Banking

How will a recession affect IT?


They're not saying there will be a recession, nor, even if there is, that it will affect IT, but Forrester is cautioning CIOs to think proactively in terms of cost-cutting measures.

At a January 31 teleconference, Forrester told CIOs that they should be prepared to help their organizations ride through economic downturns.

Andrew Bartels, Forrester's vice president and principle analyst, said that headcount reductions are neither anticipated, nor recommended. He even said, "The worst thing you can do is get so focused on cuts that when you get out of the recession, you don't have what you need to move the business forward."

But he cautions that certain IT roles may be at greater risk in an economic downturn: contracted employees and "those in more commoditized areas like help desk or application support are at greater risk."

The experts don't see companies looking to offshore outsourcing as a panacea either, as they may have in the past, since many companies have been burned by those relationships.

About

Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

31 comments
Womble
Womble

Come on folk, we are talking business here, and managers that are supposed to think 5 years ahead instead thinkin about the bonus in 7 month's time IT is a cost to the business, like all other costs, however you present yourself as providing business benefit and marketing advantage. In a recession revenues go down, so cash flow in goes down. Unless you have really deep pockets you have to reduce costs. ways to do this include = reduce staff numbers - most common = delay investment - always happens = sell off assets - usually at risk businesses = invest in lower cost processes - smart but long term, only happens when business take a long term view = hammer down external costs - this moves the risk outside the organisation = acquire others - you need deep pockets and really good SWOT analysis All of the above will impact IT, and if you are not bunkering down, setting up your protective perimeters, and locking in your allies and ties. you will go to the wall

Questor1
Questor1

1.) IT is slowly transitioning from desktop to Internet webserver applications to supposedly save costs. IT is now considered a commodity and subject to outsourcing, but the rapid decline in the value of the US dollar is causing offshore outsourcing to be more expensive. Local IT support has been deemed by larger companies as too expensive. This is why and estimated 25% of programming jobs in the past 5 years have been shipped overseas to lower cost labor markets. The current recession may slow this transition to web-based applications because of short term cost-cutting by companies. 2.) IT staff are now often considered commodities that are just-in-time workers. This has led to companies getting rid of staff due to the rapid rise in the hiring/firing of contractors on an "as needed" basis. Companies no longer provide adequate IT training to employees because they often assume that workers have all the needed skills and training when they first walk into the company. The recession is causing more employees to be dismissed in favor of contractors. 3.) Many older IT managers and workers are being laidoff from companies, which is being accelerated by the recession. This is caused by companies trying to lower labor costs, including retirement benefits for older workers. Companies often unfairly hire younger workers as contractors at lower wages to provide a cost basis to dismiss experienced workers. These unfair & possibly illegal labor cost cutting measures have opened the door of the use and abuse of H1-b and L-1 visa employees hired by contractor companies. Older American workers will continue to experience increased age discrimination as companies jetison employees in favor of H1-b and L-1 contract workers. There needs to be changes in the IT business model so that American workers are more valued for the skills they apply on the job, not as interchangable parts in a machine. Hopefully the recession will cause politicans to hera mre concerns from IT workers about their concerns. Neither party is addressing the increasing concerns and needs from IT workers in this recession that actually started in IT back in 2003.

formerly CallPete.com
formerly CallPete.com

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Questor1
Questor1

I played by the "rules" for IT careers and have bottomed out after being replaced by outsourcing contractors. The recession has caused more IT firms to outsource for short-term gain, but few companies consider the long term costs. Outsourcing means the company has lost faith in its staff and lost control of its IT direction that is managed by the IT outsourcing company. Web-based applications are generally not as secure and cannot be easily monitored with an audit trail like in house server based application. I have 3 college degrees, an up to date MCSE and a Novell CNA where I cannot get a job in this area because most decent IT jobs in this region because I am considered overqualified. The real problem is that I have experience age discrimination where potential employers see my comprehensive resume and decline to interview me based on the "younger workers are better or more current" fallacy. Another problem is that I live in Cincinnati, Ohio (in the rust belt) that seems to have become outsourcing USA. Cincinnati has the national HQ and staff for Convergys and soon Tata Consultancy Services. This has caused most large corporate IT shops in this area to shut down and outsource IT tasks to these and other outsourcing companies. Both Convergys and Tata are infamous for moving IT jobs overseas due to lower costs on a playing field that is tilted against American workers. Over 90% of Tata employees in the USA are H1-b and L-1 visa employees where Tata declines to hire most qualified American citizens for jobs in the USA. Tata has often claimed they try to undermine their employee regional IT wages by 20% or more to earn corporate profit. Using H1-b and L-1 workers, Tata is supposed to pay prevaling market wages, but instead tries to continually undercut market wages. IT outsourcing, whether inshore or offshore, is only a shell game used by employers to screw employees. Companies that outsource supposedly reduce costs by getting rid of employee training and eliminating long term retirement and pensions. Outsourcing causes security headaches and real privacy concerns where contractors in foreign countries are not held to the same legal standards as they are in the USA. Companies that outsource risk a costly loss in intellectual property when IT outsourcing firms have access to the information. It is estimated that over 30% of all current jobs in the USA can be outsourced overseas via the Internet. We have only started to see the havoc that outsourcing creates and tears at the social fabic of our nation.

