Offshoring's toll: IT departments to endure jobless recovery through 2014

Offshoring's toll: IT departments to endure jobless recovery through 2014

Summary: Offshore outsourcing in information technology, finance and other back office functions such as human resources has nixed 1.1 million jobs since 2008 and will result in another 1.3 million positions lost by 2014, according to research from the Hackett Group.

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Offshore outsourcing in information technology, finance and other back office functions such as human resources has nixed 1.1 million jobs since 2008 and will result in another 1.3 million positions lost by 2014, according to research from the Hackett Group.

According to the Hackett report the job loss rate due to offshore outsourcing has accelerated each year.

Among the sectors taking the hit, IT is taking the brunt of the offshore hits. The good news for domestic technology workers is that growth in offshore IT outsourcing is leveling off. Now offshore outsourcing will hit corporate finance at a compound annual job loss rate of 20 percent. Hackett estimated that by 2014, the annual number of finance jobs lost due to offshore outsourcing will eclipse IT for the first time.

Hackett's report is notable since it shows how career moves need to adapt. While some positions and skills will move offshore, other areas will have shortages and high demand. Hackett noted in its summary:

On top of 2.8 million jobs lost from 2000 to 2010 in finance, IT, HR and procurement, The Hackett Group projects that another 1.0 million will disappear by 2014 in North America and Europe, representing a total reduction of 46% of jobs in these functions since 2000. While the reductions were accelerated by the recession, they were driven largely by a structural, longer-term trend of ongoing innovation in companies’ Service Delivery Models, maturation of offshoring options, and increasing levels of automation. Nonetheless, looking ahead we see that several types of skill sets will be in high demand, including those in transformation, global management and relationship management. As a result, critical shortages and demand for skills in some areas will go hand in hand with large surpluses in others, putting a premium on companies’ talent management capabilities.

Here's the job loss picture, according to Hackett:

The big question is what roles are least likely to get whacked by offshore outsourcing. Hackett analysts said change management, project management and global management skills will be in high demand. Commodity skills such as business support will either go to areas with lower labor costs or automated.

Hackett said:

Our experience in the trenches of strategic transformation in finance, IT, HR and procurement is entirely consistent with the picture of a jobless recovery painted in this research. Demand for onshore “commodity skills” will shrink as a result of innovation in the delivery model for business support services, offshoring and automation. Nonetheless, along with specialist roles, several additional skill sets will be needed to enable the scenario described in this research, providing possible new avenues for white-collar workers whose current jobs may be eliminated. First are “transformation” skills, including change management, along with program and project management. Also, management skills appropriate for globally distributed, multicultural and virtually integrated organizations will be in high demand. Finally, emerging service-oriented organizations will drive significant demand for skills in customer relationship management and service level management. This situation may be described as a talent paradox of the age of globalization: the existence of high demand for scarce skills in some areas, and low demand and large surpluses of skills in others.

Topics: Enterprise Software, Banking, CXO, Outsourcing, IT Employment

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  • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

    That's all fine and dandy, but companies aren't going to create 2 million management jobs to make up for these outsourced jobs.
    barneytheblueheeler@...
    • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

      @tk1@... : It's a complex issue.

      First and foremost, the "job loss" moniker gives an incorrect picture. Most of time, outsourcing doubles or triples the human count for commodity areas. Companies that had 250 help desks people now hire 1k or 2k in India. Enterprises like Dell had only a couple of plants in the U.S. and now have a dozen when using Foxconn.

      Then again the report is completely correct. No high level job will move out of the first-world. If your are in program or project management or if you are an strategic decision taker, you have nothing to worry about. The problem's being there... sigh!
      cosuna
      • So why should the people of the US ...

        @cosuna <br><br>... support companies creating this blossoming of jobs overseas as a result of the deliberate decimation of American jobs?<br><br>We the people, through our elected representatives, allow corporations to exist in the first place. Why should we allow to be created a system that so clearly works in the advantage of a very small few, and does not protect the interest of the majority?<br><br>Why should Dell enjoy the benefits of being an American corporation while at the same time deliberately undermining the American worker? They should be punished by law for moving jobs out of the country. They should have their corporate personhood stripped from them. Their majority investors should lose the limited liability protection they currently enjoy. They should lose the beneficial tax structures that allow them to amass their great fortunes.<br><br>We gave these things to them. They did nothing to earn these things. They are gifts and they are being abused. We should take them back.
        RationalGuy
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        "If your are in program or project management or if you are an strategic decision taker, you have nothing to worry about. " Up to a certain extent, one thing to keep in mind is that typically most managers reach that position through a progressive road set of steps that starts with basic IT work (development, etc.) and eventually matures into management. Once the IT jobs go offshore there is no longer a breeding ground for managers. It is vey hard to create a manager coming straight out of school. The breeding ground for managers will be at the off shoring locations. So those manager jobs will go there, and why not? Local mangers at offshoring locations are just as capable, understand the culture, the language and work on the same time zone. So there is no need for managers in the U.S. All is needed is a set of expects to be sent to the offshoring locations. They can manage their own work. Now, if the HR and Finance work also goes offshore as predicted then the specs for change requests will also come from the offshoring locations directly to their local IT managers and the same offshoring location.
        mktpostal@...
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @cosuna,<br>"If your are in program or project management or if you are an strategic decision taker, you have nothing to worry about."<br><br>You're right. However without management growing from the ranks of those who execute the work of IT projects there is going to be a long-term brain drain effect. Onshore management over the years won't have the experience of being an engineer to draw on. It's a darn shame.
        bmonsterman
      • &quot;No high level job will move out of the first-world.&quot;

