JOB DESTRUCTION NEWSLETTER
by Rob Sanchez
This article is a two part series, the first half is the optimistic
scenario and the second half is the pessimistic view of the future of
the computer/IT profession.
Here is an example of the optimistic stuff:
Even without offshore outsourcing, U.S. IT staffing
levels were never going to return to their prerecession
highs. The cumulative number of IT jobs heading
abroad will grow from 27,171 in 2000 to 472,632 in 2015,
If the previous statement wasn't optimistic enough for you, this should
have you dancing in the streets:
It's hard to argue for keeping certain IT work stateside.
The salary for a programmer with two to three years of
experience averages $7,500 in India, according to NeoIT,
an offshore consultancy. In Russia, it's $10,000. In the
United States, it's $65,000. India graduates 75,000
computer scientists each year.
Programmers continue to ask what they can do to save their career. The
answer is simple - go into carpentry! Notice that Paul can now spend
time with his family as an extra career bonus.
Consider this hypothetical company in 2010, for example.
Paul, the Cobol programming expert who once boasted that
he spent all day every day for a year doing Y2K
remediation, doesn't work in the IT department anymore.
He's begun a second career as a carpenter and is actually
enjoying spending more time with his family.
This career advice is bogus. Most countries wouldn't let U.S. citizens
work in their sweatshops even if they were desperate enough to endure
houses without toilets.
You may think there's a shortage of your skills locally,
but companies aren't going to look at local value alone
anymore. You need to compete globally.
What a profound statement! Unfortunately business managers might parrot
stuff like this ad nauseam but they will continue to destroy our
technological infrastructure as long as cheap labor in Asia can be used
to increase corporate profits.
While individual corporations may benefit from their
increasingly global staffs, the loss of thousands of IT
jobs could hurt America's ability to remain a leader in
technology innovation. For without a critical mass of
IT professionals in the United States, true innovation
will be next to impossible.
Could the statement below by Sun CIO Howard Williams explain why the
ex-CEO of Sun (Edward Zander) is now the CEO of Motorola? If the answer
is yes, then Williams should lose his job any minute since he continues
to ship Sun's workforce overseas.
"CIOs who focus exclusively on chasing cost savings around
the world will have short careers," agrees Sun CIO Howard.
The following statement could be classified as "famous last words". The
United States doesn't have a "capitalist democracy" - it would be more
accurate to say we have a representative government that condones
corporate socialism. China's brand of Communist capitalism seems to
working well enough to take away our major industries and to send our
trade deficit out of control. Corruption exists in all economies, and
the United States is no exception. Enron and Worldcom are the largest
corporate scandals in the history of mankind so we shouldn't pretend we
have some kind of honesty advantage.
The United States has a built-in advantage when it comes
to innovation: As a capitalist democracy, it is relatively
free of the excessive government regulations, bureaucracy
and corruption that stymie IT innovation in other countries.
* * * * * * * * * * * * * *
OK, so much for optimism.
Scenario #2 has the pessimistic view of the future.
* * * * * * * * * * * * * *
Yikes! I thought this has already happened!
It's 2010. TaTa Consultancy Services has more than 100
satellite offices around the country. No longer simply a
provider of lower-level application development and
maintenance work based in Mumbai, India, TaTa now provides
high-level consulting and business process improvement,
overtaking IBM Global Services as the leading IT services
provider in the States - and the world.
Hey! What a mistake! The following statement belongs in the optimistic
scenario #1 because it would be true justice to see an out-of-work
American CEO groveling at TATA's doorsteps. I was feeling very
depressed reading this article but I now have a new sense of optimism
and I feel a ray of hope for the future of this once great nation!
Rumor even has it that a recently out-of-work Sam Palmisano,
formerly CEO of IBM, was sniffing around [TATA] for a position.
Such a scenario might scare the dickens out of most CIOs
(and probably a few CEOs), but it's perfectly plausible.
Matloff is right on. It' happened to slaughterhouse workers and fruit
pickers, and it will happen to Computer IT workers. It's just a matter
Once the number of jobs available to skilled U.S. IT workers
dips below a certain level and the salaries being offered hit
rock bottom, "Americans just aren't going to go into the
profession anymore," says Norman Matloff, computer science
professor at the University of California, Davis
All of this raises one fundamental question:
Fairchild Semiconductor CIO John Watkins understands why. "If it
looks like America is just chasing the cheapest source of labor, why
would anyone want to go into IT?" he says.
