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Tuesday, February 15, 2005

Competitive Environment in the ITC Job Market 

A shift is occurring in the ITC job market. Harold describes how graduates in technical fields, such as CS, have to have some social skills on top of technical skills. Last fall I wrote a report for my employer that stresses this reality. Here’s an excerpt:

Outsourcing or Offshoring

In a globalized competitive environment, an organization is competitive either because it can produce at a lower cost (price-based differentiation) or because it can produce goods and services of superior quality (quality- and innovation-based differentiation). North America's traditional competitive advantage was based on quality and innovation. The North American work force was better educated and consequently more capable of producing high-quality, innovative goods and services than the work forces of other countries. Because of that advantage, workers were able to command the higher remuneration corresponding to North American living standards.

Offshoring is not a new phenomenon. The basic consumer products manufacturing sector, for instance, is now concentrated mainly in Asia, obviously because of the availability of abundant cheap labour. Most of the jobs and activities outsourced involve manual tasks requiring little specialized knowledge.

The nature of offshoring is changing, however, mainly because of rising educational levels in two countries: India and China. These countries are now producing millions of college and university graduates annually, and their skill levels are comparable with those of North American graduates. Therefore, North America's competitive advantage in terms of quality and innovation is diminishing as these two giants produce new professionals with globally competitive skills. Increasingly, North American jobs in business-related fields and especially in ICTs are being outsourced to China and India. This does not appear to be a passing trend. In fact, given the demographic weight of China and India, combined with their vigorous economies, lower living standards, and high-quality education systems, it is a trend that may well grow stronger in the coming years. That view is shared by Warren Jestin, chief economist with Scotiabank.

The Open Source Movement

The open source philosophy can be simply stated as follows: a community of interest decides to work together to develop free software applications. The movement is gathering momentum with technologies such as Linux and OpenOffice, which are capturing a considerable market share. It might seem at first that an industry that gives its products away could not possibly thrive for very long, because its workers still need food and clothing. In fact, however, the open source movement is simply a new business model. Profit-seeking companies such as Red Hat and Sun Microsystems are definitely in business to make money, and yet they are among the leading companies in the open source movement, paying thousands of employees to develop free software applications. The trick is that while the software is free, the technical support and training are not. The application per se has therefore become a loss leader that creates a market for the ICT service industry.

The open source movement is exerting strong downward pressure on the prices of other software applications. Market value is therefore shifting from production activities to service activities.

Keywords

The two trends described above do not appear to be temporary phenomena, but rather new systemic realities. Like the manufacturing sector in the past, ICT manufacturing as such (programming, hardware, etc.) is increasingly being outsourced outside North America. However, the service that adds value to the product sold is still provided here, because the biggest ICT market is still here (i.e., in the United States). Since we know that value added is now generated more by services than by products, it would be wise to redirect our training initiatives toward development of service expertise, be it in ICTs or in business. Here is a list of keywords suggested by the above-mentioned trends.

  • Service
  • Client
  • Training
  • Support
  • Consulting
  • Management

These keywords indicate where North America's strongest potential lies for the coming years. The offshore competition is still at a disadvantage when it comes to the service sector. Also, since product value is decreasing as service value rises, the service sector is the one in which salaries will probably be highest, which means it will be more in keeping with our North American lifestyle.


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