Offshoring Affects Stateside IT Skills pay

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Premium base and bonus pay for IT certified and non-certified skills continue to slide in 2004. According to trend research conducted by Foote Partners LLC, for the fourth quarter in a row, offshoring of IT labor has made onshore skills supplies a bit less important, resulting in lower pay for IT workers in a number of positions. Specifically, pay for both non-certified applications programming and enterprise applications development skills declined 2 percent in the first quarter of 2004 and between 19 percent and 21 percent over the past two years. Applications development certifications have lost some 15 percent of their value in the past two years.

“If you look at the patterns of both base and bonus pay, there definitely is a connection between jobs that are being offshored right now and those that are remaining on shore,” said David Foote, president and chief research officer, Foote Partners LLC. “Often skills pay is bonus pay, and you’ve got no reason to pay bonuses if you’re sending a lot of jobs offshore. The laws of supply and demand dictate that if you reduce demand and supply stays constant, the price goes down, and that’s what’s happening here. You’re creating fewer job opportunities for a fairly constant labor supply of skilled people. ”


Foote differentiates between what some might consider natural economic slowdown and companies’ changing pay practices. Companies are filling jobs with offshore candidates or consultants, temporary workers and contractors, a class of workers who are not traditionally eligible for bonuses or variable pay for skills and certification. And, companies don’t tend to reward contractors with performance-based pay unless they are part of a team.


Foote said that the erosion of base and bonus pay for jobs that typically are being offshored—applications programming, call centers and database jobs—appeared in early 2003. “Half of the Fortune 500 told us that by the year 2006, compared with their workforce in 2002, they felt that 35 to 45 percent of the full-time workers that they employed in 2002, those jobs would not be replaced by 2006,” said Foote. “In other words, they’re either sending jobs overseas or they’re just not filling them with full-time workers.”


Foote recommends that IP professionals point their careers toward a set of higher-paying skills enabled by in-demand certifications including: HP, Cisco and various security certifications. Also, Foote said that jobs that are considered very strategic, requiring close interaction with customers to protect applications, are a good place to focus attention as there might be less offshoring of certain transaction processing or systems programming jobs.


Offshoring isn’t all bad, however. “Consider that IT people love a good challenge,” said Foote. “If they’d like to be more challenged by creating the next generation of customer-facing applications, one of the best ways of working on retention is to do offshoring. A number of companies have said anecdotally that their workers are much happier now that they do not have to do boring or uneventful work, leaving them to do more interesting applications work.”


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