Why IT Jobs Are Never Coming Back
The combination of more automation, increased offshoring, and better global IT infrastructure has taken its toll on the U.S. IT profession, resulting in a net loss of 1.5 million corporate IT jobs over the last decade, according to recent research from IT consultancy and benchmarking provider The Hackett Group.
The barely bright side for the American IT worker is that the total number of annual job losses will diminish slightly in the coming years, down from a high of 311,000 last year to around 115,000 a year through 2014, according to Hackett which based its research on internal IT benchmarking data and publicly available labor numbers. The really bad news? It's unlikely that IT will contribute to new job creation in the foreseeable future. "To succeed over the next five years, companies need to understand how to reposition existing talent; jettison or rationalize current jobs that have no place in the leveraged organization; and source, develop and retain still others to fill the need for new skills, both offshore and in retained onshore staff," reads the Hackett report, which itself was written in part by offshore researchers according to co-author and Hackett Chief Research Officer Michel Jannsen.
CIO.com talked to Jannsen and Hackett Global Business Services Practice Leader Honorio Padron about their predictions.
CIO.com: Your study looks at the decline in IT job growth based on private and public data from corporate IT departments at billion-dollar-plus companies, but ignores the jobs eliminated by IT service providers. How much greater would the figures be if the likes of IBM or HP were included?
Janssen: It would be huge. If you look at HP or IBM, India is their either second or third largest geography [in terms of hiring]. They have mammoth offshore organizations.
CIO.com: If IT is unlikely to contribute to U.S. job creation in the foreseeable future, what does that mean for America's standing in the IT universe?
Padron: Everyone wants to be like IBM, which started the strategy of having the right resource in the right place at the right time. Companies are becoming truly global. At the same time, IT is becoming more utilitarian and more standardized. And broadband is making all of this easier to do. When you put all of those things together, there's inertia in terms of creating jobs in the U.S. The jobs that you used to think of hiring in large numbers-help desk, network management, data center operations, disaster recover, programming-all of those are going to migrate or have already migrated to places other than the U.S. There's no need to be local today. You can work on anyone's problems from anywhere.
Jannsen: The whole bottom layer [of IT] has largely been removed from North America and Europe. A lot of the entry level roles are in India or China.
CIO.com: How will companies fill the mid- and upper-level IT roles at the top of the pyramid if that supporting base of feeder roles is vanishing?
Jannsen: Companies are still struggling with that, and it's going to become a bigger and bigger problem. It requires a change in thinking about how they build talent and where they will find the future leaders. Some will develop special training programs for the handful of folks they need. Others will take the easier route and hire ready-made leaders from the big consulting firms.
CIO.com: You're assuming the big IT service providers will continue to develop such talent in the U.S.
Jannsen: When I worked at EDS, we had big corporate training facilities-whole apartment complexes just full of people. Now those are in Hyderabad or Bangalore. They no longer have that kind of scaling availability here in the U.S.-the bulk may be in low-cost geographies-but they still have tens of thousands in the U.S.
CIO.com: You predict that IT job loss will level off at around 115,000 jobs a year, at least until 2014. What happens after that?
Jannsen: In the corporate world, it's going to be a grizzly picture here. [Net IT job loss] could continue until 10, 15 years from now.
Padron: Even longer. You know, the Chinese are now outsourcing to South Africa because it's cheaper. [U.S. IT job loss] is going to go on for a long time. It could be 50 years.
Jannsen: Companies have to understand the global marketplace. What we have is an asymmetrical talent war. In Asia or India the question is, 'How do I hire 500 people?' In the U.S. it will be, 'How do I hire 5, 10, or 50?' In the U.S., they will be hiring professionals with very specialized industry skills, the ability to manage in the global context, or experience in new technologies.
CIO.com: What happens to those hundreds of thousands of American IT professionals skilled in, say, programming or data center operations?
Padron: I was on a flight to Miami, and I met a 30-year-old QA auditor who had moved to Shanghai from Boise, Idaho. This isn't a high-level management job&mdsah;those jobs are going to some folks in Europe and North America. He was a mid-level manager. This is really becoming a global war for talent.
CIO.com: On the quasi-bright side, you say a weak dollar could mean transformational work will be done onshore. Is limited labor arbitrage really the only reason transformational projects would stay close to home? Are offshore IT organizations capable of handling major corporate change?
Jannsen: Labor arbitrage is still really compelling when you're trying to make your budget for next year. It's a challenge when people go back into growth mode to hire someone for $75,000 [a year] when they can get someone for $25,000. The weak dollar does play a role; it decreases the spread. If there's a violent retraction [in the dollar] for multiple years, we could see an end to this conversation.
Today, I'm hiring people with MBAs for $5,000 per year. They're tier two MBAs, so that would be about $55,000 in the U.S. And I do have to move them to $8,000 or $10,000 in two years. There isn't as much of a delta on the management side. For people with 5 or 10 years of experience, there's not a five to ten-fold difference in price points.