The UK is creating a skills abyss that could deepen the recession and slow the next upturn by sending IT work offshore.
Last week mining company Rio Tinto said it would stop or postpone new projects and speed up its programme to offshore and outsource IT work. It is following a well-trodden path. Scores of large IT employers such as Tesco, British American Tobacco and the telecommunications companies have sent work to India and the Far East.
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While developed countries are plunging into recession, newly industrialised countries are still growing and creating demand for IT skills, especially software development, outside the UK.
The effects on the UK economy are predictable. This week credit vetting agency Experian revealed that some 600 IT firms have gone bust this year. This is almost 7% up on last year. It fears what might happen next year.
Charles Ward, chief operating officer at IT suppliers association Intellect, said 2009 will be tough.
He says the hardware market will be static, but expects "moderate" growth of 2% to 3% from software and services.
David Roberts, chief executive of the Corporate IT Forum, expects the industry to suffer "a quick vicious hit". He isworried that suppliers may be underestimatingthe depth of the economic dip. "The frequency of market changes is increasing and making the troughs deeper and the peaks higher," he said."We are going to see firms running on skeleton [IT] staffs. Any supplier who doesnot have a big customer to provide subsistence income is going to be in trouble."
This was a common sentiment at a Computer Weekly 500 Clubmeeting this week. It was held under Chatham House rules of confidentiality to facilitate free discussion. One delegate said his PC supplier hadtold him that it was raising prices 15% due to the economic climate. "They just don't get it," he said.
The recession is already putting more IT staff on the streets. This will create an illusion that there is no skills shortage. An E-Skills UK report published in January showed that 65% of UK IT jobs are for managers and senior professional roles. Moreover, too few young people are joining the industry. The proportion of IT workers aged 16 to 29 has dropped from 32% to 21% as outsourcing and offshoring have taken their toll. Lars Lindstedt, a Microsoft software economist, said, "The lower runs are being taken out of the careerladder."
Several Computer Weekly 500 Club delegates expected employment levels in IT to drop further because of new technologies such as cloud computing and software as a service. These boost productivity but need fewer people, albeit with more sophisticated skills.
In addition, the Software Barometer published last week by the British Computer Society, Intellect and Microsoft shows that fewer school and university graduates have good computer, technology, science, engineering and maths skills. Together this means there is a growing shortage of UK-based people capable of becoming the next generation of IT professionals and managers.
E-Skills UK says nearly 80% of jobs in the UK need IT skills. There is virtually no business that does not use or depend on IT. Without a skilled and experienced cadre of IT professionals, the recession is likely to be longer and deeper.