Article: Why IT Jobs Are Never Coming Back

pinkydapimp

Interesting article. Thoughts?


Why IT Jobs Are Never Coming Back CIO.com

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.
CIO.com: But what about management overhead and other hidden costs that can erode those labor savings—have those diminished?
Jannsen: It's gotten a lot easier to manage in terms of basic fundamentals. There are two parts to that—problems on the U.S. side [of the offshore engagement] and problems on the Indian side. They are both more mature. But if someone tells you they're having problems with their team in India, it usually means the problems actually exist on the U.S. side. The ability to work on a global basis is more challenging for U.S. [IT organizations]. I have a lot of my research written in India today. They used to only provide charts or data.
Padron: It's becoming a moot point, because you are going to have to manage a global workforce anyway.
CIO.com: You write that captive offshore centers are the dominant model for the globalization of IT support. In recent years, a number of large companies sold their offshore IT centers. Is that trend reversing?
Jannsen: A few years ago, a number of offshore players and some domestic providers were looking to expand their global footprint and the easiest way to do that was to buy someone's [captive] operations. Proctor & Gamble's [sale of its captive centers] was a big one. But there's not a lot of selling going on right now because there aren't a lot of new entrants that need footprints.
Padron: Global shared services centers have accelerated beyond IT to other functional areas. According to our research, 65 percent of companies are leveraging the P&G model and putting it all together—IT, finance, HR, procurement—as a global business services center. Captives are still growing and companies that know how to do business offshore prefer it because they get to keep all the labor arbitrage benefits.
CIO.com: Who oversees these global service centers—the CIO?
Padron: Some are under the CFO because they started in finance, but they're migrating away from that. Sometimes, the CIO is in charge, particularly in companies with a business-oriented CIO like Merck or P&G or Dow.
CIO.Com: Offshoring isn't the only culprit in the loss of U.S. IT jobs; automation has also played a role. Which is having a bigger effect on employment prospect s for American IT professionals today?
Padron: Automation is still the preferred labor arbitrage strategy. Many companies have implemented great, new infrastructure and are saying how do we go to one instance of ERP, for example? How do we automate the next stage of work?
Jannsen: Automation has been the primary driver (of U.S. IT job loss). Looking forward, offshoring will have the biggest impact.
CIO.com: At what stage is U.S. corporate IT in coming to terms with the new global—and asymmetrical—war for talent you describe.
Padron: The first thing that went offshore was the help desk and the data center. The next thing was programming. That's lagged a bit because companies still have a lot of legacy code—spaghetti code, some non-standard thing unique to that company—and it doesn't make sense to send that somewhere else. But as the next wave of standardization happens in the next few years, those unique requirements are going to go away.
Jannsen: One other constraint is the scale issue. Companies that are $5 to $10 billion [in revenue] are ahead of other companies. Globalization is just part of doing business. But if you're a midsize company in the Midwest. it takes a lot longer. They need to go that extra mile to compete globally. The only other option is automation.
Padron: A lot of what's inhibiting companies that should be doing this is cultural. There's a lack of management team understanding of how to do business in a global setting. They're just doing things the way they've always done it.
CIO.com: What IT roles will remain stateside for now?
Padron: You have to separate the back office side from the customer facing capabilities. You'll see folks who can better integrate supply chains and do design and architecture. Customer and relationship management, those higher level strategic jobs will be retained.
We're not saying innovation in IT in the U.S. is dead by any stretch. A lot of innovation will continue to come from the U.S., but the masses of jobs will be elsewhere. We'll still see U.S. innovation in cloud computing create wonderful capabilities, but if it requires masses of programmers, they will be elsewhere.
Jannsen: Innovation will continue. It's an important part of who we are in the U.S. That combination of capital flow and entrepreneurialism is unique to America.
CIO.com: But aren't countries like India maturing in terms of IT innovation capabilities as well?
Jannsen: That's the scary part. They will get there. It's one thing to get cost savings from less strategic parts [of the corporate IT portfolio]. But at some point, Infosys is going to be just as innovative as IBM.
Padron: And some of the IBM innovation is not done in the U.S. anymore. The economic world is ahead of the geopolitical world.
CIO.com: Is corporate IT—and U.S. IT job loss—a bellwether for other corporate service functions like finance or HR?
Jannsen: Finance is catching up in a big, big way. IT was leading the pack. In three to five years, there will be just as many finance jobs lost as IT jobs. HR will take a little longer because it is a business-to-consumer function while finance and IT are business-to-business.

