IT offshoring growing

But Canada can find a niche role to play

Information and communication technology (ICT) outsourcing is growing in Canada and businesses are also becoming more comfortable with offshoring, which is a good thing for Canada’s ICT field, according to the president of the Information and Communication Technology Council (ICTC).

The ICTC predicts the industry will need 89,000 new workers over the next four years to replace retiring workers and keep up with growth, a need that far surpasses Canada’s supply, said Paul Swinwood, president of Ottawa-based ICTC.

“Outsourcing and offshoring is the only way that we’re going to be able to do some of this work because we just don’t have enough people here to do it all,” he said.

Canadian Perspectives on ICT Outsourcing and Offshoring, a study conducted by Toronto-based market research firm IDC, found while less than 20 per cent of Canadian companies offshore some or all of their IT services, they are becoming more comfortable with the notion. Companies surveyed only need an average cost savings of 33 per cent to offshore a service. This is down from a range of 35 per cent to 46 per cent (depending on service type) in 2003.

The IDC report, which surveyed 103 IT executives and 100 business executives from medium- and large-sized companies, also found IT and business process outsourcing is on the rise. In 2006, 43 per cent of IT executives said their companies outsourced IT or business processes, up from 36 per cent in 2005.

IDC predicts spending on ICT outsourcing will continue to grow over the next three years. Ten per cent of companies surveyed also said they planned to increase spending on offshoring in 2006.

While cost-savings isn’t as big a factor as it once was in deciding whether or not to offshore, the report found it’s still one of the main reasons. The easiest jobs to offshore to low-cost countries are entry-level, such as programmers, said Swinwood.

This means Canada can focus on developing strategic IT professionals, such as business systems analysts or project managers, he said.

Then Canada could become the world’s source for these professionals because the Canadian educational system has the capability to create the world’s best business systems analysts who have business knowledge, communication skills, IT expertise and people skills, said Swinwood.

“Canada doesn’t have enough people to be the code writers for the world but we do have the people and the expertise to be the project managers for the world,” he said.

Labour market information from the ICTC shows there’s already a shift from low-paying to high-paying IT jobs in Canada. Since 2000, the number of IT jobs that pay $1,400 a week ($72,800 a year) doubled and the number of jobs that pay $1,600 a week ($83,200 a year) tripled.

Universities are recognizing this shift from programmers to well-rounded IT professionals, said Swinwood. Enrolment in pure IT or computer science programs is declining while enrolment in programs that have added a business approach, or combined IT with other fields such as health care, has increased.

“If we’re going to keep Canada competitive, we need to be using the brains we have in Canada for moving us forward. We need to up-skill people and get those high-paying jobs to come here,” said Swinwood.

The council will be meeting with key members of the industry to find out how they think offshoring and outsourcing will affect the ICT labour market. The results of those consultations, along with other research, will be released as part of the ICTC Outlook on Human Resources next summer.

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