A massive wave of IT redundancies will hit Australian shores in the next few years with local vendor-based jobs moving to offshore outsourcing markets on a “substantial” scale, a senior Gartner Inc. researcher has warned.
Gartner EXP (Executive Programs) vice president and research director Andrew Rowsell-Jones told Computerworld that tightening budgets and increasing performance pressures on corporate IT departments are increasingly forcing many Australian businesses to send their work to countries such as India.
Gartner currently clocks offshore outsourcing as the fastest growing segment of the IT industry with a compound annual growth rate of 29 per cent globally, predicting “mature market” countries like Australia and the U.S. face “staggering” job losses. The research firm believes one in 10 vendor-based jobs now in the U.S. will shift each year to emerging markets, while another one in 20 will migrate away from vendors to the user side of the enterprise.
Rowsell-Jones expects a “substantial” number of professional IT jobs to relocate offshore in the longer term, with contractors feeling the sharp end of the cuts. “Unlike permanent staff, (organizations) tend to end their contracts more easily with contractors as there is less visceral effect in cutting back on them,” Rowsell-Jones said.
To cope, Rowsell-Jones says CIOs are employing models such as the ‘flat forever strategy’.
“They don’t continue to hire lots of other IT staff, but as the volume of work increases, they ensure they keep developing their existing in-house IT specialists with critical business skills such as vendor, outsourcing and client relationship management.”
The financial services industry is leading the pack in shifting employment to an offshore development partner, Rowsell-Jones said.
“That industry has substantial investments in IT and deep legacy issues dating back 40 years, thus it has been one of the earliest adopting sectors of offshore outsourcing,” he said.
Meta Group analyst Maria Schafer backs Gartner’s estimate of 10 per cent of U.S.-based vendor jobs moving by the end of 2004, but rejects that 5 per cent of corporate IT jobs will move offshore, describing the figure as “wildly high.”
Schafer said moving labour “takes a lot of different pieces coming together, not least of which is an organization strategy and plan, an available workforce and, most importantly, transition time. It takes a lot of effort to manage remotely what you’ve up to now managed locally.”
