IT Services Succumb to Recession

Payrolls among IT services firms experienced their biggest one month decline in more than five years but employment levels at these companies remained higher than they were a year ago.

According to the employment report issued Friday by the Bureau of Labor Statistics, payrolls at so-called computer systems design and related services firms fell by 2,900 to 1,428,500 in December. It’s the biggest drop since August 2003, when payrolls at IT services firms fell by 3,400. It was only the second decline in IT services payrolls since May 2005; this past March, the sector saw payrolls dip by 2,200 workers.

The loss of employment in the IT services sector shouldn’t be surprising considering the battering the economy is taking. Yet, IT services firms are performing much better than the rest of the economy. In 2008, employment among IT firms grew by 2.7% or 37,100. As a comparison, overall nonfarm employment plunged by 524,000 in December and nearly 2.6 million for all of 2008, a 1.9% drop.

As the recession continues, expect to see payrolls at IT services firms to continue to contract, but only modestly. Businesses rely on IT to function, and in an economic turndown, companies more likely will turn to IT services firms to keep their operations running before they hire full-timers to take over.

Photo: AP

If Not an IT Career, Then What?

Here's a book for professionals tired of working in IT or can't find a good job as an information technologist.

Janice Weinberg's “Debugging Your Information Technology Career” (Elegant Fix Press) identifies 20 other careers that use skills IT professionals offers. While most of them aren't usually thought of as computer jobs, a press release states, computer proficiency is a key qualification for success in each. Among her suggestions:

An architect's knowledge of best practices in systems design would be a strong asset in a technology due diligence position.

A business analyst who guided logistics staff in defining their IT requirements would be a credible candidate for a strategic alliance management position at a company marketing logistics software.

A network operations center manager who upgraded a change-management function would bring a valuable customer's perspective to a role as a change-management software product manager.

A network security administrator could become a broker or underwriter of cyberliability insurance.

A software engineer who supported customer relationship management applications could parlay that experience into a position selling CRM software.

A premise of the book, or at least the press release touting it, is that IT jobs are vanishing in this recession. No doubt, many IT pros find themselves out of work. But government data consistently shows that employment opportunities are greater in IT than in nearly any other occupation class.

If anything, what this book demonstrates is how closely linked IT is with the functioning of business. IT skills are business skills, and this know-how—whether in an IT or some other corporate job—will be needed more than ever.

Real-Life Lesson for IT Job Seekers

Apapito Soto’s story is a lesson that could benefit many IT pros seeking employment. As told in The Wall Street Journal on Monday:

Many workers, especially those out of work, turn to temporary-help firms for jobs. Unlike the past, staffing companies no longer are depositories for dead-end jobs, as they offer higher-paying positions.

"Temporary" is a relative term in staffing. In 2001, Agapito Soto, an Irvine, Calif., information-technology consultant, signed on with Sapphire Technologies, a temp agency that specializes in high-tech work. The agency placed the 55-year-old. Soto in a full-time slot with the Orange County sheriff's department, which continues to this day. Soto says he has notched on-the-job learning in his seven years at the sheriff's department.

He has even passed up permanent jobs that would match his salary because he figures those positions would be vulnerable to cuts that don't affect temps. "With the current climate, employers are looking at spending less," he says.

Follow the Money to Companies Hiring Technology Professionals

Want to know where to find jobs in this recession? Look at the firms where venture capitalists are investing.

Venture capitalist Trevor Loy invests in technology companies that haven’t stopped growing, according to a story posted on the McClatchy news service website. And, he says, these firms haven’t stopped hiring. "The end markets they serve are not shrinking," Loy said of some of the more than two-dozen companies he funds. According to the story:

They're part of a select swath of the U.S. economy that's been protected—so far—from the bad economic weather. They're schools and health-care providers, information-technology firms and green energy start-ups and other firms that, while not thriving, are at least still hiring.

Indeed, healthcare concerns and companies creating solutions to reduce carbon emissions are among ventures most in need of IT know-how.

Bad Economy but Bright Future for Some Info Technology Pros

Software as a service, mobile applications and data security should continue to flourish during the recession.

That’s the gist of a story posted on The Wall Street Journal website:

While the spending slowdown is expected to hit many technology categories, some pockets of tech—such as online software, mobile applications and security—may see increased investment and attention.

Companies investing more in all three of these tech categories make sense. Also known as a variation of cloud computing, software as a service—online apps that replace those housed on PCs, laptops and servers—provide similar benefits at much lower costs. With more people using wireless devices, creating new mobile applications helps drive productivity. And, as The New York Times reported earlier this month—in an article entitled "Thieves Winning Online War, Maybe Even in Your Computer"—securing corporate computers and networks are more crucial than ever.

