You Vs. Offshoring

U.S. tech pros are surprisingly upbeat, and pay is on the rise. But the job outlook is anything but warm and fuzzy.



The IT pro sure is a conflicted soul. As a group, tech professionals in the United States don't think IT's the promising career path it once was, yet most are satisfied with their jobs and feel reasonably secure. The money's good, but they worry that offshoring will reduce career opportunities--even though nearly half of their companies don't outsource at all and fewer offshore IT work, according to InformationWeek's National IT Salary Survey of 10,425 IT professionals. Base salaries are barely edging up, but bonuses have total pay on the rise, and tech unemployment last quarter fell below 3%--which in economic terms is about zero. For the most part, IT pros paint a picture of an uncertain and intensely demanding existence, and one they might not wish on their kids, but one they themselves expect to ride out nicely.

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Look at the numbers. With 3.47 million U.S. IT people employed today, tech employment has risen above the hiring boom that peaked in 2001, according to data from the Bureau of Labor Statistics (for details, see "More U.S. Workers Have IT Jobs Than Ever Before"). Despite that, 64% of IT pros in our survey say outsourcing is eliminating IT jobs, and nearly 60% believe the trend is hurting morale. IT pros are ambivalent about outsourcing's effect on pay. Forty-nine percent see lower salaries for new hires, but only a quarter predict reduced salaries for existing employees. In other words, the majority don't believe global IT competition will hurt the pay of people now working, and they're divided over whether it will hurt entry-level people.

Outsourcing isn't keeping Brookstone's Chuck Firth up at night.

Outsourcing isn't keeping Brookstone's Chuck Firth up at night.


Photo by Mark Ostow
Chuck Firth is typical. Outsourcing and offshoring make him uneasy, but he doubts they will affect his job and career directly. He's an application development project manager for specialty retailer Brookstone, which tends to buy its major applications and count on internal staff for the integration of those apps, supplemented occasionally by contractors. "I don't feel vulnerable to outsourcing," Firth says. "We've got a lean organization. Not a lot of value would be added by outsourcing."

Is Firth in denial? If so, he's got plenty of company. Only 12% of staff and 9% of IT managers feel insecure about their jobs. Half of managers and 42% of staff feel strongly secure, while the rest feel somewhat secure. Among managers and staff alike, feelings of job security are markedly stronger now than they were in InformationWeek's salary survey of two years ago.

Of course, it's too early to say definitely how this megatrend of global IT competition ultimately will affect tech employment and wages. A key figure to watch is whether pay rises as unemployment plunges, or whether the threat of offshoring will hold IT salaries down. This year, pay is edging up, with total median compensation rising 3% for staffers to $73,000 and 4% for managers to $99,000, according to our survey. (For detailed salary analysis, see "Average IT Manager Makes $99,000, Staffer $73,000, InformationWeek Survey Finds".)

Offshore On Their Minds
U.S. IT pros appear increasingly confident their careers can survive amid competition with low-cost labor abroad. However, very few foresee any of the promised career upside of outsourcing: Only one in five expects opportunities to work on more innovative projects as menial tasks are moved out, and just 13% see new hires to support outsourcing work.

Primary reasons for bonus

Personal performance

63%
Staff

64%
Management

Company profit sharing

41%
Staff

42%
Management

Maybe many of them work for bosses like Ron Strachan, CIO at HealthEast, a health care provider, who has yet to be sold on the idea that outsourcing or offshoring would pay off for his company. "I'm not a strong proponent of outsourcing and even less of offshoring," Strachan says. One in three people in the survey say their employers' send work offshore; half do either U.S. or offshore outsourcing.

Some IT pros may be underestimating how much they need to work at positioning their careers to compete against lower-cost workers abroad. Employees should judge how "offshore resistant" they are not by their job titles but by the role they play, says David Foote, president of research firm Foote Partners.

If they're working directly with customers or applying specific knowledge of the business, their jobs are unlikely to be outsourced. So the jobs of people doing straight programming are at risk, while application developers who know the technology and the business environment are in high demand. The same holds true with data mining and business intelligence expertise that's combined with knowledge of the business.

Yet a mere 6% of managers and 2% of staff consider "understanding the company's business strategy" an important factor in their jobs. Just 12% of staff and 19% of managers ranked as an important factor that their work is important to company success.

Buy Your Own Training
Tom Andrix is an exception. To the 61-year-old, knowledge about his company and industry is critical. Andrix has been in IT for 24 years, the last 15 as a database administrator and the last five at his current employer, hedge fund George Weiss Associates. He'd like to keep working as a DBA, preferably at George Weiss Associates, at least until he's 70. "I'm happy in this work," he says.

Andrix is realistic that database administration work can be outsourced, but he believes his situation makes it far less likely. He brings a lot of knowledge about how the company uses the data. And perhaps most important, the work involves much of the company's proprietary mathematical and statistical modeling. "They want to keep that under lock and key," he says.

Plus, Andrix wears "three or four other hats," including working with software licensing and batch job software, since he doesn't want to be seen as someone with a narrow tech specialty. "My job has expanded from DBA to also doing other things," he says.

That's a good way to gain more company knowledge or customer exposure, to be seen as someone who can shift outside an area of expertise or job title. Andrix thinks offshoring can create job opportunities for IT pros in the United States, but only for those with complex skill sets and experience. "Offshoring is upping the ante," he says.

That leads to another harsh reality: IT pros must keep their skills up to date and may have to do it on their own dime.