Bl8ckr0uter

Scary but probably accurate.

pinkydapimp

Bl8ckr0uter wrote: »

Scary but probably accurate.

yea, this is where i have thought IT was headed for a while. I think if you want to stay in IT you really are going to need a BS degree and some business savvy or management type experience. They can outsource all the tech stuff. But you will always need someone to mange the projects, people or jobs you outsource. i do think there will also be tons of jobs working for software and hardware vendors if you have project management and people skills and are able to be customer facing.

ETA i dont think they can completely outsource everything. There will still be a need for a few onsite people. But just not many like there used to be or even like many places have now.

earweed

Scary to see these stats and read his predictions. What is bad is that there are still so many schools (not just for profits, either) touting IT as a field to get into. To think that the elimination of more jobs will continue for 10-15 years is really kind of scary.
I know of several companies who offer services such as helpdesk where it is just outsourced from the actual company to a more centralized unit, I've interviewed with a couple. Hopefully more companies will use US companies such as these and keep some of there lower level, and even mid-level, IT jobs here.

NetworkingStudent

pinkydapimp wrote: »

yea, this is where i have thought IT was headed for a while. I think if you want to stay in IT you really are going to need a BS degree and some business savvy or management type experience. They can outsource all the tech stuff. But you will always need someone to mange the projects, people or jobs you outsource. i do think there will also be tons of jobs working for software and hardware vendors if you have project management and people skills and are able to be customer facing.

ETA i dont think they can completely outsource everything. There will still be a need for a few onsite people. But just not many like there used to be or even like many places have now.

Dell moved product support for business accounts from India back to the U.S. It seems some customers were not happy with the prior arrangement.
Dell can assemble and ship a new computer for a customer in 24 hours. But it took six months for the company to get Karen Anderson's name right. Anderson, who lives in Calistoga, Calif., endured dozens of phone calls before Dell issued her a promised $200 rebate for a computer she ordered last October. Dell also gave her the wrong Internet service provider. And her printer broke. "I just want to scream when I see Dell's TV commercials," Anderson fumes.
Dell moves outsourced jobs back to U.S. shores - Business - Forbes.com - msnbc.com

This story gives me hope. One thing this story doesn’t mention is that I believe it’s hard to outsource computer security jobs.

tpatt100

NetworkingStudent wrote: »

Dell moved product support for business accounts from India back to the U.S. It seems some customers were not happy with the prior arrangement.
Dell can assemble and ship a new computer for a customer in 24 hours. But it took six months for the company to get Karen Anderson's name right. Anderson, who lives in Calistoga, Calif., endured dozens of phone calls before Dell issued her a promised $200 rebate for a computer she ordered last October. Dell also gave her the wrong Internet service provider. And her printer broke. "I just want to scream when I see Dell's TV commercials," Anderson fumes.
Dell moves outsourced jobs back to U.S. shores - Business - Forbes.com - msnbc.com

This story gives me hope. One thing this story doesn’t mention is that I believe it’s hard to outsource computer security jobs.

I think outsourcing security jobs is just one part of it. This whole "cloud" concept is not going to fly for long when the government and private sector starts to finally implement actual standards. Having your stuff "out there" and companies not being up front where "out there" actually is will lead to issues. I know for my line of work no information can be just thrown out there to some third party hosted in the middle of no where. I think it will take something serious happening where important information is compromised and come to find out it was being hosted in China.

I also see automation reducing the number of people needed that is a no brainer. I know desktop support is being automated/centrally managed out of existence in the bigger companies. Help desk also. But it is interesting the article saying that if you outsource all your entry level lower paying jobs where are you going to get the mid level workers?

eMeS

With all due respect, I read an article in CIO magazine in the mid-90's that claimed that by the year 2000 that all of the IT hardware required to run the US financial markets would consist of 1 48u rack of equipment and thousands of people would be out of jobs.

I wrote them off after that...but I do remember reading an article from them a couple of years ago about the how successful the State of Texas' state agency IT consolidation SOA project was. This is the same project that the state issued notice to the prime vendor to cure material breaches and is seeking other bids to complete.

This article is somewhat wrong about what went first in offhsoring. It was always development. My first exposure to offshoring was in the early 1990's, and it involved development jobs moving to Ireland. Many companies did this in the early 90's. This was a good decade before significant offshoring to India was under way.

IT journalism is rarely aligned with IT reality.

