Although overseas outsourcing was at one time compared with corporate treachery, the pace of change has been slower than IT staff feared.

Experian: staff rewards

A highly innovative recognition scheme called Game On! has boosted IT’s ratings as a place that recognises its good performers. The Game On! online nomination process has led to no fewer than 178 people being rewarded through fun treats like a private skiing lesson, or a day driving at Silverstone. “One of the great things about this scheme is that instead of just telling our IT people what good performance is, we can now show them,” says Helen Webster, the HR manager involved. “How Jo on the helpdesk responded to a client problem: that is what we want. Or the response of a project team to a major setback: that is how we want people to behave.”

Vast amounts of IT work have been offshored but those made redundant have mostly been able to find new jobs. And IT pay has not been cut, though the favoured treatment meted out to IT workers in the 1990s is now just a dim memory. However, today’s IT functions are very different from before and one very big difference is in the profile and mindset of the onshore workforce.

Workforces are on average much older now partly because headcount caps have cut graduate recruitment to unsustainably low levels. Staff turnover is unhealthily low and many IT teams are stagnant. And the balance of power has moved to employers, many of whom, while not cutting pay, are giving modest pay rises while tightening up on employee performance standards. Finally, many workers in their fifties want to escape from all this but cannot because their options are limited.

The good news is, however, that we are turning a corner. One big change is that offshoring is no longer being demonised among all onshore IT workforces. In a recent survey of the impact of offshoring on onshore IT staff in blue chip companies, one company told us the impact on morale was “Nil to positive – it is part of our overall strategy and is seen as a defence against outsourcing.” Another company said: “There is a positive message about ensuring security of the roles internally by having more flexibility using external suppliers.”

Not surprisingly, the impact on employee morale depends on which stage of the offshoring process the employer is at. Two other FTSE 100 companies that have advanced well down the offshoring route have recently reported measurable improvements in IT morale in their staff surveys. Why? The redundancies have stopped, the end game is now in sight and a new modus operandi is bedding down.

IT people can come to work knowing their jobs and roles are secure. In one of those companies, 500 staff have been kept onshore while 1,500 undertake IT work in India. In fact there only ever were around 1,000 onshore IT jobs in the UK to start with, so offshoring has doubled the number of IT people engaged in building and supporting information systems for that company. So a larger, healthy and stable IT function spread across two countries has emerged.

As other companies reach their particular equilibrium points over the next few years, we can expect morale there to improve, too. Smart CIOs have noted that getting uncertainty out of the way sooner actually helps morale. Uncertainty and fear is more stressful than bad news.

So can we expect the onshore IT community as a whole to emerge from the end of its offshoring tunnel into sunny uplands? Yes, we can. Just as in the 1990s it was clear that IT headcount could not grow at 7 per cent per annum in perpetuity, so today it is clear that onshore IT headcount must eventually stabilise in all companies. And when that point starts to be reached (in the next few years) recruitment of graduate trainees will recover, we will see more staff movement, and morale will improve.

But the onshore workforce will have a different shape to it, and that brings its own issues. Analysing business requirements, managing business relationships, projects and vendors, providing architectures and standards and providing the glue that is needed to hold programmes and systems together needs a high level of skills. The implications of this are not yet completely understood.

One issue will be how to source those skills. This will be less of an issue in IT functions that have kept some hands-on technical work onshore. Others may have to rely on staff from competitors, from smaller IT functions that have not offshored or even from vendors if they are to get the know-how and experience that is needed when managing IT suppliers or technical projects.

Perhaps the best-kept secret is that IT is, in 2008, a fantastic place to start a career, especially if IT management is one’s preferred ultimate career path. In five or ten years, IT people with several years’ solid technical experience will be intensely in demand to manage projects, business relationships, and vendors as well as to help set technical strategies. And because of low graduate recruitment (typically just one per cent of headcount for the past six years) the competent IT worker will operate in a sellers’ market.

What should CIOs be doing about all this? Consider retaining some onshore technical teams to act as the hatcheries for tomorrow’s IT management talent. The IT manager:hands-on-worker ratio will increase drastically so do not recruit IT people unless they have clear management potential. And increase your graduate recruitment to the maximum extent possible.

Graduate recruitment into IT is an area of great difficulty at present. Contrary to the headlines, this is little to do with the scarcity of IT graduates. Recruitment into IT was very easy ten years ago, long before the dotcom boom, when graduates were even scarcer. The problem is that employers and universities are not communicating properly with young people about careers in IT. For example, in January 2007 we studied the ‘pitch’ that 47 of the world’s largest IT functions were putting to graduates on their IT recruitment Web sites. Not one mentioned IT outsourcing and why it did not pose a threat to the graduate’s career in IT. There can be few better examples of the phenomenon known as ‘the elephant that wasn’t there’. Little wonder the smarter graduates are moving briskly on to the next option on recruiters’ Web sites. CIOs need to deploy greater intelligence in marketing their IT opportunities: many recruitment copywriters just don’t get it.

Graduate recruitment will become easier because the greater numbers of IT workers in their late 50s and early 60s will mean that retirements will soon create more space to recruit younger IT workers. Already around 5 per cent of the IT population is over 55, and that proportion is increasing steadily.

In the meantime, though you may not be able to justify lavish pay rises, look for better ways to motivate and refresh your IT workforce, such as the scheme recently introduced at Experian (see box). Such schemes will be particularly useful in today’s unusually stable IT workplaces, where they can enliven and re-energise people and teams. The irony is that most companies have a budget for treats like these but many IT managers somehow never get round to making use of those budgets.

Ultimately we can expect that IT workers will recover levels of confidence and morale that are broadly similar to those in other professions, and the stagnation that is seen in many companies will ease. The shape of onshore IT careers will have changed and the options will have become if anything richer. All today’s career paths will still be on offer in one or other company, and there will be further options, too – many associated with offshore working.

Finally, it is interesting to take a glimpse into the far future. A significant milestone will be reached when India’s millions of actual and potential IT workers are fully deployed and there are no more to recruit. What the Gulf is to the oil business, so India is to IT resourcing.

But just as we are learning that oil reserves are finite, we will learn some day that there is limited number of people in the world who can perform well in that complex, fascinating, and sometimes maddening activity we call ‘IT’. By the time the Indian ‘oil’ peaks we shall either have to have automated lots more IT work or be ready to see major skill shortages re-emerge.

Iain Smith founded Diaz Research in 2001.