KANANASKIS, ALTA. – Ask a group of Canadian CIOs if they think U.S. IT workers are overpaid. After the laughter dies down, there will be a lot of affirmative head-nodding.
“They are grossly overpaid, certainly relative to Canadian scales,” said Allen Borak, vice-president of information systems at Canadian Pacific Railway Ltd. in Calgary. “It’s quite astounding.”
Borak, who’s completing an IT compensation study comparing wage rates, said IT manager salaries in the U.S. are as much as 25 per cent higher than those for similar positions in Canada after being adjusted for the currency exchange rate. “I was surprised by the difference,” he said.
Some Canadian CIOs suggest that a key reason U.S. workers are facing a larger offshore threat than their northern counterparts is because of their high pay. They see evidence of such high wages when U.S. providers bid on consulting services with hourly rates of US$200.
“The American market is overheated,” said Michael Finlayson, national manager for information services at Toyota Canada Inc. in Scarborough, Ont. And IT is “adding high costs into an organization as a whole,” he said.
But Canadian IT executives aren’t ignoring the offshore option, which their U.S. peers use to reduce labour costs.
Alex Federucci, senior manager of information systems and services at Talisman Energy Inc., an oil and gas company in Calgary, said that although offshore pricing pressure has yet to affect Canadian IT salaries, she expects that it will.
Talisman outsources 90 per cent of its IT labor but owns the assets, which outsourcers manage in-house. Federucci said she’s interested in taking some low-risk IT services work offshore. “I think the price is going to go down on the commodity business,” she said.
But because of its lower IT wages and an exchange rate that puts the Canadian dollar at about 25 per cent below the U.S. dollar, Canada is an attractive nearshore outsourcing destination for U.S. companies.
RIS Resource Information Systems Inc., an application development and maintenance outsourcer that sponsored a CIO conference here this week, is seeing steady growth in nearshore work from the U.S.: Two years ago, it accounted for none of its business; now it makes up 15 per cent. The Calgary-based company estimates that Canadian IT salaries are about 30 per cent below those of U.S. IT workers, before the exchange rate is considered.
But even RIS is going offshore to lower costs, having opened a facility last year in Romania. Workers there are paid about half as much as their Canadian counterparts.
Indeed, Borak, who uses RIS for some application development work, wants the company to shift more work to Eastern Europe to give him a “blended rate” that could lower his development costs by as much as 20 per cent.
Some Canadian IT managers said many IT positions, especially those that demand ERP skills, could see a wage increase. “Truly qualified people are difficult to find,” said Janet Topic, vice-president of IT at Trimac Corp., a Calgary-based transportation company.
U.S. companies are also in need of people who have ERP experience, and some firms look north for them, Topic noted. “They actually recruit out of Canada,” she said, adding that some Canadian workers go to the U.S. for those jobs and the higher pay.