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Labor Shortages in Global Market Impact Offshoring Decisions

April 03, 2008

The viability of the offshore market continues to be under scrutiny as organizations are feeling the economic crunch and turning to alternative solutions in order to drive down costs without sacrificing service.

XMG, a global ICT research and advisory think tank, recently conducted a study of leading offshoring countries in Asia, including China, India, Malaysia and the Philippines. This study found that the average growth of the IT labor pool in the Philippines for the last five years rests at 10 percent and is forecasted to grow by another three percent in the next two to three years.
 
This study also revealed that despite the steady increase of the IT labor pool, it is insufficient to sustain the total ICT demand in the Philippines, which is projected to grow by 30 to 35 percent full-time-equivalent year-on-year through 2010.

Metro Manila will be providing much of the fresh talent, taking up 22 percent of the estimated 50,000 to 60,000 graduates each year.
 
According to XMG statistician Benedict Dormitorio in a Thursday statement, “There is a clear need to establish additional training institutions and ladderized degree programs by existing universities to boost the dwindling talent supply due to the growth of the Philippine offshoring industry and the migration of IT skilled workforce to countries such as the United States, Singapore, Canada, the Middle East and Europe.”

Dormitorio also stressed the importance of ensuring curriculum alignment of educational institutions with the current market needs of the industry through close consultation with ICT companies and organizations.  

The study provided an overview of the availability of IT manpower primarily based on skill sets. XMG has segmented the labor supply by educations attainment with at least a 4 year bachelor degree and other IT vocational courses and skill set.
 
According to the study: “For programming and business solutions, IT skills on SAS, SAP (News - Alert), Lotus Notes and MySQL will be increasingly difficult to source and companies must be prepared to pay a premium price to recruit these individuals.”
 
The study further emphasized networking skills will be at risk, such as those in network administration. “Across all segments, there is a significant decreasing trend on the available labor force meeting the required IT skills set needed by the market,” Dormitorio continued.
 
 “With the increasing demand for IT professionals today, companies should be aware of the situation and align their strategies to mitigate risk coming from the labor market,” added Chief Analyst Lauro Vives, in Thursday’s statement.
 
“It is imperative to first understand the saturation level of the labor market by forecasting both demand and talent supply before making any firm commitment on expansion plans or further investments.”  
 
The XMG study mentioned that, “In order to minimize paralysis on critical operations and sustain growth, companies must extend their recruitment reach, improve their skill development pathways, enrich retention and provide hot skills training on the existing talents in the organization to avoid high additional cost components associated with these skill areas.”

For those organizations seeking to outsource and offshore their help desk operations, the conditions of the global contact center industry in terms of IT capabilities and labor availability, are a significant consideration. If shortages continue, it may create better cost controls to keep IT professionals onshore in the long run.
 
Susan J. Campbell is a contributing editor for TMC (News - Alert) and has also written for eastbiz.com. To see more of her articles, please visit Susan J. Campbell’s columnist page.
 
 
 
Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers white papers, case studies and other documents which are free to registered users. Today’s featured white paper is Best Practices for Deploying a Virtual Call Center: Tips, Techniques and Best Practices, brought to you by LiveOps (News - Alert).
 

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