With vast resources from stolen credit card and other financial information, the cyberattackers are handily winning a technology arms race. “Right now the bad guys are improving more quickly than the good guys,” said Patrick Lincoln, director of the computer science laboratory at SRI International, a science and technology research group.

The Journal's report concurs:

The economic downturn is heightening cyber security problems. Phishing attacks—emails that pretend to be from banks or some other legitimate source—are growing in sophistication. Cyber criminals capitalized on the collapse of several financial institutions this year by sending emails claiming that customers of failed banks needed to log on to a Web site and update their account information. The Web sites were really controlled by cyber criminals.

With the right skills, prospects for many IT pros look solid in these recessionary times.

IT Skills Essential in Recession

An article Tuesday in The Wall Street Journal confirms a tenet of this blog: employers need IT skills especially during an economic downturn:

There are also key areas where businesses—including those that are struggling—can’t go without help, says Jon Zion, president of eastern U.S. operations at staffing firm Robert Half International Inc. "There's still work to be done," he says. "And in bad times, [some] functions become even more essential."

Information technology is one such area, says Mr. Zion. Indeed, there are more than 62,000 employment ads currently listed on the technology job site Dice.com. IT positions are plentiful—even at companies that outsource jobs overseas. Systems administrators, network security specialists and help-desk technicians are still in demand, says Mr. Zion.

As we have noted, IT is so critical in keeping businesses functioning that among the last to be fired and the first to be hired are IT pros. "Today,” says Stevens Institute of Technology IT professor Jerry Luftman, “companies are going to IT and asking them for ideas as to how IT can be leveraged to reduce the costs of other parts of business.”

Can Unions Organize IT Pros?

If legislation to make it easier to organize workers into labor union becomes law next year,
how likely will information technology workers unite to join trade unions?

That’s a question posed in an article in the San Francisco Business Journal. The article quotes labor lawyer Garry Mathiason saying tech employees aren’t immune “merely because they are in technology or businesses where little union organizing has taken place.”

Big labor with the backing of many Democrats, including those in the incoming Obama administration, back passage of the Employee Free Choice Act that would make it harder for companies to battle unionization drives.

Though the bill was written to organize workers at companies like Walmart and not necessarily the information-tech industries, that doesn’t mean attempts to organize high-tech workers in Silicon Valley—where joblessness has jumped 2 points to 6.9% in just a year—won’t take place. Says labor lawyer Mark Ross, in the business journal:

“Times are changing. We’re in a troubled economy. People may be looking for other ways of protecting themselves and insuring that they are compensated appropriately.”

But would core beliefs of Silicon Valley technology workers get them to join a union. Here’s what Jan English-Lueck, a San Jose State University professor who studies the culture of the region, told the journal:

“There is a strong narrative of individuals in garages being successful, and that vision is not something that lends itself to organizing. Unions undermine the idea that I can do anything. You have a couple of really big cultural reasons against organization.”

Yet, the founder of the professional group Programmers Guild John Miano sees it differently:

“A forward-thinking union could set up a web site to create a non-stop certification drive at an unlimited number of Silicon Valley companies. This bill has the potential for having a major impact upon Silicon Valley and technology fields.”

Where the Tech Jobs Aren't

The massive job losses associated with this recession haven't hit IT professionals as hard as those in other professions. Still, IT vendors are laying off workers, which hits occupations such as engineering hard.

According to the EE Times Asia, which surveyed engineers worldwide, fear is gripping engineers as sales at high-tech companies weaken. From its report:

If the global economic crisis was a high-tech design challenge, executives at high-tech giants like Alcatel-Lucent, Cisco System, Dell, IBM, Intel, Microsoft, Nortel, Yahoo and even Sun Microsystems would be headhunting, beefing up their R&D teams and scouring the globe for the brightest engineering minds.

Instead, many of these companies, are frantically downsizing, discarding unprofitable business units, selling non-core operations, instituting a hiring freeze and eliminating thousands of skilled and experienced engineering jobs in a desperate bid to reduce costs and remain profitable in the midst of a horrid sales downturn. The result is a mind-freeze.

The article points out that Western engineers are deeply troubled by what they see as assaults by employers on their ability to fend for their families.

Unwittingly, many high-tech employers are encouraging that perception. Job cuts in Western regions are often followed by announcements of continued hiring in lower-cost centers. Seemingly, one set of employees is being swapped for another at a time of economic weakness, hence the rising tide of fear.

Engineers are equally split on whether they'd recommend their field as careers for their children.

IT Industry and IT Jobs:The Correlation is Limited

A report this weekend noted that growth in IT will lag other sectors, at least in Indiana. I don't doubt the report, but remember: the health of the IT sector (or lack thereof) doesn't mean fewer IT jobs in the economy. Too often they're confused.