gkorte
gkorte

Questor1: I'm a reporter for The Cincinnati Enquirer, working on a story about H-1B visas. I'd love to talk to you for my story. Could you give me a call? -- Gregory Korte staff writer First Amendment Desk The Cincinnati Enquirer 312 Elm Street, 19th floor Cincinnati, Ohio 45202 p: 513.768.8391 f: 513.768.8340 gkorte@enquirer.com http://www.enquirer.com

Tearat
Tearat

You are confusing cost to individuals with cost to a society Cheap goods are great for the individuals Cheap goods are great for the society if the goods are made in that society If not then it is a cost to the society Every dollar spent overseas has to be earned back some how Large organizations like unions and corporations are the last to be affected Everybody else pays first For your own peace of mind it is best not to obsess about those organizations Everyone else will go through the pain and come out stronger They will then kick the ass of those organizations What we need to concentrate on is minimizing the effect on the weakest in the society The problem with the business attitude It always comes down to getting rid of what ever is not making a profit In a society that means getting rid of the people who do not contribute to the society What needs to happen is We need to stop thinking of our nations as businesses We need to start thinking of them as homes We need to start thinking of businesses as tools to be thrown away when no longer useful We need to stop businesses spending the society?s money overseas just so they can keep going We need to stop buying things we make overseas You trade what you don?t need for things you need You always try to make everything you need

TheGooch1
TheGooch1

The problem isn't complicated, the solution is because moneyed-interests have deliberately made it so. Always favor your citizens over foreign interests. China trade agreement, they set a 12% tariff on US goods, the US set a max tariff of 3% on theirs...who's interests are we looking out for? Canada trade agreement Made it cheap to get Canadian lumber, while at the same time US lumber was tariffed at 6% so that it wouldn't sell. Foreign Outsourcing( all ) Other country gets jobs, get technical infrastructure,gets industries built around tech skill set ( schools, training companies, etc ) , get incentive to educate people, incentive for R&D. US gets cheap labor but loses ability to support its technological needs..if we go to war with a country that provides our textiles, tech, oil, or other key resource, they can pull the resource and quickly economically kill us. In addition, incentives for education, R&D, and investing in local technology infrastructure goes away. Huge loss for the US. Illegal Immigration Another source of cheap labor, it is useful for accelerating the process of eroding the middle class. The savings gained to the consumer is about 5 cents on the finished product ( agricultural, service, etc ). I'd pay an extra 5 cents for an orange if I new it helped a fellow US citizen keep their job. I could write a book about this, but many have already been written. US citizens in the top 5% income bracket will do well with the outsourcing model, but over time the middle class disappears and we are back to the middle age model with only 2 "classes", the rich and the poor. I hope this cycle ends very soon before we get all the way there.

Tony Hopkinson
Tony Hopkinson

As 'just a coder' of course it's a possibility, but only a total muppet would pay my salary just for that. It's much less prevalent in the UK and always will be. Our dreams are very different.

