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As cloud grows, IT hiring flatlines

Patrick Thibodeau | March 5, 2011
Corporate IT departments are increasing their spending on hardware and cloud services, but not on new hiring in this weak economy.

John Longwell, vice president of research at Computer Economics, said he is also expecting IT hiring to remain flat this year, except at large companies, where it expects to see 2% staffing growth. Computer Economics defines large firms as those that have IT operational budgets of more than $20 million, which translates into a $2 billion manufacturing concern or $1 billion in the bank.

While some companies will be adding staff, very few plan further reductions," Longwell said. "We don't anticipate that IT hiring is going to be robust, but the outlook for IT workers is improving."

"Jobs are starting to open up -- we are seeing that first in demand for contract labor, an extension of work hours, and use of service providers," he said.

Longwell said that the number of organizations that are turning to software-as-a-service (SaaS) is rising rapidly. About 36% of the firms they surveyed have SaaS in place, which is up from 24% in 2009.

Longwell said that the use of SaaS is a form of outsourcing , and enables companies to reduce some of their capital and staff support. But, "I don't think you can blame the current employment outlook on SaaS," he said. "It's part of the picture."

Interest in outsourcing is growing as well, according to Hackett's data, something that seems consistently obvious earnings reports among offshore firms in India.

Indian offshoring giant Infosys (INFY), for instance, which receives about 65% of its revenue from North American customers, recently reported year-to-year revenue growth of nearly 29% in its most recent quarter. It employs 127,779, including a net addition of 5,311 employees in its most recent quarter.

But a survey by the professional services firm BDO USA, released Thursday, found that of CFOs at 100 tech firms in software, hardware, telecommunications, among others, only 35% of the U.S. tech companies were outsourcing services or manufacturing to companies outside the U.S.

That finding represents a 43% decrease from the 2009 high, when 62% of companies were outsourcing.

"The loosening of the U.S. labor market is making it more affordable for companies to do this work at home," said Don Jones, a partner in the technology and life sciences practice at BDO. "Given the language and cultural barriers in popular outsourcing destinations in Asia, including China and India, some companies are choosing to do away with these services now that they can afford to keep them in their backyards."

Shifting the work back to the U.S. can help cut down on customer service complaints and can improve the overall quality of service, Jones said.

High turnover and infrastructure issues in India and China are also making it difficult to outsource, he said.

 

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