Michael Hicks is the executive director of Ball State University's Center for Business and Economic Research, and in his posting on the website of the Muncie, Ind., newspaper The Star-Press, wrote the center foresees a modest rebound in the second quarter, with a few exceptions:

Information technology and construction will continue to lag in the recovery. This represents lagging business investment, primarily in new plant and equipment.

Though the article discusses employment conditions caused by the recession, it never makes a direct link between a decline in the IT sector and IT jobs. Still, the reader could infer that, and such a conclusion would be wrong.

Most IT jobs aren't in the IT sector; they're in regular businesses, and though many IT pros will lose their jobs in this recession, business-technology employment will outperform other occupations, mostly because companies need them to remain functional.

But too often those who should know the difference don't. A posting this summer on Slashdot.com cites government research to contend that IT jobs were getting harder to come by. The Slashdot posting was based on an InfoWorld article that confused the information sector, as defined by the U.S. Bureau of Labor Stastistics, with IT jobs. The information sector, according to the BLS, consists of industries such as broadcasting and publishing.

According to a 2006 BLS analysis, fewer than 3% of the jobs in broadcasting and publishing are held by IT professionals. Other "information" industries also employ relatively few IT pros. Among telecom employers, for instance, a mere 6.4% hold enterprise IT jobs. Not surprisingly, a majority of software publisher's employees have IT jobs; yet, more than 40% of positions at the like of Microsoft, Oracle and their smaller rivals are held by non-IT workers.

Here's what I wrote last summer on my CIO Insight blog :

Each month, the government conducts two employment surveys, one of business establishments and the other of households. The establishment survey, the one InfoWorld cites, doesn't break down employment by occupation but by industry. The household survey—the one used to determine the national unemployment rate—focuses on occupations.

Analyzing the household survey ... shows a steady rise in IT jobs. Last quarter, IT employment reached a record high of nearly 4 million, up about 10% for the past year.

Those IT employment numbers haven't changed much over the past few months.

Sure, many IT pros will be caught up in the layoffs brought on by the recession, especially in financial services, a big IT employer. Yet, as an occupation class, business-technology workers will experience fewer jobs losses, and will more likely be able to find jobs in the coming months than many of their unemployed neighbors in other occupations, regardless of the health of the IT sector.

Recession Be Damned! IT Services Jobs Rise

American businesses cut 533,000 payroll jobs in November, the biggest monthly job loss in over 30 years as nearly every sector eliminated jobs. But one sector bucking this trend—computer systems design and related services firms, commonly known as IT services—increased payrolls last month.

In November, an analysis of U.S. Bureau of Labor Statistics data by The IT Job Analyst blog shows, IT services firms added 2,700 jobs. IT services firms employed in November some 1,435,900 people, a record high. Since November 2007, employment at IT services firms rose by 48,400, or 3.5%. As a comparison, all American employers shed 1,870,000 or nearly 1.4% from their payrolls in the past year.

In past recessions, IT services firms suffered along with the rest of the economy as business leaders didn’t highly value information technology. From March 2001 through August 2003, IT services firms payrolls shrank by 18.4% or 248,300 jobs.

Why is this recession different? Companies can’t function without IT. Today, IT know-how and the efficiencies technology brings business are among the last thing companies forfeit in troubled economic times.

Here’s what Jerry Luftman, a Stevens Institute of Technology IT professor who surveys CIOs for the Society for Information Management, told me earlier this week (read a fuller version of Luftman’s observation at our previous blog posting):

“This economic downturn is very, very different from previous ones. Today, companies are going to IT and asking them for ideas as to how IT can be leveraged to reduce the costs of other parts of business.”

But the recession is having a mildly negative impact on IT services employment. Payroll growth is slowing. A year ago, IT services payrolls rose by 5.8% or 76,300 jobs. Since January 2005, IT payrolls have consistently risen each month, except for one, this past March. Few other sectors can make that claim.

The computer systems design payroll numbers reflect the relative strength of IT employment when compared with the rest of the economy. The national unemployment rate jumped 2 points to 5.7% in November, a 15-year high. The government doesn’t furnish a separate IT jobless rate. It does release specific occupation figures on a quarterly basis, however. And, my analysis of those numbers from the third quarter shows IT unemployment hovering near record lows. In the third quarter, IT joblessness rose one-tenth of a point to 2.4%, with 4,010,000 Americans employed in the profession, a record high.

When the current quarter's employment figures become available next month, don't expect IT unemployment to remain so low. IT professionals aren't immune from this recession. But it would be surprising if IT joblessness came anywhere near the levels of overall unemployment. If it does, our nation would be in even worse shape than it is today.