November 19, 2003
Meanwhile, in the domestic job market

The "high tech industry" lost half a million jobs last year and will be down another 300,000 before things start to get better.

About 12 percent of the nation's high-tech jobs have evaporated during the past two years, but the meltdown appears to be in its final stages, according to an industry report to be released Wednesday.

After wiping out 540,000 jobs in 2002, high-tech employers are on pace to lay off another 234,000 workers this year, based on figures compiled by the AeA, a trade group formerly known as the American Electronics Association.

Based on the AeA's estimates, the high-tech industry will end this year with about 5.73 million workers, down from 6.5 million employees at the end of 2001.

The 2002 contraction included 146,000 job losses in the software sector, the first time employment in that high-tech niche has fallen in the seven years that AeA has been compiling its state-of-the-industry report.

Things appear to be getting a little bit better, and the outlook for next year is brighter.

The AeA depicted this year's work force erosion as an encouraging sign, noting that the projected job losses represent a significant improvement from the 2002 purge.

With the improving economy helping boost corporate spending on computer hardware and software, the high-tech industry should begin adding jobs during the spring, predicted William Archey, the AeA's president and chief executive officer.

"There isn't going to be a massive infusion of new jobs right away because companies have gotten used to operating leaner and meaner," Archey said during an interview.

Although they remain cautious, high-tech companies attending a recent AeA conference in San Diego were in a better mood than at any time since the industry's painful comedown began in late 2000, Archey said. "Companies have gone from being clinically depressed to rather upbeat."

That's certainly good, but don't confuse the "high tech industry" with technology-related jobs overall. The trend in the IT industry is clear and it ain't encouraging: A substantial number of tech jobs will be getting offshored in the next year and thereafter (more info and links here). These are not software company jobs we're talking about, which is what that AeA report is measuring, but jobs in traditional industries.

More often than ever, the software development and management once handled by the internal IT departments of financial services companies, for example, are now contracted to another company, one with supervisors managing the work in the United States and other workers writing the code halfway around the world.

This growing trend is reshaping the local economy, one just emerging from recession and still plagued with the highest unemployment in nearly a decade. A layer of once-abundant midlevel IT jobs is drying up, leaving workers to re-engineer their skills to secure a place in the next cycle of the Massachusetts economy, a cycle that has no clear direction yet.

Some people aren't worried about offshoring.

As smart U.S. companies outsource standard high-tech work, they're simultaneously shifting their in-house IT employees to more innovative, higher value-added functions, such as invention, creation, integration, key R&D and basic architecture. These core creative activities are at the heart of these companies' competitive futures. They know they have to nourish them.

The third and most basic reason why high-tech work won't shift abroad is that high technology isn't a sector like manufacturing or an industry like telecommunications. High-tech work entails innovation. It's about discovering and solving problems. There's no necessary limit to the number of high-tech jobs around the world because there's no finite limit to the ingenuity of the human mind. And there's no limit to human needs.

I'm not worried about the high end, either, but that's not where most of the work is. I'm worried about entry and mid-level stuff - help desks, system administration, database administration, quality assurance - the sort of thing that pays well, doesn't usually require an IT-related degree, and is accessible to people who want to make a career change. If the software and services industry is going to go the way of steel and textiles as Andy Grove thinks it will, where do we go from here?

I don't have an answer to this. It's something I've been struggling with in my own professional life. I just have too many unemployed and nervously-employed friends to feel any optimism right now. If there is a next big thing coming, I sure hope it gets here soon.

Posted by Charles Kuffner on November 19, 2003 to Bidness | TrackBack

I have seen first hand the outsourcing of IT work to offshore subcontractors in the financial industry. In fact, my company owns at least part of the technology companies in India with whom they do business, which sends employees to the US to do IT administration.

The one "safe" area seems to be electronic banking due to the rise of people working from home or being able to access the corporate Intranet. I know my department has experienced double-digit percentage growth each of the last three years, and is expected to continue the trend for the next several more. Since the majority of the business is based in North America and Western Europe, offshoring is not feasible. On the other hand, the company does take the time to train us on new skills.

Posted by: William Hughes on November 19, 2003 10:39 AM

I don't know if you noticed the Bush administration quote near the bottom of that article:

The Bush administration rebutted Grove's claim that it hasn't worked to battle the problems facing the industry.

"We certainly understand the challenges there," said Phil Bond, undersecretary of technology at the Commerce Department. He noted that the government has a policy to make sure that all children are "technologically literate" by the eighth grade. Funding for science and math education was also recently boosted by $1 billion.

"In trade, I don't think anybody questions the free trade credentials of this administration," he added.

Two words: steel tariffs.

Posted by: Diogenes on November 19, 2003 5:30 PM