Tearat
Tearat

Your arguments are very old and seldom work ?In the USA there is no reason to use poverty as an excuse for crime. The Amish are among the poorest people in America, but crime is almost non existent in their communities.? The Amish are you kidding me What?s your definition of poverty? ?Crime is never excusable, even to eat. I know that is controversial, but its never right to do wrong. In most developed parts of the world, if you are hungry, someone will feed you.? It can depend on what you call a crime ?There is so many welfare programs for the poor, the elderly, the disabled, etc, that there are a constant shortage in most large cities of getting qualified help in entry level positions, while the number of people on state and federally funded welfare programs continues to rise. The crime rate (theft and burglar activity) is more closely tied to drug use than poverty, although drug addicts are typically poor, since they cannot hold down a job when they have to get high. Crime, poverty and drug use usually follow similar lines, but the cause of one is the effect of another. That is another topic altogether.? Some of them take drugs because they are poor or on welfare and have no hope There is no excuse for economic blackmail And you know what I meant ?Lazy management and layoffs and outsourcing are not the main cause of business slowdown. Markets shift. Sales demands shift. Labor availability shifts. Technologies shift. Example: All of the telegraph operators have been laid off by now. Should we have tried harder to make sales and new markets for the telegraph? AT&T (American Telephone & Telegraph) did a fairly decent job of keeping up with technology changes, and they have hundreds of thousands of employees and contractors worldwide. The hundreds of other telegraph companies in USA back then have mostly long since gone away.? I feel no need to repeat my post It looks like you misunderstood what I wrote Telegraph, AT&T are you kidding? Do you have a mobile phone? ?If you are a small business owner, and you made $50k in sales last month, and you have $100k in the bank, and $75k in operating expenses monthly, ($25k/mo could be dropped by outsourcing) then you have about 3 months to get sales up or get rid of some of your help, or you will be letting EVERYONE go.? Not the subject Stupidity is not a business requirement But outsourcing is not a cure Loaded question? None of what you wrote is loaded is it? Just encase you forgot IP ?Employees, business managers, stockholders, customers, vendors, and everyone involved all bear the costs of recession.? Good to hear it ?What people never seem to see is the upside of recession. It causes businesses that don't really work to close. An ever-expanding economy that never has a chance to exhale temporarily, will eventually be full of poorly run businesses that have managers with no business managing. Sort of like the winter freeze cuts down on the mosquito population. It hurts at the time, but it leads to healthier in the long term.? That is your opinion I don?t like the suicides and other unfortunate consequences of a recession Last thing ever hear the term ?Put something away for a rainy day? Pete you are presenting your arguments as someone standing outside looking in A recession in an economy as large as the US will effect the whole world It will effect you the same as everyone else Or will I see you on Mars

Tearat
Tearat

Is what people turn to when there is no choice They have to eat Shoot the unemployed, disabled, elderly, etc Or anyone who has no means of support No I don?t think that It would be wrong The argument you are making can end with that sort of thing There is such a thing as reasonable cost cutting It should not become an obsession Or an excuse for lazy managers It is the responsibility of the company owners and managers to find new markets for products It is the responsibility of the company owners and managers to find new products for the markets Its is to easy to sit back and blame the cost of labour Why should employees be the only ones to bear the cost of a recession?

Tearat
Tearat

So this is a sensitive subject for you Do you have a problem with people disagreeing with you? Cost in any society is measured in more than dollars and cents It is fine to have a cheap product But if nobody has any money Who are you going to sell it to? Everybody needs to earn a living If they don?t have a job how do they make the money to feed themselves? Crime? Or do we just shoot them Stop trying to make this about race This subject is a hell of a lot more complex than you are trying to make it out to be Unions are the result of evil business practices Business at the time used the same arguments you are using here

Tony Hopkinson
Tony Hopkinson

I'll say it louder Lower cost to WHOM. Bt the way , your sneakers are now 7$, hallelujah praise the market force, your taxes went up by two %. Add that up.

Tony Hopkinson
Tony Hopkinson

A lot of outsourcing is done to promote an initial and often large reduction in costs. The manager who authors it, gets his back slapped and a promotion and shifted to another job. The poor f**k who comes after him has to deal with the long term problems. Yes Hamid is cheaper, he may even have the skills and the knowse to do the job, but he's massively isolated from those he is doing it for and in support et al from those he's doing it to. This is true for any subcontract scenario by the way, I worked with some US colleagues on UK Tax products once, it was hilarious until we went bust. That isolation needs to be managed, the secret ingredient in the sauce is not a comression algorithm, it's that Fred wrote it and knows how it works, Jim did the spec like that because of this environment. Pete chose the tech because of this... That's the corporate side, then ther's the big picture, give Hamid the job, Bill is out of work. Bill has to take welfare or maybe a paycut, he pays less taxes, he plays a less substantial part in the economy. Bill is p1ssed off, he has a few beers to many, sees Hamid's cousinm Raj over on a H1B and dots him. Ends up in jail. Who is paying for this, Corporate Clive or Tax Payer Tim? It's not Hamid is it, he's paying taxes elsewhere and buys his phillipino 8$ sneakers from Junna round the corner. Then even longer term, there's no future in IT, you can't any decent money, it costs a lot to get all those pieces of paper, so f**k it, I'll do media studies and work for Jerry Springer. Better still if there are no students who want to do it, what use are the teachers, there's no jobs for them either. Some centuries later, when the world labour market has evened out, (Indian outsourcing is already moving to less affluent ecomonies). Actually millenia, there is always a less affluent economy. You end up no local workforce who could take advantage of it, so now you are paying all the costs related to being widely distributed AND in real terms a much higher salary. Sound financial sense my arse. Well unless your plans are for your next promotion, you term in office or more likely until the next quarterly report. That's not planning it's acting on impulse.

