December 31, 2005

Should a young person consider going into IT?

Today I had an IM exchange with a friend whose son is in college. We were talking about his major and his interests. When the conversation ended I said, "I should blog this!" So here it is ...

Clif says:
Your son knows a lot about computers. After an ugly couple of years the IT labor market is coming back strong. So it would be a good option for him if he's interested.

My friend says:
That is interesting... he has asked me what I thought of the market in IT and I have hedged. Do you think the improved conditions have any staying power?

Clif says:
In short: yes. Here's my high-level view ...

1. The market overheated with Dot Com and Y2K. There was a labor shortage. Compensation rose in response, attracting career-changers and causing a boom in the IT training industry and the IT consulting industry. (1998-2000)

2. The bubble burst. The NASDAQ collapsed. The macro economy went into recession. 9/11 happened. (2000-2001)

3. Business people were tired from the boom 90s. The IT innovation curve flattened. Businesses took the opportunity to consolidate and reap the productivity gains of the previous investment cycle. (2002-2004)

4. There were lots of initial experiments in off shore outsourcing. Some successful. Some not. (2002-2004)

5. The entire labor market adjusted to a new lower demand level combined with a new source of cheap supply overseas. The career-changer folks lost their jobs, many leaving the industry and not returning. The IT training industry collapsed. The IT consulting industry collapsed. Many people lost jobs and consulting assignments with inflated compensation and eventually found new jobs at more reasonable compensation. (2002-2004)

6. Now the economy is growing robustly (GDP growth in the range of 3% to 4.5%). The labor market has adjusted to the overseas supply. Business managers have determined what they can and can't outsource off shore. IT training is back to a more normal level, with no new career-changers. IT consulting has returned, but at a much reduced level. (2003-2005)

7. We're seeing a dramatic increase in the IT innovation curve that will continue for the next three years, at least. This innovation curve is driven by: RSS, AJAX, web services, multi-core processors, Windows Vista, Office 12, and wireless. (2005-?)

So ... in summary, IT is a good field again. Not overheated, but not depressed. Healthy sources of innovation that will drive growth in demand, coupled with stabilized labor supply. [See also my previous post on the economy, IT innovation, and the IT labor market.]

My friend says:
I am less exposed than you are to much of this but I agree with what you are saying. The question in my mind is which jobs are the most secure. (most difficult to commoditize and outsource)

Clif says:
Well, that question (at least for now) has been answered.

The very high-tech stuff is still done here: chip design, compiler design, etc. But there are very few folks who do that work.

Work in large organizations that is highly repetitive and relatively low value is done off shore: call centers, big software development sweat shops, etc.

The biggest demand for people here is in the middle: project managers, people who understand technology and can apply it, system architects, etc. Also, nearly all small-to-medium businesses use local labor because it's too difficult to establish off-shore relationships, find good people, and manage them. Only the largest companies can really do that. (And they're finding that the cost advantages are more modest than they expected in the beginning.)

Bottom line: off-shore is now a permanent part of the labor market. But it doesn't threaten anything that your son would really want to do with his life.

3 comments:

Anonymous said...

Great post. My question is is now the time to start looking for a new job? I am happy where I am at and my pay is good but there isn't room to grow because I am the only IT person. I want to make more money and I want to climb the ladder. Is the market ready for job seekers again?

Andy H said...

Clif,

This was a fun read! I bounced from consulting to y2k to hardware to Internet startup and somehow ended up working with Technology in our ministry. Thanks for the overview.

Clif Guy said...

"Is now a good time to start looking for a new job?"

Well, I'm hardly a career counselor. However, I'd say based on everything I've heard and experienced for the last six months, yes - the supply/demand balance is shifting more toward a neutral position, perhaps slightly favoring job seekers for the first time in 4-5 years.