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December 14, 2003

Reich on IT Jobs

Here's the bad news, quantified:


I.T. employment is down 20 percent since early 2001. Salaries are down too. In 2000, senior software engineers earned up to $130,000. The same job now pays no more than $100,000. In 2000, entry-level computer help desk staffers earned about $55,000; now, $35,000.

This article on jobs in my part of the industry has got me thinking. I'm glad that somebody has put some numbers on the table because our collective paranoia hasn't been especially useful.

Global outsourcing is a small factor relative to the bad economy and the productivity gains wrought by automation. The number of IT jobs sent abroad still accounts for a tiny proportion of America's 10-million-strong IT workforce. But there's no doubt that the trend is gathering steam.

While the words on everyone's lips has been 'outsourcing', how many IT jobs can actually go to India? To hear folks talk, you'd think "all of them". Acting as if this was true we've all been looking for work that we think cannot be outsourced. We've been mumbling and grumbling. But here's some perspective:
India, where the bulk of foreign IT jobs are, already has 520,000 IT professionals. It's adding 2 million college graduates a year, many of whom are attracted to the burgeoning IT sector.

Wait. Only half a million in India compared to our ten million? One out of twenty? That's a breath of fresh air, and it eases my mind. A month ago when I almost had to move to Detroit to do a one year contract with Lockheed Martin, I was told during the interview process that the financial data warehouse (my particular genius) was one of the only functions not being outsourced. Even though I didn't get the gig (they wanted somebody a lot less qualified and therefore likely to bolt if and when the market came back) I was feeling rather lucky. It's true that this is a very hard job to pull off, even when everyone is from the US, it's difficult to imagine how it could possibly be outsourced well. But folks like me are not quite as rare as I thought.

I've been thinking, especially since my partner happens to have 150 staffers on call in India, how certain jobs can or cannot be outsourced. As I am going downmarket into the Russell 2000 rather than the Fortune 500 where I had been all my career, I would like to believe that these IT managers are a lot less likely to outsource. This is primarily because they are not likely to undertake massive projects where labor costs are an obviously tempting target. At the same time, I can see that these smaller companies are more likely to need the potential cost reductions. So I'm very curious to see how manageable such outsourcing can be and what mid-cap companies think.

I think that Reich is right on the money with regards to the risks.

First the risk. Outsourcing—especially to a country 10,000 miles away—increases the possibilities of loss or theft of intellectual property, sabotage, cyberterrorism, abuse by hackers and organized crime. Not much of this has happened yet. But as more IT is shipped abroad, the risks escalate. Smart companies will keep their most important functions in-house, at home.

Second is quality control. The more complex the job order and specs, the more difficult it is to get it exactly right over large distances with subcontractors from a different culture. In a recent Gartner survey of 900 big U.S. companies that outsource IT work offshore, a majority complained of difficulty in communicating and meeting deadlines. So it's unlikely that the most complex engineering and design can be more efficiently done abroad.

Third is the competitive pressure for continuous innovation. Even as they ship out "commodity" IT work overseas—including software maintenance and support, and even infrastructure support—the best companies are simultaneously shifting their in-house IT employees to more innovative, higher value-added functions, such as invention, integration, key R&D and basic architecture. Companies need to continuously nurture these core creative activities, which are at the heart of their competitive futures.

So even though one out of five of us has lost our jobs, and I keep hearing stories about folks who are learning how to sell real-estate, there's some hope, and it depends mostly on our economy, not a threat from abroad.

Buy socks. (or SOX as the case may be)

Posted by mbowen at December 14, 2003 05:24 PM

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Comments

I "had" been working in the IT industry since the mid-80s and after several layoffs and more recently a relocation (where I left a very good IT management position in the northeast), I found myself in an economy that produced few IT prospects. I recall only a few years ago our phones rang off the hook once we placed our resumes on Monster, Careerbuilder, etc. Well, after months of trying to obtain a comparable position in my new area, I finally settled for the first non-IT job I've had since the start of my career and at almost half the salary. I hope all of the predictions are and aren't true. We IT folk have definitely been devalued and with the "gold rush" mentality of so many entering the IT field during the last 5-7 years or so, the field is now quite saturated. I long for the "old days."

Posted by: Deb at December 14, 2003 08:36 PM

Two years ago, I attended one of those pricey tech schools for comp. networking. Never worked one day in the field. Upon graduation, the bottom fell out in the field. I stayed in healthcare. As of three weeks ago, I became unemployed. I've been advised to go the Monster.com and CareerBuilder route, which I will do, but I dont feel terribly hopeful. Does anyone have any suggestions for me??

Posted by: Liz at December 14, 2003 09:27 PM

If you are certified on your networking skills, it probably won't be as hard as you think. Network techs don't get outsourced, you have to be onsite. Definitely check out craigslist.org for jobs in your town. You get credibility just for knowing craigslist exists.

Secondly, set up some alerts from Monster so that it's sending jobs to you. Also don't forget Dice.com which is more techie than Monster or CareerBuilder.

Also check out Google Groups for whichever kind of networking you know. Check your skill level against the conversations going on there. It will save you some grief to hear the kinds of problems and solutions you are likely to come up against in the real world. Understand that in computing as in martial arts there are many degrees of black belts. People may be telling you that you're an expert, but don't believe it until you start solving problems.

Posted by: Cobb at December 14, 2003 09:48 PM

Thanks Cobb! Thats the most* solid advice I've been given in 4 years. I will be taking those suggestions. :)

Posted by: Liz at December 14, 2003 11:37 PM