Report: Pendulum Swinging for IT Job Market

Is outsourcing still dragging down salaries of key IT talent in the U.S.? Not anymore, according to a new survey by Foote Partners, an IT consultancy based in New Canaan, Conn. According to the report, such adverse effects of outsourcing — made an issue in last year’s losing presidential campaign of Sen. John Kerry (D-Mass.) — are beginning to taper off.

“It is true that 18 months ago, pay for networking, database, and applications skills were in 7 percent to 10 percent annual declines,” said David Foote, president and research director at Foote Partners. “But the pendulum has since swung to the other side, as companies have become more aware of the difficulties in doing offshoring successfully and achieving anticipated cost savings.”

Investing in Talent

For the last year, companies have been once again investing in their own talent, and are using competitive pay to attract, and keep, professionals with business and technical skills. Salaries in categories like development, database, enterprise software, networking, and systems administration has grown from 2 percent to 8 percent, depending upon the specialty.

“We projected this continued growth earlier this year, due to several factors now in play,” said Foote. “There’s been a return of hiring as the economy has strengthened, and, certainly, concerns about retention of talent connected to legacy systems and critical technology and business initiatives.”

The study indicates that employers are investing in in-house applications development, once again, as they were during the 1980s and 1990s and early this decade, before the dot-com bubble burst. The report also shows employers are averse to sending projects overseas that are mission-critical.

“There is a renaissance in IT roles and a redefinition of IT jobs,” said Foote. “Traditional job titles are becoming increasingly meaningless.”

Technical skills are what differentiate workers today, rather than titles, and firms are “putting a market value on those skills, and adjusting base pay accordingly,” said Foote.

Hybrid Jobs

New “hybrid” jobs are emerging which combine IT and operational skills. “Our research indicates that this has been occurring in the banking/financial services, insurance, telecommunications, and utilities industries, where operations and technology have had a close relationship historically,” said Foote, whose study was based on interviews with a pool of 50,000 IT professionals. “But we’re now seeing it elsewhere.”

Others have also confirmed the rising economic fortunes of the United States. Federal Reserve Chairman Alan Greenspan last week told Congress that the economy is now on “firm footing.”

Testifying before the House Financial Services Committee, Greenspan said that the economy should continue its “sustained growth” as business spending picks up and manufacturing continues its rebound.

Wages should continue to climb as businesses raise prices to cope with the expanding economy. Overall, hourly wages were up 2.7 percent last month, from a 2 percent growth rate six months ago. “Corporate profits continue to beat expectations,” Greenspan told the committee.

There is concern, however, that with all of the mergers and acquisition activity, there may be some layoffs. “Integration challenges are immense where M&A’s are concerned,” said Foote. “With many more of the likes of Oracle/PeopleSoft, Bank of America/Fleet Financial, Verizon/MCI, and SBC/AT&T, expect some small, consolidation driven layoffs.

“But, more optimistically, M&A’s create job growth in the IT services industry, and opportunities for versatile IT workers with various blends of technical, business, and soft skills that are highly prized in architecting, systems engineering, and integration, security, project management and business technology,” concluded Foote.

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