Offshoring hits mid-value IT jobs

Offshoring to India and elsewhere has hit demand for mid-value IT positions in the UK, according to research from ReThink Recruitment, an IT staffing firm.

The number of new IT jobs in software development has shrunk six per cent from last year, down to 28.5 per cent from 34.3 per cent, while the number of new positions in IT support roles fell from 24 per cent to 21.9 per cent, ReThink said.

Higher-paying roles - including consultants and managers - now make up a larger proportion of IT positions in the UK. The proportion of managers increased from 19.6 per cent last year to 22.3 per cent this year, while the number of consultants jumped from 6.8 per cent to 8.1 per cent. The increasing demand for consultants is driven by public sector outsourcing and integration work, according to ReThink.

Jon Butterfield, the managing director of ReThink, said such statistics, along side anecdotal information from their customers, shows outsourcing is shrinking the UK market for mid-level IT work. Noting that the thousand placements they make a year were shifting to higher-level work, Butterfield asked his customer base. "We placed many more people in higher-end jobs this year. The lower end jobs seemed to be disappearing," he said. "We asked our customers, and majority said they were outsourced."

The firm said this shows that a global division of labour is happening, with the UK taking on higher-level work, while developing countries focus on more technical areas.

"The fear that IT helpdesk jobs simply represented the thin end of the wedge, and that higher value technical roles would be sent offshore next, is not new. But it is now having an impact on the IT jobs market," said Butterfield.

He said IT contractors and workers can keep themselves in demand by maintaining their skills. "Some UK financial services businesses are now shifting application development offshore to low cost locations. This is lessening new demand for some programming skills in the UK," he added. "As India moves up the IT value chain, so is the UK. Offshoring raises quality control issues, which strengthens demand for project managers in the UK to manage processes."

But wage inflation in India could stop jobs moving there within the next five years, ReThink said. Indian software engineers make just £6,500 annually, compared to the £32,000 their UK counterparts earn, but 15 per cent wage inflation could soon narrow the gap.

Butterfield said: "When wages for software specialists in India reach around 40 per cent of the UK rate and you factor in the cost of maintaining two offices, travel expenses, time differences and so on, the financial case for offshoring begins to unravel. We are not there yet, but in five years we could be."

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