An uncertain future for the IT workforce continues to loom

It’s the million-dollar question: “What is happening in the IT job market?” The question that often follows: “When will it get better?”

Don’t expect improvements any time soon. Respondents to the InfoWorld (U.S.) 2003 Compensation Survey believe IT staffing levels at their companies are not likely to rise in the near future. Only 12 per cent of respondents say their companies increased internal IT staffing in 2002, and only 15 per cent expect their companies to increase staffing this year.

The Compensation Survey findings are mirrored in another U.S. IT workforce study released in May by the Information Technology Association of America (ITAA). Surveying 400 hiring managers from IT and non-IT companies, the ITAA found that projected demand for IT workers has dropped to 493,000 positions for the next 12 months. That’s less than half of the 1.1 million IT positions that ITAA had predicted would be needed for 2002.

Outsourcing, autonomic computing, and increased system reliability may further weaken demand for IT workers. “It will be easier to buy IT ‘off the shelf,’ ” said Peter Cappelli, professor of management at The Wharton School of the University of Pennsylvania. “Unless there’s a paradigm break, the job market will remain soft for the next few years.”

Overseas competition is also taking its toll on the U.S. domestic job market. According to ITAA’s report, 12 per cent of IT companies and three per cent of non-IT companies surveyed say they have opened up overseas operations. Large IT companies were most likely to say they’ve made this change – 22 per cent have already moved work offshore. Additionally, 15 per cent of IT companies say either they will move jobs overseas in the next 12 months or they remain undecided. Only four per cent of non-IT companies say the same.

In the long term, there might be hidden benefits to outsourcing abroad, says Alister Piggott, chairman of Morgan Howard, an executive search company in Stamford, Conn. “Outsourcing allows companies to take out the bloat and invest in new areas. (Companies) will invest the perceived extra capital into their people, taking them up a notch.”

He predicts that Egypt and South Africa will emerge as lower-cost centres for IT outsourcing.

Overall, Piggott is optimistic about the future. “The IT job market will improve because the order books are improving now. Companies are saying that they need to upgrade software …. All this is being fuelled by the tech sector. They’ve had enough of cost-cutting and need to start focusing on revenues again …. We’ll see interesting growth (in the job market) in 2004 and accelerated growth in 2005.”

Even if Piggott’s upbeat buying predictions come true, IT salaries will likely remain flat for awhile. “We will see some increases, but not the tremendous bumps like we did in the dot-com era,” said Jack Downing, the managing partner at recruitment company WorldBridge Partners in Chicago.

Downing says there are signs that employers are becoming concerned about employee retention. “Companies are starting to put together compensation models that will keep employees long term, with stock options vesting three to five years out,” he said.

Still, there may be an IT-worker shortage down the road. Companies have expressed an increased need for business-savvy managers but could have difficulty finding them as seven million baby-boomers approach retirement age. And the current lack of entry-level IT openings – the training ground for future managers – may further deplete the pool. “If you look at the next decade, you will see a hiring frenzy worse than (the dot-com boom),” Downing said.

Not everyone shares that view of the future. Piggott says there are factors that will modify any shortage created by retiring IT workers. “Given the (poor) performance of pensions…some retirees (are picking) up consulting work (and will) ease any perceived labour shortage. It all comes down to supply and demand.”


Canadian job market stagnant

Only 13 per cent of the 270 CIOs polled plan to expand their IT departments in the coming months, and nine per cent see staff reductions as a possibility, according to a report released in June by Toronto-based Robert Half Technology. The net increase of four per cent is down five points from the second-quarter forecast. The remaining 78 per cent of CIOs polled expect no change in hiring activity in Q3.

Other key findings highlighted in the report include: