INFOMAXIUM
Thousands of IT jobs are moving as companies cut costs, but more complex strategic functions will remain in North America
The trend that has seen hundreds of thousands of North American high-tech jobs shift offshore will continue for the rest of the decade, but experts predict most IT jobs will remain here. "Entire business functions, such as customer service functions or call centres, are being transferred offshore," says Tony Small, chief executive officer of Axceleron Consulting of Toronto and a former partner at Deloitte Consulting. When these departments move, all the related support infrastructure, including technology, is dragged along, Mr. Small says. "Many types of positions, especially those that can be transparent to the organization, or done in relative isolation, are candidates for offshore outsourcing."
But the growing fear that this trend will scoop up all business functions in a corporation and that the demand for information technology skills will be met offshore is largely dismissed by many industry experts.
Brett Turner, executive vice-president with Blast Radius Inc. in Toronto, does not feel that IT skills are becoming obsolete in North America. Mr. Turner argues that "offshore solutions can work for certain types of development, but not for the more complex multidepartment business requirements. Roles that involve integration, strategy, management, customization, localization and business analysis and consulting must be staffed locally."
David Smart, vice-president of systems and technology services with the CIT Group Inc., a U.S.-based lender with Canadian operations, agrees.
"While some work will go offshore, significant integration activities will continue to be required in North America. Integrating multiple technologies into a business solution is going to be more difficult to do offshore."
The technology sector has enabled the migration of jobs to locations such as India, the Philippines, China, Ireland and Russia. The Internet, coupled with high-bandwidth telecommunications, essentially allow a developer to be on the other side of the world as easily as being in the office next door. A U.S. study released in early October says that
$1.2-billion (U.S.) of IT-related work was shifted to offshore locations between 1995 and 2001. Forrester Research Inc. of Cambridge, Mass., last year projected a loss of 3.3 million U.S. service jobs over 15 years, with IT leading the way.
"There is certainly a danger or risk that a large number of tech jobs will end up offshore," Mr. Small suggests. "However, the effect will not be felt 'across the board.' It will depend on the nature of the job, certifications and education requirements." The number of information technology workers will grow by between 60 per cent and 100 per cent between 2000 and 2010, the U.S. Federal Bureau of Labour predicts. In 2001, there were about 400,000 high-tech employees, Statistics Canada says, but the number has slipped since then. However, the growth over the rest of the decade is expected to match that in the United States. IT jobs can be classified into two categories. The first involves work for an organization that develops packaged software or IT products. This includes companies such as Intel Corp., Oracle Corp., Microsoft Corp., Cognos Inc. and SAP AG. The second category involves the application of technology skills to fulfill a business function as part of the in-house technology group. These include jobs in industries such as banking, insurance, energy, manufacturing and retail.
Canada has gained jobs in both of these categories in the past. The strong U.S. dollar made it cost-effective for many U.S. corporations to use high-quality Canadian labour that came at a 35-per-cent to 40-per-cent discount and that could easily travel and work in the United States using H-1B visas.
Gartner Research Group, a prominent IT think tank, estimates that 10 per cent of the jobs from the first category will move offshore by the end of 2004. During that period, about 5 per cent of the jobs in the second category will be moved.
Intel has added more than 1,000 engineers in India and China, CEO Steve Barrett says.
American Express has created a fraud analytics department in Asia that is staffed by PhDs.
HSBC has also moved mortgage processing operations in Asia.Intel has added more than 1,000 engineers in India and China, CEO Steve Barrett says.
American Express has created a fraud analytics department in Asia that is staffed by PhDs.
HSBC has also moved mortgage processing operations in Asia.
J.P. Morgan has moved some research operations to Mumbai.
Goldman Sachs is in the process of moving some British-based operations to Asia.
But North American IT workers who keep up with emerging technologies can stay ahead of outsourcing.
J.P. Morgan has moved some research operations to Mumbai.
Goldman Sachs is in the process of moving some British-based operations to Asia.
But North American IT workers who keep up with emerging technologies can stay ahead of outsourcing.
"You are always going to need direct person-to-person access to professionals who understand the latest and greatest technology choices and especially how the pieces fit together," Mr. Smart says. "The IT body of knowledge is becoming so large that there is a need for local pockets of expertise or specialization."
Ten years ago, the cost of hiring a developer in Asia was about a 10th the cost of a North American counterpart. Today, it is about 30 to 40 per cent when travel costs and other expenses are included.
Another factor could also create job opportunities in Canada.
"There are a large number of baby boomers that are going to be retiring over the next 10 years, without the corresponding number of university/college graduates to replace them," Mr. Smart says. "This is going to create an enormous skills shortage."
Another area that is not likely to be a candidate for offshore migration involves mainframes and legacy applications. Mr. Smart predicts that this area will also require local skills as many large corporations are not going to replace systems that were fixed for the year 2000 and are expected to continue working satisfactorily for at least the rest of the decade.
On the other side of the coin, small businesses are also not expected to benefit from the economy of scale that offshore development offers. These businesses are expected to continue relying on local resources.
It is too soon to predict the outcome of the offshore model. However, other industries may suggest what could happen in the technology sector. The automotive industry has had massive globalization for decades now and there are offices and facilities around the world. However, North America is still a leading hub for resources in this industry.