Firm predicts IT jobs are moving to outsourcing

As many as 35 per cent to 45 per cent of U.S. and Canadian IT workers will find themselves replaced by contractors, consultants, offshore technicians and part-time workers by 2005, according to a report issued this week by New Canaan, Conn.-based Foote Partners LLC.

And though some analysts and IT labour experts said those figures, while eye-popping, may not be far-fetched. Four high-level IT managers said the predictions probably won’t apply to their companies. For them, outsourcing hasn’t proved to be a lower-cost alternative to keeping IT inside corporate walls.

“While there are times where I’d love to throw something to the outsourced den, so far we’ve found that it wouldn’t be cost-effective for us,” said Amy Courter, vice-president of IT at Valassis Communications Inc., a Livonia, Mich.-based marketing services firm.

“We do everything in-house,” said John Studdard, senior vice-president and chief technology officer at Lydian Trust Co. in Palm Beach Gardens, Fla. “The reason we’ve been successful in light of 9/11 and the economy and the bursting of the dot-com bubble is that we’re in control of our own destiny and not locked into long-term contracts that may or may not be relative to our business anymore.”

Nevertheless, David Foote, president and chief research officer at Foote Partners and a Computerworld (U.S.) columnist, said American companies “can’t afford to do application development in the U.S. anymore. The nature of the business has changed.” Foote said he based his estimates on surveys his company conducted last year with 1,880 private-sector and government employers, which were asked what percentage of their future IT workforces will be in-house vs. external.

Foote’s timeline for such a massive workforce shift “is a little aggressive,” said Maria Schafer, an analyst at Meta Group Inc. in Stamford, Conn. “It will be after 2006 before we get to that point.” Schafer added that she still thinks application development and Web design are growth areas for IT workers in the U.S.

But the shift of technical work to offshore operations by many companies “doesn’t bode well” for U.S. IT workers, Schafer said. Some types of IT work can be done for 20 per cent to 50 per cent less cost in places such as India, Eastern Europe and parts of South America, she said.

Although Foote’s prediction “sounds radical now, it’s not too far off the mark,” said Jeremy Grigg, a New York-based analyst at Gartner Inc. “You’ve got this wholesale rush to the door for external, offshore services.”

Still, William Finefield, CIO at the Navy Exchange Service Command in Virginia Beach, Va., said he doesn’t foresee any rush to outsourcing at his organization. “Our experience has been that it costs us more to go outside [for IT services] than it does internally,” he said.

A previous outsourcing deal went sour for Steve Hammond, vice-president of information services at Plasti-Line Inc. in Knoxville, Tenn. Nine years ago, Plasti-Line outsourced its IT operations to what is now Accenture Ltd. But after running into problems with the contract, Plasti-Line opted not to renew the five-year agreement and began moving workers back in-house, Hammond said.

“We do ramp up and down on resources with contractors,” he said. “But as far as flat-out outsourcing, we’ve looked at that and haven’t seen the financial returns.”

Foote and Grigg said IT workers facing displacement should retrain themselves in project management or technologies such as IT security and wireless networking.