ITAA Says Demand for IT Workers at Historic Lows

by Timothy Prickett Morgan

According to a recent survey by the Information Technology Association of America (ITAA), unless there is a dramatic recovery in the US economy within the next year, a return to normal levels of hiring and compensation among IT workers in America is not likely to happen. This will make it tougher for anyone looking for new work as a manager or a programmer, but companies will probably have a large pool of candidates to choose from because of the downturn in hiring.

The ITAA was recently commissioned by tech jobs site Dice and some of the top IT suppliers (including Microsoft and Oracle) to take the pulse of hirings and firings across the IT sector. ITAA talked to managers in charge of hiring management and programming talent at both IT companies and non-IT companies. Specifically, ITAA did telephone interviews with at 155 IT companies and 377 non-IT companies (meaning manufacturers, distributors, financial services, and other companies not directly involved in making or selling IT products). These were all companies with 50 or more employees that were not non-profit organizations.

The study shows demand for IT workers is continuing to drop in the United States, even as the number of lay offs has slowed and the overall size of the IT market has stabilized at around 10.3 million workers. One of the major factors contributing to this trend is the increasing use of offshore people with management and programming expertise to do work that ends up being used in America. This is a hot political topic, and one that will get even hotter as the pressures increase on all companies to reduce IT project costs. Farming out at least some work to programmers in India or China, just to name two countries with lots of talented programmers who work for a lot less money than even a programmer from a rural area in America, can make the difference between a project being done or not done. Overall, 12 percent of IT firms and 3 percent of non-IT firms have moved IT projects offshore. Some 22 percent of large IT organizations have done this to cut costs, according to the ITAA. Two thirds of the firms that send work overseas say they have farmed out programming and software engineering positions, while 37 percent of firms have moved network design jobs offshore. About 30 percent of the firms cited have moved Web development offshore.

The US job market, according to ITAA, had 10.3 million IT workers at the start of 2003, up 4.2 percent from the same time last year. ITAA says 86,406 net new IT jobs were added in the first quarter of 2003, but this level was lower than the gains in the fourth quarter of 2002, when 97,118 more people were hired than fired. By category, ITAA reckons there are 2.1 million programmers and software engineers in the US, and 1.9 million technical support staff. There are another 1.1 million enterprise systems engineers and administrators, 1 million database developers and administrators, about 885,070 Web masters, and 729,417 network administrators. The remaining 2 million or so workers are in various jobs, including digital media and technical writing. Tech support jobs were up 8.8 percent in early 2003, says ITAA, but network admin jobs were down a fraction of a percent. No data was available for the other job categories.

What is most astounding about the ITAA report is the downward spiraling demand for IT workers in the United States. Back in 2000, projections based on survey data indicated about 1.6 million IT job openings in America. This dropped by half in 2001, and rebounded slightly in 2002 to around 1.1 million openings. Right now, ITAA is projecting fewer than 500,000 open IT jobs in the US, which is about 400,000 fewer jobs than ITAA was projecting at the end of 2002. This dramatic drop in demand is about the same at IT companies and those outside the IT sector. This is not just IBM, Sun Microsystems, and Hewlett-Packard not hiring people. It's across the board. And perhaps more sobering is the fact that even those companies with open positions are not in any great hurry to fill them, with only 31 percent of those responsible for hiring saying they will do so in the next three months. This rapid decline in job openings in the IT area will probably have an adverse impact on the prospects of renewing, much less increasing, the H1-B visas that have been the lifeblood for technical talent in the States in the past decade. No matter. IT vendors and companies large and small will just export the work instead of importing the people. It will all come to the same, because capital always flows to where it can get the most work done out of the least possible amount of money.

On the compensation front, only 8 percent of companies say they have cut salaries and other compensation in the past year. Three quarters of companies say they did not change compensation for IT workers at all in 2002.

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