Offshoring Shrinks Number of IT Jobs, Study Says

The number of IT jobs at large corporations is declining significantly, but within 10 years this exodus may end as companies run out of jobs suitable for moving to low-cost countries, a new study says.

The number of IT jobs at large corporations is declining significantly, but within 10 years this exodus may end as companies run out of jobs suitable for moving to low-cost countries, a new study says.

The Hackett Group , a management consulting firm, examined services occupations in the bull's-eye of offshoring -- finance, human resources, procurement and IT. What it found is that only about 4.5 million of the 8.2 million jobs in these fields that existed in the U.S. and Europe at the start of 2002 will still exist in 2016.

This estimate of the jobs decline is specific to 4,700 companies with annual revenue of $1 billion or more in the U.S. and Europe, Hackett said.

Of the 1.8 million IT jobs at the companies represented in the report, Hackett said about 270,000 jobs in the U.S. and Europe will be moved offshore between now and 2016. Hackett said the U.S. share accounts for about half of the total jobs lost, or 135,000.

By 2016, if Hackett's estimates hold, the 1.8 million IT jobs in North America and Europe at these large companies today will have declined to about 1.5 million, despite the growth of many of these companies.

The number of jobs lost to productivity improvements is roughly offset by the new jobs created through growth, "so the net change is about equal to the decline due to offshoring," said Erik Dorr, the senior enterprise research director at Hackett.

To some extent, this decline in IT jobs reflects decisions to buy IT services, in the form of cloud -based services. But the IT industry, which has been seeing employment growth , will still move some of those jobs moved offshore.

As bleak as these numbers may seem, Michel Janssen, Hackett's chief research officer, said U.S. companies are doing what they need to do to be globally competitive.

"If you didn't have this productivity improvement, we would be seeing actual drops in profits, which would be a bad thing for everybody," said Janssen. The profits, however, don't necessarily translate into new jobs, he said.

What will ultimately deter outsourcing will be the decline in the types of jobs that are suited for offshore.

"You can't offshore everything," said Jansen, "you can't offshore the CIO."

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com .

See more by Patrick Thibodeau on Computerworld.com .

Read more about outsourcing in Computerworld's Outsourcing Topic Center.

This story, "Offshoring Shrinks Number of IT Jobs, Study Says" was originally published by Computerworld.

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