Report: IT Service Jobs to Take Biggest Offshoring Hit

By Deborah Perelman  |  Posted 02-12-2007

While the loss of service jobs to offshoring in the near future will be modest, metropolitan areas with large concentrations of IT and back-office jobs will be harder hit, finds a report released Feb. 12 by the Brookings Institution, a Washington-based independent research group.

Noting that public fervor and coverage of offshoring has noticeably died down since the 2004 elections, U.S. companies continue to seek offshore solutions for a range of jobs only expected to grow in the next decade. Using occupational data, the study investigated the implications in job losses of service offshoring for 246 U.S. metropolitan economies between 2005 and 2015.

"Companies assume they can get the work done cheaper or that it doesn't matter if the work is done onsite, but they often find unexpected difficulties, such as problems coordinating activities and security lapses. But it doesn't seem to have abated the tide of offshoring. Offshoring will continue for the foreseeable future," Howard Wial, a senior research associate in the Brookings Metropolitan Policy Program and a co-author of the report, told eWEEK.

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Large metropolitan areas in the northeast and west were found to be the most vulnerable to service offshoring, more than their small metropolitan and midwestern and southern counterparts. In metropolitan areas with a population of 1 million or more, job losses from service offshoring between 2005 and 2015 were projected at 2.4 percent, but only 1.7 percent in metropolitan areas with populations less than 250,000.

About 2.3 percent of jobs in northeastern and western metropolitan areas were likely to be offshored, 2.2 percent in midwestern metropolitan regions and 2.1 percent in southern ones, finds the report.

It was metropolitan areas with high concentrations of IT jobs, however, that were expected to be the hardest hit by service offshoring. Between 2005 and 2015, these IT-focused areas were expected to lose 2.6 percent of their jobs to offshoring, 2.4 percent in metropolitan areas that specialize in back-office services but only 1.9 percent of jobs in other metropolitan areas.

At least 17 percent of computer programming, software engineering and data entry jobs were likely to be offshored in these IT-concentrated metropolitan areas, including Bergen-Passaic and Newark in New Jersey; Boston; Boulder, Colo.; Danbury, Stamford and Hartford in Connecticut; Minneapolis; Orange County, San Francisco and San Jose in California and Wilmington, Del.

"IT service jobs and back-office service jobs that use IT are more likely to be hit. The three big at-risk occupations that appeared over and over again were computer programmers, software engineers and data entry engineers. They can have job loss rates of 17 to 24 percent in some metropolitan areas," said Wial.

The report notes that while services enabled by IT can now be moved to offshore locations, not every IT-enabled service can be performed anywhere in the world. Some will continue to be performed more economically in the U.S. Furthermore, the report concludes that even jobs that are not likely to be offshored in the next decade are not off the hook for the indefinite future.

"The overall impact offshoring is fairly minor in contrast to the number of jobs in the U.S. But when you look at particular places like San Jose, Stamford, Boulder, etc., and specific occupations such as those in IT, these regions and fields are likely to take a much more substantial hit," said Wial.

"We're not suggesting that offshoring is all good or all bad. Some can be productive, but some is outright harmful."

Editor's Note: This story was updated to include comments from the co-author of the report.

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