The Future of Jobs and Innovation
U.S. Stays on Top
Even though some IT jobs will continue to move overseas, by 2010 the
United States will still have a sizable population of IT professionals
doing high-level work on strategy, implementation and design.
BY STEPHANIE OVERBY
EVEN THOUGH SOME IT jobs will continue to move overseas by 2010, the
United States will still have a sizable population of IT professionals
doing high-level work on strategy, implementation and design
By the year 2010, Intel CIO Doug Busch envisions himself managing an IT
staff that's all over the map, literally. Not only will his employees
be working in places ranging from Rio Rancho, N.M., to Parsippany,
N.J., in the United States, they'll also reside in Beijing, Leixlip,
Haifa, Penang and a host of other locations Busch has never even been
to. Each spot will specialize in a particular area of expertise for the
company's IT department - call centers in Manila, business analysis at
company headquarters in Santa Clara, application development in Mumbai.
And a full roster of career opportunities - from entry level to senior
leadership - will exist at each and every location.
"Talent will rise to the top, wherever it is," Busch predicts.
Busch's scenario may sound a bit like corporate IT's version of "It's a
Small World." But the CIO of the world's leading computer chip maker
already oversees IT workers in 27 countries around the globe. And most
CIOs (to differing degrees) are headed in that direction.
The part of the picture that strays furthest from Disneyland is what
this means for American IT staff. Even without offshore outsourcing,
U.S. IT staffing levels were never going to return to their
prerecession highs. The automation of tasks, increased productivity and
a reluctance to return to the unfettered IT budgets of yore pretty much
guarantee that the demand for American IT professionals is destined to
decline. But, incendiary conjectures to the contrary, the entire
population of IT workers in this country will not be replaced by
counterparts in emerging economies.
Doug Busch, CIO of Intel, suggests that U.S. IT executives look beyond
the possible short-term savings from offshore outsourcing to the
long-term impact on the nation's ability to remain innovative.
Instead, even as 2010 will see a further movement of some IT activities
- application development, legacy maintenance, call center operations -
overseas (Forrester Research estimates that the cumulative number of IT
jobs heading abroad will grow from 27,171 in 2000 to 472,632 in 2015),
U.S.-based companies will keep work here that requires close contact
with the business: strategy development, business process improvement
and the actual application of IT to the business.
The net result: There will still be a future in IT for smart young
Americans. But the higher-level IT positions that remain stateside will
require new skills. Today's CIOs would be wise to encourage broader
business education in U.S. IT degree programs. And increased government
and corporate support of IT R&D will be critical to retaining America's
position as the world's IT leader.
"In the best-case scenario, IT will become a core competency and
economic engine in emerging economies, and these emerging economies
will complement the U.S. IT industry," Busch says. "A strong investment
in education in the U.S. and intelligent U.S. government policies will
produce aggressive investment and innovation, and the U.S. will benefit
along with the rest of the world from the economic benefits of IT."(For
a different future, see "Americans Need Not Apply," below.)
What Jobs Will Go
When it comes to the future of American IT staff, past is prologue. The
current trend toward sending some IT work offshore actually began a
decade ago, when stateside outsourcing began to gain favor. Companies
such as Xerox inked multimillion dollar deals sending their IT work out
the door to outsourcers. Some believed that the rise of the EDSs and
CSCs would mean the fall of the in-house IT staff. That didn't happen,
but today, with offshore outsourcing, IT workers are not simply
shifting employers but in many cases losing their jobs altogether. And
at many levels - lower-end programming, call center tasks, system
maintenance and help desk work - that trend will continue.
"Commoditized work will go overseas," says Peter Cappelli, director of
the Center for Human Resources at The Wharton School of the University
of Pennsylvania. "Some more creative work - like non-commodity one-off
and unique projects - will go overseas. But where interface with the
business is important, that work will remain here."
Nancy Markle, president of the Society for Information Management,
believes that high-level IT jobs will remain onshore, even as more
routine IT tasks move overseas.
