Big outsourcing shift predicted for IT jobs

A new report on the IT labour market predicts that 35% to 45% of full-time IT jobs in the US and Canada will be shifted to contractors, consultants, offshore technicians or part-time workers by 2005.

          A new report on the IT labour market predicts that 35% to 45% of full-time IT jobs in the US and Canada will be shifted to contractors, consultants, offshore technicians or part-time workers by 2005.

          And some analysts and IT abour experts say those figures, although eye-popping, may not be far-fetched.

          However, four high-level IT managers say the predictions made in the report issued this week by New Canaan, Connecticut-based Foote Partners 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," says Amy Courter, vice president of IT at Valassis Communications, a Livonia, Michigan-based marketing services firm.

          "We do everything in-house," notes John Studdard, senior vice president and chief technology officer at Lydian Trust, a financial services firm in Palm Beach Gardens, Florida.

          "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 relevant to our business anymore."

          Nevertheless, David Foote, president and chief research officer at Foote Partners and a Computerworld US columnist, say American companies "can't afford to do application development in the US anymore. The nature of the business has changed".

          IT job sharing will also play a role in reducing full-time positions, Foote says. He based his estimates on surveys his company conducted last year with 1880 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," says Maria Schafer, an analyst at Meta Group in Stamford, Connecticut. "It will be after 2006 before we get to that point." Schafer adds that she still thinks application development and web design are growth areas for IT workers in the US

          Cheaper labour overseas

          But the shift of technical work to offshore operations by many companies "doesn't bode well" for American IT workers, Schafer says. The cost of some types of IT work is 20% to 50% less in places such as India, Eastern Europe and parts of South America, she says.

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

          But William Finefield, CIO at the Navy Exchange Service Command in Virginia Beach, Virginia, says he doesn't foresee any rush to outsourcing at his organisation. "Our experience has been that it costs us more to go outside [for IT services] than it does internally," he says.

          A previous outsourcing deal left a bad taste in the mouth of Steve Hammond, vice president of information services at Plasti-Line in Knoxville, Tennessee. Nine years ago, Plasti-Line outsourced its IT operations to what is now Accenture. 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 says.

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

          Foote and Grigg says IT workers facing displacement should retrain themselves in project management or technologies such as IT security and wireless networking -- suggestions that map with the advice of panelists at an outsourcing conference in September.

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