Tearat
Tearat

Questor1 wrote ?Companies that outsource risk a costly loss in intellectual property when IT outsourcing firms have access to the information.? He did not state how many or what the IP was You placed a value on an unknown factor You offered a very simplistic reply it is a lot more complex than that The two main factors in the cost of living are Where you live and what it costs? How much it costs to feed your family and/or yourself Transport cost is affected by distance from work and the food markets Work and the food markets also pay rent Clothing retailers etc also pay rent Property prices for sale or rent are the biggest drain on any economy But it is more complex than that You will find the wages in many 3rd world countries are rising faster than they are in the 1st world You seem to have a sore spot on this subject so I will end it with that

Tearat
Tearat

You typed ?Again... cost vs value. Putting a million dollar security system in place to protect $500,000 of information isn't always the right answer.? You cannot put a value on intellectual property It?s like predicting the future It is impossible for someone in 1st world countries to compete with someone in the 3rd world The cost of living is lower In the 1st world wages go down but the costs stay up I blame the landlords first Banks second

formerly CallPete.com
formerly CallPete.com

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TheGooch1
TheGooch1

My employer has a strict no-telecommuting policy and has a system in place to keep track of in-office ours, flagging late arrivals, early departures, and long breaks by salaried IT personnel. However, you can work from home all you want, in addition to the mandatory work in the office. You just cannot replace in-office work with remote work. It really stinks with there is a blizzard and the highway is closed, schools are closed, and you still have to get to work somehow...yes, this really happened.

arjeyar
arjeyar

It is the interaction of Demand and Supply laws. Most of the companies possess the attitude that 'unless there is a demand I will not produce' which matches against the user-communities mindset, 'I wll not go for it unless there is a demand (in the market place) for the product. This would lead to incessant downward loops leading to 'no production' and 'no buy situation'. Multiplicity of IT players and variations in the product features being more of cosmetic in nature, the IT companies would find it hard to market their products unless they are offering effective solutions to the existing problems faced by the user community. In such cases, there could be a price war initially,for sustaining the market. Later, the existing products would lose their edge for the reasons that fresh innovations would be fewer. Products which are quite innovative and could influence the user community to go for them would survive. Alternatively the existing managements would make way for new management from other global-locations -- takeovers could be high. If the buyer communities themselves are affected through lack of sustainable business volumes, then IT would see a streak of slowdown leading to a stagnation in developmental activities.

TheGooch1
TheGooch1

IMHO, IT has been in a recession since 2003. With many IT folks out of work or having had to switch careers since then, it is ludicrous to read claims that the US needs more H1B's because there are not enough IT workings. I call Shenanigans as there are obviously enough such that many cannot find jobs or have to change their career path to another field entirely.

cquirke
cquirke

Aspects of IT rest on some shaky assumptions, such as the notion that all brand exposure will lead to sales, no matter how intrusive the advertising method. Or that folks will continue to conduct ecommerce in the face of malware and phishing onslaughts. As it is, we've had legit web sites being infected since November 2007 and we still don't know how these infections are being done. We also hear that https doesn't really secure Gmail against Hamster attack at public WiFi hotspots. Sooner or later, software update delivery mechanisms will get malware'd, eroding another "you're safe if you..." assumption. So there may be a die-back on online advertising and ecommerce uptake, possibly triggered by hard times that force a reassessment of what works. In addition to this, the nature of IT has changed from creating new functionalities, to trying to re-impose the natural limitations that IT can remove. For example, whereas once the industry would create the ability to digitize media and thus copy and transmit it virtually for free, it has now passed that growth point into the senescence of trying to re-impose scarcity via DRM. Much new work in IT goes about negative value such as this, changing the nature of the industry from real growth in positive value, to a tottering ediface of self-serving complexity. Somewhere along the line, folks will start to walk away from the whole mess.

TheGooch1
TheGooch1

Well, I've kept track of many of my departed coworkers, and the majority of them trained themselves out of the IT field, mostly into health care and general consulting positions. IT expects too much to too little, if I wasn't in a position of juggling so much ( school/work/etc. ) I'd would have made the leap a few years ago. I will definitely be making the leap after I graduate, however. It just makes sense. Dollars and cents to be more precise.

csmith.kaze
csmith.kaze

I see what you mean. It's almost like we are always reacting to problems, never actively trying to stave off the next disaster or what-not. But people walking away from IT? I doubt it. Most of my users always complain day to day about how they don't know anything about computers and how they never will (regardless of how much i try to teach them) but even though these people don't particularly like computers, most of them have come to see how much easier their lives have been since we started the IT program here (i work in healthcare, and since they atarted IT, we have made an enourmous amount of changes.) Without our network, or the IT department, my users would still be hunting for medical records in a huge warehouse, while our doctors would still be doing their procedures the same way they did it in the seventies. gratned more problems arise, but the income of the facility has nearly doubled. I think IT will never be "walked away from." people have become too used to having everything in seconds as opposed to hours. But a trimming is quite possible, though I hope not. I think other (gov't) sectors of the economy needs trimming since they will be leading in any recession, in my opinion.

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