Are you endangered? Offshoring now targets corporate IT jobs

If you’re looking for a job in corporate IT, you might want to think again. While there are plenty of jobs at technology companies, startups, and smaller businesses, the classic enterprise IT department is laboring under what can only be called a perfect storm that’s blowing away full-time positions at a frightening rate.

“Large companies in North America and Europe are now losing over 250,000 jobs each year in IT, finance, and other key business services areas, due to the combined impact of offshoring, technology-driven productivity improvements, and the low-growth business environment,” according to a new research update from The Hackett Group, a global consulting and research organization.

[ With worker retirements looming, IT starts to prepare for a workforce exodus. ]

The report holds a glimmer of good news: Offshoring, the movement of jobs to countries where labor and infrastructure costs are lower, is finally beginning to slow, although Hackett analysts predict that as many as 100,000 jobs in so-called business services will still move annually to other countries over the next few years.

These are all long-term trends, of course, and when looked at over the last decade, the results are staggering. The report says that “of the baseline of about 8 million business services jobs that existed in North America and Europe in 2002, The Hackett Group’s research estimates that 46 percent, or 3.7 million jobs, will have disappeared by 2017, including 1.4 million jobs in corporate finance and 1.5 million jobs in corporate IT.” Roughly half of those lost jobs were based in the United States.

The job killers

Neither I nor Hackett’s analysts are saying that the bottom has fallen out of the IT labor market. In May, for example, the Dice employment board listed 83,000 jobs in IT, including nearly 50,000 full-time positions. That number has held steady for 12 months, and the IT labor market as a whole has long since climbed out of the hole created by the recession.

The Dice data doesn’t indicate what sorts of businesses are actually hiring at the moment, and there’s another potentially mitigating factor: Many IT jobs within enterprises have moved out of the traditional IT ghetto and into various business-related departments.

A recent report by the Bureau of Labor Statistics showed a net gain of 18,400 jobs in July across four industry job segments commonly associated with IT professionals, the second largest monthly gain in 2013. That’s the third month this year in which more than 18,000 workers were added to U.S. payrolls.

The good news notwithstanding, it’s clear that corporate IT is far from a fertile field for job seekers and professionals moving up the career ladder.

Although offshoring has blown away many jobs, gains in productivity cost even more jobs. Between 2003 and 2010, only about a quarter to a third of the job losses were attributed to offshoring. Although the report doesn’t directly address technological change, there’s no doubt that trends like cloud computing have eliminated many jobs that were done in-house or moved them to cloud providers.

Because the authors of the report count jobs lost to outsourcing within the United States as a productivity gain, it’s not possible to pinpoint the number of jobs lost to technological shifts and various forms of automation.

Where the jobs remain

Speaking more generally, Erik Dorr, a co-author of the report, says that within IT, the losses are in what he calls “transactional-oriented” jobs, including help desk duties, data center operations, and “even routine coding.” But “knowledge-centric” jobs in IT, like architectural design, business analysis, and program management, are in demand, he says. There’s actually a talent shortage in that area, and companies are waging a war to attract the best and the brightest, he adds.

That last point tracks with other research that I’ve seen recently. After years of declines, the value of IT certifications has finally started to grow, in particular for specialties like architectural design, according to Foote Partners, which surveys IT salaries and premium pay across more than 2,400 employers. (But don’t confuse spot shortages of talent with an overall shortage of IT professionals. There isn’t one.)

Dorr and his colleagues point to another trend reshaping the enterprise job market: the rise of what they call global service organizations. “Unlike most shared services operations, which focus on a single function, GBS [global business services] organizations strive to support an array of business services, including finance, IT, procurement, and human resources, in an integrated fashion,” they write.

Enterprises that turn to a GBS model reap substantial gains in productivity, “with typical companies seeing an average of 20 percent cost savings in their first year of GBS operations, and 6 percent savings annually thereafter.” Unfortunately, the savings will also result in job losses, particularly for holders of commodity skills.

Overall the message is apparent: The IT job market has changed radically, and professionals who can’t change with it are in a tough spot.

This article, “Are you endangered? Offshoring now targets corporate IT jobs,” was originally published by InfoWorld.com.