of the U.S. Department of Labor report released on Friday found that IT employment increased by only 600 jobs in November on a base of 3.9 million jobs. Overall, U.S. employers added 39,000 jobs last month, according to the Department of Labor.

TechServe, which which conducts its own monthly analysis of government labor data, said IT employment has increased by 2.5% so far this year.

Why the anemic jobs growth in IT?

The Hackett Group, a business advisory and consulting firm based in Miami, places at least some of the blame on offshore outsourcing , which it calls a contributor to a "jobless recovery."

Using data from its own clients and other sources, Hackett examined IT hiring trends among U.S. and European public companies with annual revenue of $1 billion or more, and concluded that by 2014, there will only be 2 million back office IT jobs back office jobs in the U.S. and Europe, down from 4 million today.

The Hackett Group defines a back office job as a position that directly supports corporate IT by running data centers and business information systems. Commercial technology product developers, consultants and the like are not included in the IT workforce subset.

Michel Janssen, Hackett Group's chief research officer, called the projected reduction in IT staff employment "the new reality. It's not good if you are an employee looking for a job, but [offshoring] is what is required for survival" by many companies, said Janssen.

"If you are not competitive on a global landscape and your cost structure is too high and you are paying premium rates for your staff, then you're not going to survive," he added.

Offshoring is so pronounced that companies "have taken that whole bottom level off the rung," said Janssen, referring to the lower-level IT positions. He added that by doing so, though, companies are creating a new problem by losing much of their pool of future senior IT managers.

The biggest jump in job losses came in 2009, with a net loss of 311,000 IT back office jobs in the U.S. and Europe, according to Hackett Group figures.

Companies shift jobs offshore to save anywhere from 30% to 70% worker costs within a brief period, sometimes as quickly as a quarter, said Janssen. Companies get the most savings by shifting entry level positions offshore, he added.

Jerry Luftman, a professor at Stevens Institute of Technology's Howe School of Technology Management in Hoboken, N.J., who conducts an annual survey of IT budget allocations for the Society for Information Management (SIM) in Chicago. said he has found a similar shift in IT budgets toward offshoring.

In better economic times, about 3% to 4% of IT budgets on average were spent on offshore outsourcing. Today, IT departments allocate an average of 5% of the budget on offshoring, and that allocation is expected to rise to 7% in 2011, said Luftman.

Nonetheless, Luftman is bullish on the outlook for IT employment for people, even students coming out of college, who have the right skills.

"The bottom line is IT is still the place to be for a career point of view," said Luftman. "Not only are there great job opportunities in the short term, I think for the foreseeable the future the opportunities are not only to be there but they will increase. Everything will be much more dependent on IT."

IT workers, however, will need more than simply technical skills, he said. From an employer's perspective, "if you're just going to offer me technical skills, I might as well just go offshore and get it a lot cheaper," said Luftman.

According to SIM surveys, employers are now are seeking a good balance of skills from IT professionals, including technical skills, general business knowledge, industry knowledge if possible, negotiation and communications skills, as well as a sense of ethics, said Luftman.

He said his students are getting jobs quickly, and participation in college fairs by companies is at its highest levels.

Patrick Thibodeau covers SaaS 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 e-mail address is .

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Copyright © 2010 IDG Communications, Inc.

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