Right now the trend is to sacrifice everything for cost. Trends change, and so will that one.

Besides, in 10-15 years we'll all be doing very different things.

MS

MechaniX

As with any article written about the future of the IT industry, I take this with a grain of salt. There are quite a few jobs that companies will not want outsourced, such as security. Not to mention that there has been a huge backlash recently (corresponding with the Dell article above) dealing with the inadequate quality companies have been receiving from overseas. Regardless of how long you train these people, the fundamental issues of mismanagement and cultural/ethnic difference will almost always end with customer service issues. This is coming from an IT professional who had been working with members of my team being in India for over three years, and having to deal with the overall discrepancies.

In the end, I see IT outsourcing eventually plateauing. Will a company like Dell outsource? Of course. What about HP? You bet. But I believe that market of Small/Medium businesses really wont deal with this, and you will see their support staying local. A company 50 people strong won't outsource their IT department in most cases, it's just too daunting.

In fact, the company I work for withdrew their teams from India (counting about 280 people in total) and moved those operations back here. They figured out that moving the operations back here, and slashing the jobs from 280 to 150 would still save them a substantial amount of money, while also dumping excess weight and increasing the integrity of our work. Best thing was that with that move, most of the former employees from India made the choice to stay there, so we were able to fill out a bunch of great IT jobs here when the market was quite dry.

That's my two cents on the matter, take it with a gra......a lot of salt.

Hypntick

I can see the reverse happening with help desk type jobs as well. When doing support for my last job I talked to a lot of people whose companies off-shored their IT departments. I would consistently get calls about things we had no control over or could not fix specifically because they did not want to call their own help desk. Got a lot of "Thank god you're in the US!" type responses as well.

Joe in accounting doesn't want to call India or China for help anymore. I think any company that's worth a dang is going to at very least try and take into account the happiness of their employee's. Hopefully those who have a corporate culture that doesn't care about their employee's and only the bottom line will fade away over time.

veritas_libertas

This stuff always goes in waves and always will. I'm just not convinced that we are all going to lose our jobs to India and China. If anything I believe that eventually more jobs will start heading back home.

At my current job the Help Desk is outsourced to IBM. Last year most of our support was in India and (believe it or not) Ireland. This year because of complaints our IBM Help Desk is based out of Colorado.

I could be wrong with my predictions but there is a lot more to outsourcing than just storing your data in another country. What about Desktop Support? What happens when the Internet drops and all your data is stored New Dehli or Shanghai? What happens when your data stored in a foreign country is stolen?

sidsanders

dealt with infosys before and a few others. dragged the infosys work back after that failed. dealing with outsourced internal support has been terrible. anything even close to "out of scope" costs extra $$$, and the in scope items are poorly done. i had to lead "the horse to water" for an exchange related problem and it still didnt get done correctly, as one example. i have TONS of awful experiences...

other folks probably havent had bad things with offshore items, and just as many bad with groups who are on site (not outsourceded).

eansdad

Like I've said before some jobs can't be outsourced to other countries. Sure you can send programming and help desk jobs away but hands on will always need to be close by. That doesn't mean the company will not outsource to a foregin company that hires locals or a local staffing agency. As long as things break there will always be a need for someone close to fix it. In 10-15 years job roles might be blurred more then they are now (ie all in one support instead of specific roles) but they will be here not there. Continue your schooling and keep up with new tech and you should be fine. IT is not your basic get a job and survive for 30 years until retirment. A lot of people in IT move around as their skill level increases.

10 years ago an A+ was enough to get you in the door. Now we are getting into AS degrees and 1-3 certs. In 10-15 years we might need a BS and several certs for entry level. Maybe we can become like doctors where after tons of schooling (which we seem to do anyway) and certs we too can earn big money....

earweed

I don't necessarily think outsourcing is a bad thing ( as long as it's outsourcing and not offshoring). Consolidating things is a way for the corporations to make money but let US companies reap the benefits. As you can tell I'm not totally in favor of the "global economy" when it affects having available jobs here in the US.

Also +1 on what Veritas said about what happens when our data is in some foreign country and no telling who is looking at it.

tpatt100

I am not even sure outsourcing software development overseas will even be possible with possible future requirements. If anything the demand for software security professionals will rise for people who can go through software and audit it properly to make sure its ok.

higherho

I can picture foreign countries developing code for people in the US. Not removing any backdoors in their software and just allowing them to get right into your system


IT will never be fully outsourced and I doubt it will be that major of a threat like this article claims.

ehnde

In 5 years we'll all be replaced by robots. By 2020 the people that work on the robots will be replaced by robots.

eMeS

ehnde wrote: »

In 5 years we'll all be replaced by robots. By 2020 the people that work on the robots will be replaced by robots.

