Saturday, August 30, 2008

IT workers hit hardest by offshore outsourcing, survey finds

As many as 8% of IT workers have been displaced by offshore outsourcing, either through job loss or an involuntary transfer to a new job by their employer, which is twice the rate of workers in other occupations, according to a study based on data collected from some 10,000 people, which may be the largest survey of its kind.

The survey, conducted by researchers at the New York University Stern School of Business and the Wharton School of the University of Pennsylvania, also backs up the long-standing view that IT employees in purely technical jobs -- computer programmers and software developers who have little customer interaction -- are at the most risk from offshore outsourcing.

The broad conclusions are unlikely to surprise many high-tech workers, but what may make this offshore outsourcing study unique is its breadth: some 6,700 workers across a variety of occupations and more than 3,000 hiring managers and human resources professionals were surveyed.

There has been a dearth of data about the impact of offshore outsourcing on U.S. workers, and its authors, Prasanna Tambe of the Stern School and Lorin Hitt of Wharton, said their work is the first to pin down offshore outsourcing's impact by occupation.

The job site funded the research, which looked at a spectrum of occupations, including technology, and published initial data from the survey in April. But the 44-page paper, posted this week on the Social Science Research Network (registration required) analyzes what the data is saying about the fate of high-tech workers who have been directly affected by offshore outsourcing.

Tambe, an assistant professor of information, operations and management sciences at NYU, said the data isn't a forecast of how extensive offshore outsourcing will be, but instead tries to fill in the gaps of the theoretical work on offshore outsourcing and address the dearth of data on this topic.

But the impact of offshore outsourcing on IT jobs may just be a sign of how this trend will unfold across a broad range of occupations. "I think [IT] is definitely ahead of the curve, but I think that gap will probably close in the future," Tambe said.

The base rate of offshoring across all industries is just over 15%, but some 40% of all tech and telecommunications companies are doing some type of offshore work, according to the research.

By occupation, more than 30% of the survey respondents said they are offshoring computer programming and software development jobs, but only about half, or 15.5%, reported offshoring systems analysts, who typically interact more with others in a business.

Among employees, across all occupations, slightly more than 4% of workers were displaced because of offshore outsourcing, half the rate of IT workers. The survey's 8% figure for IT displacement represents the percentage of workers who have ever been affected by offshore outsourcing, a rate that implies an annual offshoring-related displacement of 1% to 2% per year for IT workers, according to the study.

Of those displaced by offshore outsourcing, 70% lost their jobs, with older workers more likely to be displaced.

The researchers don't predict what future displacement rates may be, but they say that as offshoring grows, tech workers without jobs that don't require interpersonal skills, are being replaced more rapidly.

IT workers concerned about displacement "can focus on further developing these interpersonal skills, or may find more robust long-term careers in IT professions that involve significant face-to-face interaction such as those involving cross-organizational process change or hands-on support functions," the report's authors wrote.

Since IT workers have been more severely affected than other types of workers, Tambe and Hitt argue that policy-makers could focus on tech workers to provide help, including job training and government compensation to offset wage losses. Educational institutions will have to react as well, with "increased emphasis on the development of interpersonal and management skills within the IT curriculum."

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