Last week CIO.com reported that “IT Jobs May Get Left Behind in Recovery.” To sum it up, author Patrick Thibodeau deduced that companies will be less likely to hire permanent employees and more likely to hire contractors or use outsourcing providers to meet increased demand for IT workers and functions.
The evidence? Increased revenue and earnings from outsourcing providers such as Cognizant and ACS. Further support arrived in Forrester Research’s report citing that outsourcing is the only IT spending category that will finish “in the black” in 2009. The good news is Forrester’s prediction of a strong recovery next year with overall 7.7% growth, and led by IT consulting services expected to increase by 11.4%. [Author’s note: This is according to CIO.com. I was unable validate this. If you find other citations, please comment below with the link.]
Also quoted is Peter Bendor-Samuel, CEO of Everest Group, an outsourcing research group, who believes that IT service providers will benefit from companies that are hesitant to hire or rehire and are otherwise inclined to rely on outsourcing companies. The implication is that more dollars will end up offshore.
Our take? Here at 3coast, we’ve experienced every recession since 1980, and history shows that contract labor and outsourcing will rebound first. The predicted contract labor cycle is consistent with economic cycles in the past. Comparing recession to recession, only the amplitude and period have varied.
Other factors indicating IT services and outsourcing firm growth…
• Advances in technology and connectivity make outsourced IT services, such as outsourced level 1 support, more affordable and effective now than in the past.
• Outsourced IT support has become more widely accepted and available, with established service levels and delivery models. There is far less risk in moving forward with an managed IT support service.
Does that mean that jobs will shift offshore, diluting the recovery?
Of that, I’m less certain. Strong arguments exist that offshore outsourcing providers will greatly benefit. However, many highly competitive, domestic managed IT support providers will benefit as well.
Does that mean that U.S. IT workers will suffer?
Not necessarily. We’re seeing reduced labor supply of domestic IT workers. The current recession makes this less apparent, as today there is abundant supply of unemployed IT workers. We expect this excess supply to be absorbed quickly as the United States emerges from recession. Consequently, domestic IT managed service vendors will use economies of scale and new technologies to deliver shared services across many clients.
Domestic companies and organizations will be more productive overall, generating more with less … which is a very good thing.