        @cosuna <br><br>This is what we were saying about IT jobs 10 years ago as we stood by and let the manufacturing jobs leave first.<br><br>Why will they new high-level jobs here after the vultures pick the economy and the people clean?
        RationalGuy
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @cosuna
        The problem is this. I don't care if outsourcing turns 100 jobs into 1 billion jobs. Those jobs are not in the U.S. So we don't benefit from it. The vast majority of the benefits will be for the shareholders and the company's upper crust. By the time those benefits trickle down to us, its insignificant like employees get donut wednesdays.
        rengek
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @RationalGuy - great response, thank you!

        Especially given the amount of taxpayer-funded subsidies (the real "entitlements" that people should be discussing) they receive.
        HypnoToad72
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @cosuna I call BS, as one poster said, "IT jobs seemed secure while manufacturing was outsourced". Management will be outsourced as well, and so will any other job. Do you really think that outsourced companies will be content to be the "grunt" labor? Come ON get real! As has been illustrated China and India will move up the food chain!

        The companies that will survive are those that can use offshore when needed, and onshore when needed. That is the real solution.
        serpentmage
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        Once the IT jobs go offshore there is no longer a breeding ground for managers. It is vey hard to create a manager coming straight out of school. The breeding ground for managers will be at the off shoring locations. So those manager <a href="http://www.realessaywriting.com/">essay writing</a> jobs will go there, and why not? Local mangers at offshoring locations are just as capable, understand the culture, the language and work on the same time zone. So there is no need for managers in the U.S. All is needed is a set of expects to be sent to the offshoring locations.
        adamjones342
    • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

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  • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

    Of those 2 million that are jobless, most will not find employment at the salaries they made before their position was outsourced. That's a lot of money leaving a seriously ailing US economy and bolstering Indian and Chinese economies. The people responsible for IT outsourcing are directly responsible for causing harm to the US.
    keith.r.benedict@...
    • Most US programmers aren't even given the chance

      @keith.r.benedict@...

      What chaps me is that most companies who outsource to India don't really give US resources a chance to compete against offshore, the assumption is that US resources will always cost more even if their quality of work is higher.
      terry flores
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @terry flores

        The reality today is us against them and not US vs India. An American will deal with an Indian if it causes benefit to an American and vice versa. It is about a globalized economy where cost matters no matter where you get it. Tomorrow if India becomes expensive jobs will move out of India as well.

        Only way out is to be unique, be the best and outperform others in all departments. Nationality and fellow countrymen do not matter.
        ashish.mumbai
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @terry flores Exactly. And the quality of off shore is sub par at best.
        ItsTheBottomLine
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @ItsTheBottomLine<br><br>"And the quality of off shore is sub par at best"<br><br>That's not really true. Some are good, some are not so good. Usually the driving force behind using an offshore resource is a cost incentive. They aren't usually shopping for the most competent resource in India...just the cheapest. That doesn't mean competent resources don't exist in India.
        bmonsterman
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @terry flores : most of the time, it's not just a matter of cost but also of volume. With 100k in the U.S. you can hire one developer in the Bay Area (with lotsa luck). With that same money you can hire 3 Mexicans or 10 to 12 Indians. Same job, same budget, more hands.

        So if you are in the Bay Area, and definitely don't want to move to Bangalore, Hylderabad or Monterrey (Mexico), you must focus not only on quality but also moving higher up the food chain. Else, even if you excel on what you do, you certainly can't compete against 10 bad programmers.
        cosuna
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @ashish.mumbai

        "Nationality and fellow countrymen do not matter."

        Then the people of the US, from whom the power of the government is derived, should not feel that the wants of American corporations that ship jobs overseas matter. They should tell their elected representatives in Congress to pass laws that punish such companies, take away their corporate personhood and strip their executives and majority stakeholders of limited liability, favorable tax structures and all of the other positive benefits that the people of this country bestowed upon them in the first place.
        RationalGuy
      • It's not price or &quot;volume&quot;

        @cosuna

        We laid off hundreds of programmers without giving them any option to take a lower-tier job or a salary cut. They were replaced with offshore contractors who in many cases were job-hopping so much that we had to restart major projects from scratch and multiple times to boot. Our CIO saved his job by saying that he saved millions of dollars in salaries, but he had squat to show for the money he did spend.

        We all recognize that genie is out of the bottle and there will always be competitive pressure on IT salaries. But our company never even sent the RFPs out to any local companies, but just to the megacorps and Indian outsourcers who all bid 100 percent offshore resources. Even if a local company had $15/hr US-based people, they didn't have the opportunity to bid the work.
        terry flores
      • RE: Offshoring's toll: IT departments to endure jobless recovery through 2014

        @terry flores I wrote a longer blog entry about this. http://www.happyasahippo.com/?p=1283. In the one part I illustrated how a dot com outsourced to Poland and left the "management" in New York. I found it very hard that some programmers in say Iowa would not have been as competitive as programmers from Poland. Poland is not as cheap as one thinks it is.
        serpentmage