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Offshoring, technology advancements and low growth have contributed to a massive reduction in IT jobs in Europe, with almost half the number of IT roles in the largest companies expected to exist in 2017 compared to 2002.
According to research from The Hackett Group, in 2002 there were 1.6 million corporate IT jobs in the 3,000 listed European companies with over $1bn revenue, but this is expected to fall by 770,000 in the 15-year period.
The rate of decline could actually be a modest estimate as further economic stagnation will make the figure higher, according to the Hackett report.
“Even this assessment could be optimistic, as it factors in modest job creation due to economic growth. As the IMF and others are now looking at shrinking short-term global growth projections, and more than half of the European Union countries have returned to recession in early 2013, even the modest job creation assumptions in the Hackett model may prove to be overly optimistic,” said the report.
This year alone Hackett predicts 83,000 IT jobs to go in the largest corporates.
"For many people in Europe seeking jobs in corporate IT, our research offers a bleak picture to be sure," said Rashpal Hullait, managing director at The Hackett Group.
"The evolving offshore job market and the maturing of global business services operations has simply eliminated many of the jobs that used to exist in IT, and a similar thing is happening in finance and other business services areas.”
Offshoring, where firms send roles to low-cost locations such as India, is often identified as the main cause of the reduction of UK IT jobs but technology advancements such as business process automation as well as recession are also contributing.
Offshoring has grown rapidly since Western companies first turned to India-based software resources in the late 1990s when faced with the challenge of Millenium bug compliance.
They needed a pool of low-cost labour they could dip into as needed rather than giving permanent staff contracts, and the well-educated engineering workforce in India fitted the bill.
Since then US and UK corporates in particular expanded the role of their offshore support to cover many more IT and IT-enabled services such as application development and business process outsourcing (BPO).
As firms became more confident in offshore services they set up their own operations, known as captives, in developing countries like India. Today there is a trend seeing multinational companies set up offshore global business services (GBS) operations to provide standardised services in areas such as IT and finance.
“GBS organisations expand and mature; many companies have found they can dependably be used to drive both cost and productivity improvements year after year,” said the Hackett report.
“Typical companies see an average of 20% cost savings in their first year of GBS operations, and 6% savings annually thereafter. They also see 7% improvements in quality and customer service, as well as a 9%improvement in productivity.”
Automation software, which is used to automate business processes, is a trend putting further pressure on UK IT professionals and graduates. There is a lot of potential for UK organisations to increase use of automation software.
Earlier this year IT trade body Intellect said automation software is underused in the UK, where it is in an early adopter phase. The industry group said businesses are missing out on what it describes as "white-collar automation".
Automation software is often spoken of as a replacement for offshoring IT and back-office roles. For example, mobile operator O2 deployed software to automate business processes, which reduced the cost of back-office operations and cut its reliance on offshore recruitment to cope with spikes in workload.
When Apple decided to change the size of the SIMs in the latest iPhone with less than six weeks' warning, O2 had to have a business process in place to deal with changing customer SIMs. O2 said that, without automation software, there would have been a three-month spike in demand for 60 full-time staff in India to cope. But the software from back-office process automation supplier Blue Prism meant this was not required.
Recent research from analyst Quocirca, commissioned by IT automation software maker IPSoft, found IT staff spend 30% of their time carrying out basic tasks and are growing frustrated with the lack of time left to focus on transformational work. The average IT worker is also only using half the skills they possess as a result of time spent on straightforward tasks.
Another factor eating away at the European IT profession is the economic downturn that began with the credit crunch and financial services crisis in 2008. Since then hundreds of thousands of IT jobs have been cut by the finance firms themselves and many thousands more by businesses hit hard by the recession the crisis caused, which is ongoing for many countries while others are only just emerging from it with no guarantee they have escaped fully.
Lower demand from consumers for products and services means less IT required by businesses. At the same time as firms try to cut costs to help through the recession they might offshore jobs to low-cost regions.
Despite this seemingly vicious circle, the Hackett Group believes “new opportunities are presenting themselves.”
“Staff that can develop the knowledge-centric skills that companies need to support their shift to global business services, and their overall globalisation goals, will find themselves in great demand," said the report.
“The need for transactional staff is decreasing dramatically, while the demand for knowledge-centric staff is increasing. [There is] a critical IT talent shortage, most clearly for knowledge-centric staff with the skills to help enable global business operations.”