Actually I think this is the more likely scenario, but I put the time frame at 2030's - 2040's...

MS

rwmidl

Hypntick wrote: »

I can see the reverse happening with help desk type jobs as well. When doing support for my last job I talked to a lot of people whose companies off-shored their IT departments. I would consistently get calls about things we had no control over or could not fix specifically because they did not want to call their own help desk. Got a lot of "Thank god you're in the US!" type responses as well.

Joe in accounting doesn't want to call India or China for help anymore. I think any company that's worth a dang is going to at very least try and take into account the happiness of their employee's. Hopefully those who have a corporate culture that doesn't care about their employee's and only the bottom line will fade away over time.

I worked for a company years ago that moved all helpdesk/Level II/III support to a center in China they owned. There were problems with this from the start:

1. They kept all of us in IT (our job description/scope was changed). the front line users were confused and we heard quite often "why do we need to work with someone in China when you are three desks down from us?"

2. Communication. The new center wanted you to chat/email/log a ticket for an agent to help them. They had an 800# to call, but it was hardly answered. When it was, there was such a language/accent gap that I heard it was impossible to explain what you needed and what the agent was saying.

3. Support. When users went to the help center for assistance, quite often they would bounce the ticket back over to resolve the issue if it was something they could not fix via remote desktop, etc. Again this goes back to the statement in #1 "why do I have to go to someone in China when I can just walk over to you?"

The transfer of the position overseas, the increased stress level and the lack of not going anywhere caused me and quite a few really smart and talented people to leave.

chmorin

ehnde wrote: »

In 5 years we'll all be replaced by robots. By 2020 the people that work on the robots will be replaced by robots.

Let's not forget skynet.

katierose

I'm not really worried about offshoring, but it is scary to think about where I could be 10, 20, or 30 years from now. I'm only 22. My worst fear is that one day my certifications and education will all be useless and I'll be struggling to survive moving into another career. I love technology, so I hope I can stay in this area at the very least.

My father was in construction and because of the recession he has been out of work for years now. It's incredibly depressing to see him struggle everyday while I am out doing great for myself. Nothing lasts forever.

veritas_libertas

katierose wrote: »

I'm not really worried about offshoring, but it is scary to think about where I could be 10, 20, or 30 years from now. I'm only 22. My worst fear is that one day my certifications and education will all be useless and I'll be struggling to survive moving into another career. I love technology, so I hope I can stay in this area at the very least.

LOL, I wouldn't be worried about that. Technology just fluxuates and unless your working at a Help Desk or doing Desktop Support you will probably just keeping moving up the ladder. At your crazy speed you could be CIO in ten years

brianeaglesfan

katierose wrote: »

My worst fear is that one day my certifications and education will all be useless and I'll be struggling to survive moving into another career.

That's why I am so big on education, and while I pursue credentials to advance in this field I'm also looking for those that will provide flexibility down the road. Already have a BSBA (in CIS, mind you) and just completed an AAS in Accounting.

katierose

veritas_libertas wrote: »

LOL, I wouldn't be worried about that. Technology just fluxuates and unless your working at a Help Desk or doing Desktop Support you will probably just keeping moving up the ladder. At your crazy speed you could be CIO in ten years

Haha that would be awesome. I guess you can't really go wrong once you gain experience in management within any field.

tpatt100

ehnde wrote: »

In 5 years we'll all be replaced by robots. By 2020 the people that work on the robots will be replaced by robots.

jmritenour

katierose wrote: »

I'm not really worried about offshoring, but it is scary to think about where I could be 10, 20, or 30 years from now. I'm only 22. My worst fear is that one day my certifications and education will all be useless and I'll be struggling to survive moving into another career. I love technology, so I hope I can stay in this area at the very least.

I'm with you there. I'm always leary that my knowledge and skills will be obsolete, just like printed circuit boards and lowered production costs more or less killed off the electronics repair industry. When's the last time you saw an actual television repair shop?

mikej412

I knew if we waited a day or two a "news article" with the opposing view would appear:
http://www.techexams.net/forums/jobs-degrees/60913-best-career-2011-article.html

Which is it? Jobs not coming back or 54%/32%/14% (less some outsourcing to offshore locations) growth?