Offshoring Eats Away at IT Pay, Study Shows

By Lisa Vaas  |  Posted 2004-01-13

Offshoring Eats Away at IT Pay, Study Shows

The offshoring of IT jobs caused IT salaries to slip for the third quarter in a row, according to new research from Foote Partners LLC, a management consultancy and IT workforce research company.

Some of the findings on premium pay for certifications and skills were:

  • Stand-alone applications development skills fell 8.5 percent in 2003.

  • Application development certifications lost almost 18 percent of their value of the past two years.

  • Webmaster/Internet certifications were down 22.7 percent in 2003.

  • Beginner certifications such as the MCP (Microsoft Certified Professional), CCP (Certified Computing Professional) and CompTIA A+ were down 13.6 percent.

  • Database certifications fell 9.4 percent.

    Foote Partners research detected the trend a year ago but refrained from reporting on it until the company could ascertain whether it was being caused by the sour economy or by offshore outsourcing, according to David Foote, president and chief research officer for the New Canaan, Conn., research firm.

    Foote Partners pegged offshoring as the salary-eroding culprit after interviewing executives who are offshoring, executives at the middlemen companies that are contracting with offshore companies, and those IT workers whove dealt with jobs being offshored at their companies.

    Storage Center Editor David Morgenstern recently wondered if offshore outsourcing was a "natural law." Click here to read more.

    Foote Partners has been tracking IT salaries since 1997 and, as such, can put the current IT salary and bonus-pay slide into historical perspective.

    "We first started noticing offshoring pressures on stateside compensation early in 2003," Foote said in a statement. "Premium bonus pay for segments of IT skills and certifications that had been performing steadily in our quarterly research began to slide noticeably. These segments coincided with many of the same employment categories that have been most susceptible to offshore outsourcing."

    Next page: Whats not getting offshored?


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    According to Foote, the employment categories most susceptible to offshore outsourcing include application development and maintenance, some data-center tasks, help-desk jobs, and, recently, some business-processing work.

    The type of work thats being sent to countries with low salaries, such as Pakistan, India and China, is along the lines of rote implementations of higher-level infrastructure architecture. In other words, Foote observed, if youre the one doing the modeling or the systems-architecture work, your job is safe—for now. Those workers carrying out orders, may have either lost jobs, or should be worrying.

    "A lot of this stuff isnt being outsourced," Foote said. "Project management, security, architecture, those arent being offshored. Systems and network administration isnt being offshored. Theyre still onshoring jobs that require in-depth knowledge of business processes."

    Click here to read about slowing IT job cuts.

    Companies have been spending "a fortune" project-managing this stuff from afar, Foote said. Thats one reason why project-management certifications still demand a strong premium, with 6.7 percent growth in premium pay in 2003.

    But how long will it be before project management gets outsourced for lower wages, as well?

    Not too long, Foote said. "We talked to companies who said early on, Were not setting up operations in other countries. Were simply offshoring jobs. We said, At what point will you consider setting up an outpost in another country? Youre spending so much time there and your customers want you to do that. They feel safer. Their data is on computers in Pakistan, and they want you there, with your regular operations, with your internal checks and balances," he said.

    Now offshoring executives are now starting to tell him that the time to offshore entire operations is upon them, Foote explained. "Theyre saying, Youre right, its too risky. Its cost-effective. Were going to do this offshoring thing for a long time to come, so were going to set up operations there. Were going to house people there. Thats coming from customer pressure and the costs of managing from afar."

    Click here to read survival tales from pros who pursued alternate, non-IT careers.

    So whats still safe from getting offshored? Here are some bright spots from Foote Partners research that also reveal the current state of supply-and-demand and can point to relatively secure jobs in the U.S.:

  • Project management certifications premium pay was up 6.7 percent in 2003.

  • Security certifications were up 1.1 percent. Top performers were:

    • Certified Information Systems Auditor, up 25 percent in 2003 and 38 percent over the past two years;
    • Certified Information Systems Security Professional was up 20 percent in 2003 and 50 percent in the past two years;
    • GIAC Certified Windows Administrator was up 13 percent in 2003 and 29 percent in the past two years; and
    • GIAC Certified Unix Administrator was up 13 percent in 2003 and 29 percent in the past two years.

  • Systems administration and engineering/network certifications were up 0.4 percent.

  • Premium bonus pay for Citrix Certified Administrator went up 17 percent in 2003.

  • Citrix Certified Enterprise Administrators value was up 10 percent in 2003.

  • Red Hat Certified Engineer was up 14 percent in 2003.

  • Linux Professional Institute Certification Levels 1 and 2 were up 17 percent since late 2001.

  • Cisco Certified Internetworking Expert was up 11 percent in 2003.
  • These certifications were earning 10 to 11 percent of base pay in median premium bonus pay in 2003:
    • Microsoft Certified Trainer,
    • Microsoft Certified Solution Developer,
    • Oracle Certified Professional/DBA,
    • Cisco Certified Enterprise Administrator,
    • Cisco Certified Network Professional,
    • Master Certified Novell Engineer.

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