It's hard to argue for keeping certain IT work stateside. The salary
for a programmer with two to three years of experience averages $7,500
in India, according to NeoIT, an offshore consultancy. In Russia, it's
$10,000. In the United States, it's $65,000. India graduates 75,000
computer scientists each year. The United States, 52,900. China, which
currently brings 50,000 new IT workers into the world every year, could
eventually provide 200,000 computer science graduates annually,
according to Marty McCaffrey, executive director of Software
Bandwidth costs have declined dramatically and should continue to dip,
furthering the beneficial cost structure of transoceanic work.
"What will continue to go overseas are the repetitive activities, the
things that will ultimately be automated anyway," says Nancy Markle,
president of the Society for Information Management (SIM) and former
Arthur Andersen CIO. "We have to be able to continue to get the best
prices, or else we'll be growing companies offshore instead of
competing with the rest of the world."
-->TIPPING POINT: In 2007, Congress passes restrictions on L-1 visas,
hampering the ability of foreign outsourcers to bring their employees
here to aid the transition of sending work overseas. The restriction on
L-1 visas, which allow a foreign worker with specialized knowledge of a
company's processes to work in America, slows the pace of offshore
What Jobs Will Stay
By 2008, the IT workforce situated in the United States will be 25
percent smaller than it is today, according to Gartner. But the workers
who remain will be more important to the business than ever. They'll be
working on architecture, strategy, project management and business
processes, predicts Lance Travis, vice president of outsourcing
strategics for AMR Research.
"A standardized problem can be solved anywhere," says N. Venkatraman,
chairman of Boston University School of Management's IS department.
"But if you need to understand the business and create value, you must
be here. It's very difficult to understand the business context of IT
remotely." Supporting a new product launch, for example, requires close
observation and fast response - both impossible if the work is done
halfway around the globe.
"If it can be codified, it can be done remotely and supported by IT,"
says Travis. "If it is still tacit and requires a lot of unstructured
discussion, then it must be done here."
That need to keep certain activities close to home is one reason why
many high-level IT jobs will remain in the United States. Speed and
ease of management are two other factors. "Offshore outsourcing
ultimately represents a certain loss of control," says Travis. "It is
very dependent on the ability to manage relationships, and you always
give up some agility." When CIOs outsource development to India, for
example, it's much harder to make changes to projects. "Anything beyond
the scope of the project is impossible, unless you want to pour more
money into it," says Travis.
Infrastructure, security, communication and project management issues
already erode some of the cost advantage of offshoring, says Larry
Pickett, CIO of Purdue Pharma. If CIOs try to go further up the value
chain - sending high-level consulting services elsewhere, IT will be
even more difficult to manage, he says.
Larry Pickett, CIO of Purdue Pharma, says security, communication and
project management issues are already eroding some of the cost
advantage of offshoring.
The IT department at Sun Microsystems is a test case for the future. "I
have a staff of IT people around the world," CIO H. William Howard
says, rattling off cities from Bangalore to Beijing where his IT staff
resides. "Any large company is going to position their workers where
the talent exists at the best price." Howard employs about 75 percent
of the IT staff he used to. By 2010, he expects to outsource 50 percent
of noncore activities. He adds, "Does that mean everything will be
offshore? No. The things that are core, that are tightly tied to
business process and the local business community, won't."
However, John Watkins, CIO of Fairchild Semiconductor, views IT as an
enabler of his business and only offshores on a limited, case-by-case
basis. "It's that intellectual capital we need to protect, especially
when you're as integrated in business processes as IT should be," he
Similarly, Cingular CIO Thaddeus Arroyo sends 10 percent of his IT work
(mostly maintenance work) offshore. But he retains a U.S. staff to keep
"new and more complex development close," from application development
related to business process improvement to the integration and
customization of off-the-shelf software. Arroyo makes these decisions
project-by-project, considering such factors as capability and capacity
of his U.S. workforce, the strategic nature of the work, and how
closely tied a specific project is to other enterprise applications
within the company. And by 2010, he says, CIOs will need to be even
more judicious about what they send out the door.
"As we come out of the downturn, there will be even more potential for
IT to become the business differentiator," says Arroyo. "Offshore
outsourcing simply allows us to remain productive so we can deliver
innovation here." In addition, the inevitable rise in labor costs in
India, Russia and elsewhere could further reduce the cost advantages of
Your IT Staff of the Future
If even 25 percent to 50 percent of offshore work does go overseas by
2010, what will the future hold for IT professionals here?
Diane Morello, a vice president and research director at Gartner,
predicts that those who remain in the field will become "IT
versatilists, equally at ease with technical and business issues."
