The future of jobs and innovation

Scenario one — U.S. stays at the top

By the year 2010, Intel Corp. CIO Doug Busch envisions himself managing an IT staff that’s all over the map — literally. Not only will his employees be working in places ranging from Rio Rancho, N.M., to Parsippany, N.J., in the United States; they’ll also reside in Beijing, Leixlip, Haifa, Penang and a host of other locations Busch has never even been to. Each spot will specialize in a particular area of expertise for the company’s IT department — call centres in Manila, business analysis at company headquarters in Santa Clara, Calif., application development in Mumbai. And a full roster of career opportunities — from entry level to senior leadership — will exist at each and every location.

“Talent will rise to the top, wherever it is,” Busch predicts.

Busch’s scenario may sound a bit like corporate IT’s version of “It’s a Small World.” But the CIO of the world’s leading computer chip maker already oversees IT workers in 27 countries around the globe. And most CIOs (to differing degrees) are headed in that direction.

The part of the picture that strays furthest from Disneyland is what this means for American IT staff. Even without offshore outsourcing, U.S. IT staffing levels were never going to return to their pre-recession highs. The automation of tasks, increased productivity and a reluctance to return to the unfettered IT budgets of yore pretty much guarantee that the demand for American IT professionals is destined to decline. But, incendiary conjectures to the contrary, the entire population of IT workers in this country will not be replaced by counterparts in emerging economies.

Instead, even as 2010 will see a further movement of some IT activities — application development, legacy maintenance, call centre operations — overseas (Forrester Research Inc. estimates that the cumulative number of IT jobs heading abroad will grow from 27,171 in 2000 to 472,632 in 2015), U.S.-based companies will keep work here that requires close contact with the business: strategy development, business process improvement and the actual application of IT to the business.

The net result: There will still be a future in IT for smart young Americans. But the higher-level IT positions that remain stateside will require new skills. Today’s CIOs would be wise to encourage broader business education in U.S. IT degree programs. And increased government and corporate support of IT R&D will be critical to retaining America’s position as an IT leader.

“In the best-case scenario, IT will become a core competency and economic engine in emerging economies, and these emerging economies will complement the U.S. IT industry,” Busch says. “A strong investment in education in the U.S. and intelligent U.S. government policies will produce aggressive investment and innovation, and the U.S. will benefit along with the rest of the world from the economic benefits of IT.” (For a different future, see “Scenario two — Americans Need Not Apply,” below.)

What jobs will go

When it comes to the future of American IT staff, past is prologue. The current trend toward sending some IT work offshore actually began a decade ago, when stateside outsourcing began to gain favour. Companies such as Xerox Corp. inked multimillion dollar deals sending their IT work out the door to outsourcers. Some believed that the rise of the Electronic Data Systems Corps. and Computer Services Corps. would mean the fall of the in-house IT staff. That didn’t happen, but today, with offshore outsourcing, IT workers are not simply shifting employers but in many cases losing their jobs altogether. And at many levels — lower-end programming, call centre tasks, system maintenance and help desk work — that trend will continue.

“Commoditized work will go overseas,” says Peter Cappelli, director of the Center for Human Resources at The Wharton School of the University of Pennsylvania. “Some more creative work — like non-commodity one-off and unique projects — will go overseas. But where interface with the business is important, that work will remain here.”

Nancy Markle, president of the Society for Information Management, believes that high-level IT jobs will remain onshore, even as more routine IT tasks move overseas. It’s hard to argue for keeping certain IT work stateside. The salary for a programmer with two to three years of experience averages US$7,500 in India, according to NeoIT Inc., an offshore consultancy. In Russia, it’s $10,000. In the United States, it’s $65,000. India graduates 75,000 computer scientists each year. The United States, 52,900. China, which currently brings 50,000 new IT workers into the world every year, could eventually provide 200,000 computer science graduates annually, according to Marty McCaffrey, executive director of Software Outsourcing Research.

Bandwidth costs have declined dramatically and should continue to dip, furthering the beneficial cost structure of transoceanic work.

“What will continue to go overseas are the repetitive activities, the things that will ultimately be automated anyway,” says Nancy Markle, president of the Society for Information Management (SIM) and former Arthur Andersen LLP CIO.

“We have to be able to continue to get the best prices, or else we’ll be growing companies offshore instead of competing with the rest of the world.”

What jobs will stay

By 2008, the IT workforce situated in the United States will be 25 per cent smaller than it is today, according to Gartner Inc. But the workers who remain will be more important to the business than ever. They’ll be working on architecture, strategy, project management and business processes, predicts Lance Travis, vice-president of outsourcing strategics for AMR Research Inc.

