Changing IT Skills: The Impact of Sourcing Strategies on In-House Capability Requirements

Introduction

The increasingly global sourcing of IT work, the shift from exclusively IT services to business process services, pending baby-boomer retirements, and a period of declining IT enrollments in universities are prompting fundamental changes in the availability of IT skills and capabilities needed in both client and service provider organizations. The impact of these changes affects employers and employees:

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  How can organizations respond to these changes through hiring their workforce or retraining employees?

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  How can students learn the needed skills to become marketable for a changing workforce?

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  How can mid-level workers insure their marketability?

In order to answer these questions, we will review literature pertaining to information technology skills and capabilities both from an academic and practitioner perspective. Then we will describe the research methods used to understand the changing workforce. The results follow with a discussion of implications for individuals, academics and future research.

Literature Review

The very significance of IT to an organization has been questioned. Carr (2003) argued that as information technology becomes more pervasive it will become more of a commodity and that investing in IT for differentiation or for competitive advantage is futile. This argument would appear to call for greater outsourcing of the IT function and a greatly reduced need for in house IT skills and capabilities. More recently, Gottfredson et al (2005) suggest that sourcing is itself becoming a strategic opportunity and that even strategic functions like engineering, R&D, manufacturing, and marketing can be moved outside. In a report published by the Cutter Consortium, Rottman and Lacity describe the positive effect that sourcing has had in the U.S. on IT jobs, IT productivity, IT costs and IT quality (Rottman and Lacity, 2004). UBS, in a report for their investors, predicts a labor drought in the U.S. that will require some jobs to move offshore (Ryan, Farrell and Doerflinger, 2005).

Tapscott (2004), in a rebuttal of Carr, responded that companies with bad business models tend to fail, regardless of whether they use IT or not. In a recent Deloitte Consulting report, the authors conclude that outsourcing is complex and that results have been mixed (Deloitte, 2005). Their evidence suggests that most (70%) of the participants in the study had significant negative experiences with outsourcing and will be more selective in using it. A McKinsey report (Farrell et al., 2005) finds that a single global labor market exists but that it is small. Offshoring accounts now for only about 1% of the service jobs in developed countries. Even though the report projects that this proportion will gradually increase as the global market becomes more efficient, it does not forecast a sudden discontinuity in employment for developed countries. The report cites a US Bureau of Labor statistic that the growth rates for wages and jobs in computer and data-processing services are higher than those in the economy as a whole. The extent to which organizations subscribe to one or another viewpoint on the importance of IT and sourcing to a business strategy will affect the changes in the IT skill set.