Offshore Threat to IT Jobs: Overblown or on the Money?

Ann All

TechRepublic's Jason Hiner pulls a stat or two from a Society for Information Management report on tech spending that I referenced in a post last week to lead off a discussion on whether companies are having trouble filling IT positions and whether offshoring's impact on U.S. IT jobs is overblown.


While the IT leaders surveyed by SIM plan to spend more on outsourcing (both onshore and offshore) next year, notes Hiner, it still accounts for just over 5 percent of projected 2009 budgets. The amount of money allocated for outsourcing peaked at 4.2 percent of budgets in 2006 and declined the past two years. Offshore outsourcing will account for 5.6 percent of 2009 budgets, less than the 6.2 percent earmarked for domestic outsourcing and 33.7 percent that will go to internal staff. (This is by far the biggest line item, dwarfing software in second place at 16.3 percent.)


Not only that, says Hiner, but many companies are struggling to fill IT jobs. He quotes incoming SIM President Peter Whatnell, Sunoco's CIO:

There's the attractive companies like Intel, Google, and Sun that have to beat people off with a stick, and [then there's] the rest of us who have to work to find people.

Jerry Luftman, SIM's VP of academic community affairs, faults the media for making it sound as if massive numbers of IT jobs are being offshored. Christine Bullen, a senior lecturer at the Stevens School of Technology Management who has participated in past SIM research projects, took a similar stance when I interviewed her in September 2006. Enrollment in university IT programs hasn't been as strong as it should be, she said, due to pessimism following the dot-com bust and negative hype about offshoring, especially from vocal commentators like CNN's Lou Dobbs. She said:

Together these issues communicated to young people that there were no career opportunities in IT. However, these knee-jerk reactions were na�ve, as they were not based on really understanding the needs of the marketplace.

Like Luftman, Bullen stresses the importance of working with universities and even government entities to promote IT career opportunities. But based on some of the comments following Hiner's post, maybe it'd also be a good idea to work with employers to promote the idea of recruiting with a relatively open mind and willingness to provide training in desired skills.


Many of Hiner's readers don't believe there is an IT labor shortage. In a poll of 818 readers that appears after Hiner's post, 55 percent of respondents say there is no legitimate shortage of IT talent. Not only that, but several readers who posted comments say that potential employers are seeking highly specific capabilities rather than good all-around tech skills and ability to work with a variety of platforms. Writes a reader called Arsynic:

HR and management have no idea what they want. They create all of these insane requirements and wonder why they can't find anyone qualified. I see a lot of Cisco shops like this. They want to see experience on one specific piece of hardware when you've worked with much more complex hardware from the same vendor. ...

This echoes my March post about a Baseline article that implied the IT labor shortage was a "self-serving myth." Among the folks cited in that article were the Urban Institute's Hal Salzman, who has produced research that indicates that America's universities produce a more-than-adequate number of science, technology and engineering students to meet available job demand. Salzman told Baseline that the industry is experiencing "hiring difficulty" due to "unrealistic expectations" rather than a true shortage. A money quote from Salzman:

I once had a manager talking about difficulty in finding a Java programmer with ten years Java experience and who he wanted to come into a mid-level Java position. Java's been around for what, 12 years now? There are probably not a lot of these folks around who have that much experience and who are willing to work at that level.

Hard statistics on offshoring are hard to come by, as I wrote in August, and several academics have conducted research that seems to support Hiner's conclusion that "the IT offshoring trend is greatly exaggerated."


What do you think?

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Add Comment      Leave a comment on this blog post
Nov 18, 2008 5:48 PM Virgil Bierschwale Virgil Bierschwale  says:
Some good points.I write about this all the time at http://www.KeepAmericaAtWork.comYou may want to look at the article "Your wages do matter" to see the damage we are doing to our country.All of the things in the news today, sub prime, bailouts, etc. are SYMPTOMS of what we are doing to ourself by transferring our operating capital to non-democratic countries that do not believe in our way of life via the purchase of oil and labor and these same countries are using our money to buy our assets.Where is the sense in that ?You might also enjoy an article I wrote recently titled "You are going to go bankrupt" at the same site.Regards,Virgilhttp://www.KeepAmericaAtWork.com Reply
Nov 24, 2008 10:07 AM Frits Frits  says:
The offshore outsourcing is getting all the attention, it is causing a job loss by definition, but it is not the big loss that people think it is. Most of the loss is felt in cutting back on staff due to budget cuts, and outsourcing is one strategy to backfill positions "as needed" because any impact of on-again/off-again budget decisions are also offshored. People in India or China have less recourse when they are let go: that is one of the main reasons for outsourcing (onshore or offshore). The cause is that IT tends to be poorly aligned to corporate strategic goals and objectives, because many IT leaders are technical but not business minded. Intel does not have problems like that because IT is automatically aligned to business (that does not apply to loss of sales volume that could have a ripple-effect which is outside the scope of this article). Most of the outsourced work is "commodity" work where there is no complex integration with local facilities, so cost savings are a great motivator. Since that is always a small portion of the big budget it hasn't been a big issue until now: that is because the strategic initiatives (that depend on local people) are put on hold. I don't think you can begin to find a solution until you put the focus where it belongs: outsourcing is more or less a smokescreen and it appears to be quite effective. Reply
Nov 25, 2008 6:55 PM Nicholas Saccleris Nicholas Saccleris  says:
Speaking only from personal experience at Merrill Lynch, there is massive insourcing/outsourcing. Our distributed capacity planning group has 4 people in Singapoor, 6 in India, one insourced from India, 2 local consultants working for Satyam(at insourced wages), 1 employee and 1 consultant. Outside my group, there is a very high percentage of workers from India. However, I do believe Merrill Lynch is probably one of the most aggressive companies doing insourcing/outsourcing. My assumption is that outsourcing is not as extensive at other companies. Reply
Dec 5, 2008 1:03 PM Michael N. Burch Michael N. Burch  says:
I could be mistaken, Ms. Hall, but I would wager you are not, nor ever have been, employed by the IT industry. Would you care to come to work for my company for a while and see how "exaggerated" offshoring reports are? It used to be treated like the red-headed stepchild that no one wanted to talk about. Now it's touted in a most open and brazen manner on corporate-wide town hall meetings, apparently with no concern whatsoever on the part of the upper-level managers running the town hall - whose jobs, or families, will NEVER be impacted by offshoring, by the way - that the very people who are listening in are the ones whose jobs will soon be sent to a euphemistically named "Best Shore" location such as India, China, or South America. Reply

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