“A standardized problem can be solved anywhere,” says N. Venkatraman, chairman of Boston University School of Management’s IS department. “But if you need to understand the business and create value, you must be here. It’s very difficult to understand the business context of IT remotely.” Supporting a new product launch, for example, requires close observation and fast response — both impossible if the work is done halfway around the globe.

“If it can be codified, it can be done remotely and supported by IT,” says Travis. “If it is still tacit and requires a lot of unstructured discussion, then it must be done here.”

That need to keep certain activities close to home is one reason why many high-level IT jobs will remain in the United States. Speed and ease of management are two other factors. “Offshore outsourcing ultimately represents a certain loss of control,” says Travis. “It is very dependent on the ability to manage relationships, and you always give up some agility.” When CIOs outsource development to India, for example, it’s much harder to make changes to projects. “Anything beyond the scope of the project is impossible, unless you want to pour more money into it,” says Travis.

Infrastructure, security, communication and project management issues already erode some of the cost advantage of offshoring, says Larry Pickett, CIO of Purdue Pharma LP. If CIOs try to go further up the value chain — sending high-level consulting services elsewhere — IT will be even more difficult to manage, he says.

The IT department at Sun Microsystems Inc. is a test case for the future. “I have a staff of IT people around the world,” CIO H. William Howard says, rattling off cities from Bangalore to Beijing where his IT staff resides. “Any large company is going to position their workers where the talent exists at the best price.” Howard employs about 75 per cent of the IT staff he used to. By 2010, he expects to outsource 50 per cent of noncore activities. He adds, “Does that mean everything will be offshore? No. The things that are core, that are tightly tied to business process and the local business community, won’t.”

However, John Watkins, CIO of Fairchild Semiconductor International Inc., views IT as an enabler of his business and only offshores on a limited, case-by-case basis. “It’s that intellectual capital we need to protect, especially when you’re as integrated in business processes as IT should be,” he says.

Similarly, Cingular Wireless LLC CIO Thaddeus Arroyo sends 10 per cent of his IT work (mostly maintenance work) offshore. But he retains a U.S. staff to keep “new and more complex development close,” from application development related to business process improvement to the integration and customization of off-the-shelf software. Arroyo makes these decisions project-by-project, considering such factors as capability and capacity of his U.S. workforce, the strategic nature of the work, and how closely tied a specific project is to other enterprise applications within the company. And by 2010, he says, CIOs will need to be even more judicious about what they send out the door.

“As we come out of the downturn, there will be even more potential for IT to become the business differentiator,” says Arroyo. “Offshore outsourcing simply allows us to remain productive so we can deliver innovation here.” In addition, the inevitable rise in labour costs in India, Russia and elsewhere could further reduce the cost advantages of offshoring.

Your IT staff of the future

If even 25 to 50 per cent of offshore work does go overseas by 2010, what will the future hold for IT professionals here?

Diane Morello, a vice-president and research director at Gartner, predicts that those who remain in the field will become “IT versatilists, equally at ease with technical and business issues.” Travis of AMR Research calls them 50/50 professionals. Fairchild Semiconductor’s Watkins brings up a similar picture: “The IT cohort of the future has to be a good technologist and protector of technology, but also be a savvy businessperson.”

Will the IT professional of today want the position of tomorrow? Some will and some won’t. “The content of jobs is changing and will continue to,” says David Foote, president of IT management consultancy Foote Partners Llc. “A number of people I know who are really smart stopped working in IT when they realized what it would take to be this hybrid, versatile person. They’ve said, ‘I’m not interested in being a (multitasking) Swiss Army knife. I want to be a big bowie knife.'”

Consider this hypothetical company in 2010, for example. Paul, the Cobol programming expert who once boasted that he spent all day every day for a year doing Y2K remediation, doesn’t work in the IT department anymore. He’s begun a second career as a carpenter and is actually enjoying spending more time with his family. At his old desk sits Bianca, who has an MBA from Boston University. Just back from a two-year stint at her company’s office in Ho Chi Minh City, Bianca has a meeting to discuss a business case for a joint marketing and IT project in the morning, and will review the post-implementation audit of the recent biometrics installation over lunch. In the afternoon, she has a Six Sigma class so that she can effectively manage the development of a CRM project at the company’s Chinese outsourcer.

Like Bianca, the IT applicants of tomorrow will have to position themselves differently. “I tell my students that the job market is forevermore global, not local,” says Venkatraman, who advises his prot

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