Travis of AMR Research calls them 50/50 professionals. Fairchild
Semiconductor's Watkins brings up a similar picture: "The IT cohort of
the future has to be a good technologist and protector of technology,
but also be a savvy businessperson."
Will the IT professional of today want the position of tomorrow? Some
will and some won't. "The content of jobs is changing and will continue
to," says David Foote, president of IT management consultancy Foote
Partners. "A number of people I know who are really smart stopped
working in IT when they realized what it would take to be this hybrid,
versatile person. They've said, I'm not interested in being a
[multitasking] Swiss Army knife. I want to be a big bowie knife."
Consider this hypothetical company in 2010, for example. Paul, the
Cobol programming expert who once boasted that he spent all day every
day for a year doing Y2K remediation, doesn't work in the IT department
anymore. He's begun a second career as a carpenter and is actually
enjoying spending more time with his family. At his old desk sits
Bianca, who has an MBA from Boston University. Just back from a
two-year stint at her company's office in Ho Chi Minh City, Bianca has
a meeting to discuss a business case for a joint marketing and IT
project in the morning, and will review the post-implementation audit
of the recent biometrics installation over lunch. In the afternoon, she
has a Six Sigma class so that she can effectively manage the
development of a CRM project at the company's Chinese outsourcer.
Like Bianca, the IT applicants of tomorrow will have to position
themselves differently. "I tell my students that the job market is
forevermore global, not local," says Venkatraman, who advises his
protégés to consider taking a position in Ireland or India or China
if only for the sheer market value of global experience. "You may think
there's a shortage of your skills locally, but companies aren't going
to look at local value alone anymore. You need to compete globally."
Despite downward pressure on U.S. IT salaries (the average compensation
for tech workers grew just 1.7 percent from 2001 to 2002, while
inflation was 2.2 percent, according to the Economic Policy Institute),
experts expect wages to stabilize. But IT workers hoping for the fat
paychecks and big bonuses of the past will be sorely disappointed.
Normal cost-of-living increases and enough lift to keep up with other
corporate positions are more likely, agree Intel CIO Busch and SIM's
Corporate America's Conundrum
While individual corporations may benefit from their increasingly
global staffs, the loss of thousands of IT jobs could hurt America's
ability to remain a leader in technology innovation. For without a
critical mass of IT professionals in the United States, true innovation
will be next to impossible.
"In 2010, we won't have gutted the IT industry in the U.S. or any other
currently developed economies in favor of moving somewhere else if we
behave the way we should as leaders," says Busch. Hopefulness aside,
Busch admits it isn't easy juggling four major constituencies - his
employees, shareholders, customers and the communities Intel operates
in. "It feels like swimming upstream," he says.
Busch is currently trying to increase IT's presence in emerging
economies while continuing to invest to a certain extent in his U.S.
workers. "We have to compete with highly skilled IT workers in very
sophisticated companies with lower cost structures. But simply
substituting lower cost resources to reduce spending or deciding to
solve a weak IT organization by sending the work someplace else is
thoughtless," says Busch. Rather, CIOs must concentrate on improving
efficiency, taking the risks necessary to innovate, and investing in
"CIOs who focus exclusively on chasing cost savings around the world
will have short careers," agrees Sun CIO Howard. "What matters is smart
sourcing that looks at the [total cost of ownership] over the long haul
and the many other factors like security privacy, [intellectual
property] protection, geopolitical risks, and the potential cost of
having to bring it all back in."
Investing in R&D will also be important both in the government and
private sector. A lot of IT innovation came out of the space program,
for example. "We wouldn't have computers or the Internet had the U.S.
government not invested in the research," says Ron Hira, assistant
professor of public policy at the Rochester Institute of Technology.
Homeland defense, security and military technology are all areas where
federal funding could spur future innovation.
"But we can't wait for the government to address these issues," Busch
says. CIOs in the private sector can do their part by bringing the R&D
spend back in their own companies.
Putting a greater focus on R&D and continuing to recruit the best and
the brightest into IT are crucial to maintaining our competitive edge
as a nation. But bear in mind, the United States has a built-in
advantage when it comes to innovation: As a capitalist democracy, it is
relatively free of the excessive government regulations, bureaucracy
and corruption that stymie IT innovation in other countries.
