Corporate IT departments in North America and Europe will shed about 1.8 million jobs between 2002 and 2016 due to the wave of offshoring that has occurred during that period, according to research by The Hackett Group.
What can IT workers do to retain positions in the U.S. over the next several years? Share your comments below.
The Hackett Group surveyed 4,700 companies with more than $1 billion revenue in 2010. It found that of the 8.2 million jobs in business services at the start of 2002, only about 4.5 million will still exist in 2016. The study also covers jobs in finance, human resources and procurement, but found IT bearing the brunt of the offshoring trend, with the steepest spike coinciding with the recession in 2009. Not all the jobs cut were sent offshore; other reductions in head count can be attributed to automation and improved productivity.
Another 270,000 IT jobs will be moved to India and other low-cost regions by 2016, but the report predicts that offshoring will begin to decline by 2014 and eventually cease altogether in the next eight to 10 years simply because there are no more jobs suitable for offshoring. Yet until 2014, about 54,000 additional IT jobs a year will be offshored.
Michel Janssen, Hackett Group chief research officer, said in a press release:
That trend is going to continue to hit us hard in the short-term. But after the offshoring spike driven by the Great Recession in 2009, the well is clearly beginning to dry up. …
This situation presents a challenge for U.S. and European companies, who have come to depend on increased offshoring to help drive down their costs… But other opportunities for improving efficiency still exist, particularly automation, and end-to-end process improvements to streamline how business services are provided.
The research shows 1 in 3 jobs in operational IT have been sent offshore, as have 15 jobs that it calls “knowledge-centric,” defined as infrastructure development, application development, implementation and similar jobs.
At the same time, jobs are being created, especially among technology-dependent small businesses. This information-intensive economy requires people with management and analysis skills, which generally require a close tie to core operations.
In an interview, Janssen told me that there’s no indication that all IT jobs will be sent offshore, but likened it to moving management out of the data center. If it could be done next door, now it also can be done 5,000 or 10,000 miles away. Jobs such as data-center monitoring or security monitoring remain at risk for offshoring. He explained:
We used to think they could only do low-end jobs, but now, any job you could do in Dallas, you can do in Mumbai. The biggest differences will be if you want to look the person in the eye, sit in conference room with them to go through specs….
Companies will not move jobs that are highly contextual to the business, if, say, you’re in insurance and working with customers. Jobs in which you talk to customers to understand their business requirements will be the safest. Or if you have high-end customers and you need to sit next to them to fix their PC … or you have to actually be there to install the technology.
He advised IT pros that the best career strategy is to focus on customer contact and business context, explaining:
It’s not about being expert programmers, it’s about being expert problem-solvers.
Upcoming Hackett Group research will show that the models for IT careers are broken, he said. Rather than taking on new graduates, as in the past, and teaching them the EDS way or IBM way, rotating them through the company’s various functions, companies send the low-level work offshore, meaning new hires fail to learn the business from the bottom up. “Now they no longer have a base and there’s no natural flow of senior talent,” he said.
He advised job seekers to seek out multinationals that offer rotations in other parts of the world:
If you expect to be a global person, but you’ve only been in Toledo, you don’t understand the world. You don’t understand the world until you’ve lived it.
The report notes that companies will have to be at the top of their game to retain top talent. And it’s important, at the same time, to notice that this research only focuses on large companies. While smaller companies might be more apt to rely on managed services, they also might be more likely to keep their remaining IT staff on site.