Risky business

“Britain can be one of the great global success stories in the coming age but only if we establish ourselves as a world leader in knowledge, science and skills,” said then-Chancellor, now Prime Minister Gordon Brown in 2006.

If the country’s success at producing knowledge, science and skills is measured by the availability of suitable job applicants in the UK’s IT sector – surely a central pillar of the ‘knowledge economy’ Brown was promoting in his speech – that great global success story may never come to pass.

According to e-skills, a government-backed agency dedicated to improving the availability of IT-related training, there are over 100,000 vacancies in the UK’s IT sector – primarily for programmers – that cannot be filled because appropriately skilled staff are simply not available.

The blame for this situation is most often laid at the door of the country’s education system and there is no shortage of ammunition with which to do so.

At every level of education, the number of students completing science – and, more specifically, computer science – qualifications has waned. The number of students taking mathematics A-level has dropped by 15% since 2002, physics by 14%, and computer science 47%.  There have been calls to make science GCSEs and A-levels easier, and even to bribe students to take them.

Those students that do eventually reach university to study computer science have the highest likelihood of dropping out in the UK, with 10% quitting the course before the second year. What is more, according to an e-skills survey, one in five employers finds computer science graduates lacking both in technical know-how and communication skills when they reach the workplace.

According to the Confederation of British Industry, the number of graduates leaving university with a science-based degree needs to double from 12% of the student population to 25% by 2014 if the country is to fill the predicted number of new jobs arising in technology-related areas.

Some argue that the government’s culpability stretches beyond the classroom. Karl Parkinson, chairman of IT training company Computeach, which deals mostly with people retraining to change careers, believes the UK government has undermined the chances of people joining the IT sector from other industries.

“Our beef with the government is that all of its employee training initiatives, such as Train to Gain, and the £8 billion it spends on them, are channeled through employers,” he says. “And what employer is going to help their staff retrain to get a different job?”

But this is not to say the government has not identified a problem. Gordon Brown’s restructuring of his government’s departments in June 2007 produced the Department of Innovation, Science and Skills. Parliamentary Under-Secretary for skills David Lammy MP told Information Age this was motivated by a need to “help employers harness the skills they need to build successful British businesses.”

“IT skills are becoming critical in our increasingly technology-enabled world – and we must ensure that everyone is able to develop the skills they need for successful careers and lives, whether they are an IT professional, a business leader or someone who uses IT in their everyday job,” Lammy added. And the UK is not the only or worst affected country.

In August 2007, Dutch IT services company Ordina told investors that it would not fulfil its previous revenue predictions as a direct result of plummeting supply of suitably qualified employees. Other European services companies could, undoubtedly, make the same admission if they so wished.

Nevertheless, the figures paint a grim picture for the UK’s IT industry. Without the qualified staff to fill technology roles, argue commentators including the CBI, how can the UK stave-off the ‘threat’ of offshoring?

Is such pessimism justified, or is this changing demographic a symbol of the maturation of the UK as a genuine knowledge (rather than technical) economy?

Strategic choices

Leaving aside the employment prospects of their children, the generation of IT managers now at the height of their careers has never had it so good. The promotion ladder open to them now, in many cases, reaches all the way to the board of directors or at least the management board – unthinkable when they trained.

The increasing importance of IT to the business is reflected in both their power and compensation. Recruitment consultancy group Harvey Nash found in a recent survey of 500 CIOs that average wages grew by 24%, from £84,000 to £104,000, between 2006 and 2007. The proportion of CIOs surveyed that sit on the operational board grew from 43% to 46% in that time.

Paul Smith, outsourcing director at Harvey Nash, says that what the market is crying out for, however, is not technically proficient CIOs but those with business nouse. “IT directors that are strategic and business savvy are more in demand than technologists,” he says. 

IT’s coming home

“Today, we made a very big decision,” wrote Manjul Shah, CEO of Silicon Valley-headquartered development agency Riya in April 2007. “It was difficult and painful but the right one.”

The decision was to move Riya’s coding workshop from Bangalore, where it had been since 2002, back to California. The problem was not the availability of talent, which Shah described as of surprisingly high quality. The problem was wage inflation.

“Bangalore wages have just been growing like crazy,” he wrote giving the example of one employee who had spent the first five years of his career working for between 1% and 10% of the salary of an American counterpart. The next year his salary rose to 20%, and then, while at Riya, jumped to 75% within two years.

Eventually, the cost of paying Bangalore wages combined with the inconvenience of operating in two distant continents forced the company to give up on its Indian adventure.

Shah described the moment as “a turning point for [the company] and maybe India”. And as if to confirm that watershed moment, in August 2007 Indian IT services giant Wipro announced that it intended to hire 500 to 1,000 staff in Atlanta, Georgia, pressured by the inflation of the rupee and by a desire to provide its US customers with a locally resident skills base.

What that demonstrates is that the passage of IT-related work between the West and the sub-continent is not a one-way street.

Wage inflation, however, does not mean that the Indian advantage in executing development and IT support work will evaporate – India still has a huge, home-grown pool of skills on its side.