"The free flow of information and the freedom to develop products is
really the U.S.'s ace in the hole," says Maria Schafer, a program
director at Meta Group. "That doesn't exist in China or in Russia, or
even in India. It's why the U.S. has always been the innovator. There's
a tremendous strength in the way IT is done in the U.S."
Two Americans Need Not Apply
If we continue to move jobs offshore, the U.S. IT professional could
It's 2010. TaTa Consultancy Services has made New York City its de
facto worldwide headquarters and opened more than 100 satellite offices
around the country. No longer simply a provider of lower-level
application development and maintenance work based in Mumbai, India,
TaTa now provides high-level consulting and business process
improvement, overtaking IBM Global Services as the leading IT services
provider in the States - and the world. The company has hired a recent
Nobel Prize winner to head up its burgeoning R&D business, and rumor
even has it that a recently out-of-work Sam Palmisano, formerly CEO of
IBM, was sniffing around for a position there.
Such a scenario might scare the dickens out of most CIOs (and probably
a few CEOs), but it's perfectly plausible. Offshore companies have made
no secret of their wish to compete with the likes of IBM Global
Services and EDS. Changing the base of operations to the United States
is possible, particularly if the U.S. government does not rein in the
L-1 and H-1B visa programs that encourage the hiring of foreign workers
here to oversee work done abroad.
"If Indian firms set up shop in the U.S., that's where the real threat
happens," says N. Venkatraman, Boston University School of Management's
IS department chairman. "You no longer have to fly someone over from
India. You now have someone who's worked for the EDSs and Accentures,
and now just carries a TaTa business card."
If offshore providers transform themselves into multinational
corporations, watch out. They'll develop talent at all levels of IT
operations. "The U.S. IT professional could become extinct if we
continue to import foreign labor," says Norman Matloff, computer
science professor at the University of California, Davis.
Increased standardization of IT tasks that once required localized,
human skills will further the export of the American IT function. And
improvements in real-time communication could boost the use of staff
around the world as well.
A lack of entry-level IT employment might dissuade U.S. students. It
already has. Although America saw a rise of IT college degrees awarded
in the late 1990s (from 37,500 in 1998 and 1999 to 52,900 in 2001,
according to the Digest of Education Statistics), enrollment has begun
to decline again. Fairchild Semiconductor CIO John Watkins understands
why. "If it looks like America is just chasing the cheapest source of
labor, why would anyone want to go into IT?" he says.
Ron Hira, assistant professor of public policy at the Rochester
Institute of Technology, saw the effects last fall. The new IT major at
RIT missed its hoped-for enrollment figure by 200 students.
Without new entrants in the domestic labor supply, the United States
could lose its competitive edge. In a 2003 report on workforce
policies, the National Science Board predicted dire consequences if the
United States depends primarily on foreign talent. "If you don't have a
critical mass of people, you won't get innovation." says Matloff.
"Companies that offshore all of their entry-level positions will be
shooting themselves in the foot." They'll be forced to look elsewhere
for IT talent, perhaps at higher costs.
-->TIPPING POINT: In response to cost pressures and global competition,
IBM in 2008 relocates its base of technology operations to Bangalore.
Remember the leaked tape that came out of IBM last summer? IBM Global
Employee Relations Director Tom Lynch said IBM had to accelerate the
shift of white-collar services jobs, including software design, to
markets such as India and China because "our competitors are doing it,
and we have to do it."
Once one big name in IT does it, nearly every other CIO will too. "It's
the most destructive characteristic of large enterprises, that we're
like herd animals and just do what everyone else is doing," says Intel
CIO Doug Busch.
Once the number of jobs available to skilled U.S. IT workers dips below
a certain level and the salaries being offered hit rock bottom,
"Americans just aren't going to go into the profession anymore,"
Matloff says. And that bodes ill for CIOs' ability to get the job done
at their companies and for their own future clout in corporate America.
Wholesale offshore outsourcing would also be a disaster for America's
leadership in IT innovation.
"I'm not certain that the U.S. can retain its reputation as the leader
in IT innovation. The leadership we've had in the past could move
offshore if we're not careful," says Nancy Markle, president of the
Society for Information Management. "As CIOs, we have to make sure that
that doesn't happen."
Senior Writer Stephanie Overby covers staffing issues. You
her via e-mail at email@example.com.
The Future of Software
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