Andrix has more than two decades of IT experience, and he still takes about two weeks of IT classes every year. Most recently, he completed an overview course on the latest version of Microsoft SQL server. He also has taken classes on statistical analysis to get tips on how to make the company's databases run faster. He attends Web seminars as well as in-person classes.

Despite the pressure Andrix recognizes, just 42% of IT staffers and 43% of managers receive education and training as part of their benefits packages, our survey finds. Even fewer get tuition reimbursement: 30% of staffers and 28% of managers. Many IT pros have to come up with the money and time to keep their skills up to date. Andrix says it's a struggle finding time to study while devoting a lot of hours to a job, but he believes there's no alternative. "The pace of change is intense," he says.

Not As Promising A Career Path
Attitudes toward IT as a career path have improved in the last two years--though most in the profession still are down on it. Back in 2004, only 15% of staffers thought IT was as promising a career path as five years earlier. Today, 29% say it looks as good as five years ago. As for managers, 38% are as optimistic as they were five years ago, a better mood than we found two years ago. Still, 61% of staffers and 53% of managers now think the IT career path doesn't seem as promising as it did five years ago.

No Promises Here, bar chartA lingering pessimism isn't surprising. When the tech-telecom bubble burst, IT employment slumped, going from 3.4 million to as low as 3.2 million, according to the U.S. Bureau of Labor Statistics. And that disguises the level of turmoil in the IT job market--for example, there are 220,000 fewer people who call themselves programmers today than in 2000, analysis of the bureau's stats shows. So the IT people still working today have had to adapt to a much different market.

Kelan Birnbaum is one of the IT pros who has been through the tough times and thinks he's got the right mix of skills and the right job to fend off outsourcing--but he's got a backup plan just in case. Birnbaum has been in IT for 17 years. In 1998, he launched a consulting firm, then took a job with one of his clients, Blue Cross Blue Shield of Minnesota, where he's now a full-time Java programmer, developing front-end systems that make SAP applications easier to access. One current project is for account collection teams.

Birnbaum says his job isn't very susceptible to outsourcing or offshoring because of the close work he does with users. "If you can find a niche like SAP with specialized business skills, that's harder to outsource," he says. Yet he warns against getting too far from the technology, too much in business or project management, because those jobs are dropped quickly when projects slow down. And he's kept his consulting business on the side, just in case.

Business Measurement
Median salary of IT managers by their understanding of business management frameworks
$99,000 An expert or master
$89,000 Knowledgeable or experienced
$82,000 Novice
$68,000 Almost no knowledge or experience
Job Security In Security
Information security pros are among those most resistant to offshoring or outsourcing. While companies are willing to outsource some security functions, such as intrusion-detection monitoring, most work related to information security is staying in-house. "Companies are crazy scared about outsourcing security," researcher Foote says. Put another way, security gaffes are the kind of thing for which IT execs get fired.

Dean Sapp, an IT security specialist at a large law firm in the Southeast, got his first taste of security work doing software development and quality testing for Novell as it added encryption to products. He kept learning about IT security, mostly on his own, after joining the law firm several years ago as a network engineer. Two years ago, the firm's CTO decided to create a dedicated security specialist job, and Sapp stepped forward. He's studying for his Certified Information Systems Security Professional certification. "If you want to keep your skills fresh and like a challenge, then you need to be proactive," he says.

Brad Lape seems like the kind of IT worker who should be worried about outsourcing. He started in tech support and help desk jobs 10 years ago, straight out of high school, having gotten the tech bug while tweaking PCs to maximize game performance. He spends his days driving to Time Warner Cable offices to fix the company's PCs and support cable modems. Our survey finds help desk pay has stagnated in the last three years, with median total compensation at $49,000. Lape believes companies will always need people to fix PCs, but he realizes he must expand his skills--though he's not keen to take up Time Warner's offer of college course reimbursement. "In 10 years, I foresee myself doing network administration work, but I'm a creature of comfort," he admits.

Tighter Job Market
Location, Location, Location, pie chartTalk to IT executives, and you'll hear about the market for talent getting tighter. E.&J. Gallo Winery is struggling to find integration, business intelligence, and security skills in its central California region. "When we post openings for these jobs, we don't get a lot of resumés, so the search criteria is changing a lot, and we're providing more training," CIO Kent Kushar says.

Gallo sends some programming offshore, such as a current business intelligence project. But there's little turnover among Gallo's IT department of 200 people, and the staff received raises in recent years when other IT shops were holding back on pay hikes.

As for Kushar, who's been in IT for 42 years and the CIO at Gallo for the last 10, he's sure there's a promising future for U.S. IT professionals, despite outsourcing and offshoring. Kushar sees cost savings in offshoring eventually being squeezed as countries such as India struggle to keep their workforces skilled in the latest technologies, making U.S. workers who understand technology and the business even more valuable.



Career Outlook
Chris Murphy has his sunglasses and his umbrella handy.

IT Phone Home
Chris Murphy on Perks for IT Managers.

That's not going to comfort a lot of IT workers, even if recent data suggests offshoring hasn't reduced total IT employment or clobbered salaries. It's not yet clear whether the current tight labor supply, marked by 2.5% unemployment, will lead to higher salaries, or whether the offshore alternative will keep a lid on wages. And it's certain that offshore competition will continue moving into new areas of IT work, forcing IT pros to manage their careers to avoid getting caught in the path of lower-cost labor. "The problem is that you never know when it will hit you," says researcher Foote, who adds that he knows people who've left IT careers rather than try to move into more offshore-resistant IT jobs. "Some people say they just can't have a bogeyman on their shoulder."

As it turns out, if the offshoring, the constantly changing skills, and the pressure of IT work don't get you, the uncertainty of it all just might.

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