“The lasting economies [of offshoring to India] do not come from the cheaper labour, they come from the sheer numbers,” explains John Torrie, UK CEO of Steria, the French IT services company that recently bought Xansa for its Indian capability (see Company Analysis). “If you’ve got a project that needs 50 developers, you can find them in a day in India. Over here, they might take months to hire.”

Nevertheless, a more complex picture of the global distribution of IT work is clearly emerging, one which requires each nation to define what it offers the rest of the world, and make sure it does it better than anyone else.

Smith believes that it is the CIOs that focus on technology, not strategy and profitability, who are the ones that make the most noise about the looming skills crisis. “Many CIOs still believe they need to have a large in-house development team,” he says. “I would describe that as a legacy thought process.”

Of course, the senior management candidates that are technically competent but strategically focused will be even harder to find in the future if there is nobody coming up through the ranks. The statistic that there are over 100,000 vacant IT positions in the UK, coupled with the paucity of science graduates and the constant outflow of programming jobs to India and other offshore locations, might suggest that there will be no-one to fill the senior management positions in the years to come. But not everyone is so negative.

“People leaving secondary schools and universities are much more computer literate than ever before,” says Jeff Barnes, head of the instructor community for QA-IQ, the country’s largest IT training provider. “We have candidates on our courses that we haven’t traditionally seen before; the strong business candidate that is technically aware.”

Barnes reports that, although his company’s bread and butter is still training systems administrators and programmers, people from all departments of the business are being put forward by their employers for technical training. “For example, we might have the head of the marketing department come in to learn how to be a Microsoft SharePoint administrator,” he explains.

As the roles of technician and businessman blur, technical education before graduation will become less important, says Barnes. “Today, employers are not targeting graduates with IT degrees, they are targeting graduates with good degrees in any subject,” he argues. “A good degree is very much a proof of capability, and that capability can be applied to whatever is needed of the candidate.”

Dr Vesna Brujic, head of the informatics department at London’s City University, believes that any lack of interest among students for computing and IT courses reflects the fortunes of the IT industry itself. As the excitement and optimism that once surrounded the IT industry dipped after the dot-com crash, so did applications for IT courses.

But, Brujic adds, in the last two years, applications have been heading back up, but this time around students are interested less in pure IT than they are in how IT can be applied in various environments. Conveniently, this is both what students are interested in, and what employers want from their graduate entrants.

“Our IT courses used to be about how to use the machine,” she recalls. “But there is an emerging understanding of IT, thanks in part to the fact that today’s computing environments are much friendlier than they were 10 years ago.”

“Everybody knows how to use Google, for example, so the question is how to put it into the context of your own discipline,” she says. “I predict that courses that relate to the application of IT in different arenas will be increasingly popular.”

According to these educators, there is a coming generation of employee that embodies the alignment of technology and business that companies, frustrated by the mismatch of technical and strategic priorities, have been crying out for.

The cost that the nation pays for this may turn out be a ready supply of middle-tier programmers – dependable technologists with little business insight. The critical question is whether this is a worthwhile trade.

National foray

A man with a global view of the distribution of IT skills is Sergey Karas, VP of global strategy for Luxoft, a Russian IT services company with plans for further European expansion. As such, he needs to know what his Russian workforce can offer the Western European market that is not already available locally or sourcable from India.

“India is very good for very large scale projects, where you need lots of staff and where there is very little communication required,” he says. “In Russia, our Soviet legacy makes us very technically minded, so we offer high-end technical products for customers like banks and financial institutions.”

“The UK, meanwhile, has the perfect chance and ability to produce engineers with a management angle, which will be poised for IT management and make great careers worldwide,” he continues. “I think that is where the competitive advantage is for the UK, not producing more Java programmers.”

“After all,” he adds, “in the global economy, if someone else is doing what you do, you either do it better or you do something else.”

Taking this argument to the extreme is Harvey Nash’s Paul Smith. “We won’t need to understand technology in the future. Technology is nowhere near as important as it was five years ago, and will continue to get less important,” he says. “We need to be business innovators.”

Smith uses the example of the textiles trade. Once upon a time, London was the centre of design, manufacture and distribution of clothes and materials. Then, says Smith, India undercut the UK in manufacture, due to the sheer amount of cheap labour that was available. But London is still a global fashion capital, he argues, because it continued to innovate and export its ideas.

He maintains that instead of maximising on its potential to be an innovator, the UK runs the risk of squandering competitive advantage if it is to increase its dependence on local developers, as their wages would inevitably increase while offering no extra benefit. Instead of concentrating its efforts on producing more programmers, he says, the UK must “focus on generating savvy innovators”.

Smith’s take may be too hard-line for some. It seems to ignore the fact that there is latent demand for engineering talent in the UK, demand that could provide people with careers. But it does link the IT skills shortage to the more fundamental question of what the UK’s role in the global IT economy is going to be.

There is plenty of demand for high-end .Net and Java developers all over the UK, reports QA-IQ’s Jeff Barnes, and that is unlikely to change soon. But that doesn’t mean a shortage of programmers – or to put it another way, a backlog of programming work – should be cause for either panic or corrective intervention.

Because to plug the hole with new technicians would be to risk wasting an opportunity to create something altogether more valuable on the global stage: the IT-aware business leader.

Information Age: Further reading

A question of gender – Women in IT
CIO heaven – From business to consultancy

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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