Once IT spending begins again , companies in need of tech workers will likely turn first to consultants and outsourcing companies before they take on full-time staff. Whether this decision contributes to what's often called a "jobless recovery" will depend on where the work is going -- onshore or offshore.
This view is gleaned from surveys and analysts trying to understand what's next for tech job market. In the hunt for clues about the future, some of the best evidence about what's head may be with companies yhat are already doing well. Take Cognizant Technology Solutions Corp., for instance.
It's been a miserable year for many IT companies, but Cognizant, in its most recent quarter, reported a revenue gain of 13 percent to $776.6 million, boon growth for most companies. One reason for this can be explained by one of its customers, Emmaus, Penn.-based Rodale Inc., publisher of Prevention, Men's Health, and Women's Health magazines.
By hiring Cognizant, Rodale CIO Ken Citron was able to cut costs for infrastructure, hardware, help desks and networks by 15 percent on annual basis. The IT savings was achieved, in part, because Cognizant remotely manages some of the systems offshore.
About three quarters of Rodale's IT infrastructure employees became Cognizant employees, and the remaining either received severance or moved into some other role . While Rodale didn't want to disclose the number of employees affected by the change, Citron said the change is allowing the compay to focus on its core needs, especially its customer-facing applications and services.
Cognizant, based in Teaneck, N.J., finished last year with 62,000 employees, 12,000 of whom were in the U.S., and 47,000 in the Asia-Pacific region. Another U.S.-based outsourcing company with rapidly growing operations in India , Affiliated Computer Services Inc. in Dallas, reported $1.7 billion in revenue in its more recent quarter, a 6 percent increase. Xerox Corp. is buying it for $6.4 billion.
Will Cognizant and ACS help with a recovery or hurt it by shifting work overseas? The only IT spending category that is expected to finish 2009 in the black is outsourcing, with a 2.1 percent gain, said Forrester Research Inc., in a report released Tuesday. If that increase seems scant, consider that Forrester is expecting IT spending to decline overall by 9.3 percent for the year, led by a hardware spending plunge of 15.5 percent.
Andrew Bartels, the analyst who prepared the forecast, expects IT managers will be conservative about taking on new staff and will rely on consultants and outsourcers to meet immediate need.
"You probably won't start to see hiring for permanent staff until the middle of next year," Bartels said, but employers will hire consultants.