Everyone knows the story of the Christmas Carol. Charles Dickens examines Christmas past, Christmas future, and Christmas present. As perhaps the worlds only Software Economist, I examine IT past, IT present and IT future in this short article. Like Dickens, I have endeavored in this Ghostly little article, to raise the Ghost of an idea.
- IT past.
- IT present.
- IT future.
All industries have cyclical ups and downs. There is no reason to believe that the software development industry (IT) will not follow the same up and down cycles like other industries and the overall economy. When the economy rebounds will so IT.
The more I study, learn and experience software development, the more I am convinced that software development is just like every other industry. What a Ghostly idea!
The Current State of IT
What has happened in the field of software has happened before and has happened in a lot of other industries too. The recession in IT is worldwide problem and not isolated to the United States or Western Europe. An Australian friend who does IT consulting in Southeast Asia wrote, “The few consulting jobs I had planned in 2009 in Malaysia, Singapore, and Vietnam are gone or on hold for the time being.” Another friend living in Europe wrote, “these are tough economic times and it is a bad time to be looking for a job.” More than half of IT employees and contractors in the UK express dissatisfaction with their career path.
It seems like there are comments on all the Linkedin groups about the economic woes of IT.
According to a recent CIO survey CIO’s are continuing to put discretionary IT projects on hold, renegotiating IT vendor contracts, and freezing IT hiring. Nearly 64% of the CIO’s reported they were freezing IT hiring and nearly 43% planned on reducing head count.
Before we get depressed here are some basic economic principles:
1. All industries have cyclical ups and downs. There is no reason to believe that software will not follow the same up and down cycles like other industries. For those of us with a bit of gray hair we remember the slump in oil industry in the 1970’s and look at the profits of the oil industry today.
2. Recessions are like forest fires because they clear out a lot of the dead and unnecessary wood. Investment in IT needs to be re-examined and carefully scrutinized. Too much investment was based upon “latest” and “greatest” technology and not on sound cost/benefit analysis.
3. When the economy rebounds so will IT. IT is following the same cyclical pattern as the overall economy.
The unemployment rate for the software development industry rose over the last year. Overall the unemployment rate for software development rose from 2 percent to 4 percent or it just about doubled. According to the Bureau of Labor Statistics (bls.gov) during the past year the
- Software Engineers unemployment rate rose 1.9 percent to 4.1 percent
- System Analysts unemployment rate rose 3 percent to 5.7 percent
- Computer and Information Systems Managers unemployment rate rose 2.7 percent to 4 percent
This is just about the same level of unemployment for college educated individuals. While the overall unemployment rate is just around 9.5 percent, the unemployment rate for those with a bachelor degree is around 4.8 percent. The rise in unemployment in the software industry is following the same trend as overall employment too. The unemployment rate for individuals with a bachelors degree or higher went from 2.4 to 4.8 percent during the same period of time.
Not too long ago, there were companies testifying in front of congress saying there was as shortage of IT workers and they need more H1B visas. During the early 1990’s many proclaimed that the IT industry was recession proof. Some experts proclaimed there would be a shortage of IT workers by the year 2010. IT turns out these experts were wrong. It seems that IT is following the same economic trend as the overall economy. I feel like I am repeating myself.
Many in the IT industry were fat and happy and did not continue to improve skill sets or learn about the business. It seems like few in IT actually study the core business.
The software industry will return and be healthy again. Will the software industry be exactly the same as before? No, this much we know for sure. It will emerge and become healthy again, but the shape and especially the location is not known for sure.
Those individuals that take the time during a recession to sharpen skills and increase their skill sets will prosper. There will be many individuals that will leave the software development industry for good and look for career options elsewhere. This same thing happened in the late 1970’s with the oil industry.
This is the time to polish skills and sharpen your tools. The internet provides an avenue for individuals to self study without outlaying any cash. The library offers a lot of online resources and current technology books too.
Continuation of Offshore Development
Clearly a lot of IT jobs are being exported and this trend will continue. Other industries like textiles moved completely offshore and the design and marketing jobs remained in the USA. It appears the same is going to be true of software development.
The number of graduates in computer science continues to plummet. The number of those choosing to major in computer science has fallen about 50% since 1999. BUT the number of PhD’s getting computer science degrees continues to grow. The percentage of non residents (international students) getting PhD’s in Computer Science rose from 20% in 1985 to nearly 80% in 2008. Most of these doctoral students are from Asia. These PhD’s return to their home countries and teach computer science. This means the instructors for off shore developers are being trained at schools in the US.
The next round of off shore developers will be better trained than the first round of developers. It will be increasingly difficult for US and western European developers to compete on skills and on price.
As industries mature they specialize. Software development is still an immature industry. There are a variety of industries that have been around for a few centuries like engineering, medicine, law, architecture and textiles and they all have specialists along an industry line.
In the early nineteenth century a skilled seamstress performed all the roles necessary to make a dress. All dress making was customized. The industry matured until several specialists performed all the roles once performed by the seamstress. Designing, planning, and marketing became a specialization too. There are some designers who specialize in men’s clothing and others that specialize in just designing wedding dresses. This trend is already starting to happen in software development.
Less Technical Skills and More Business Skills
The long term trend is away from technical skills and towards business and design skills. When the only tool was a needle and thread it took a lot of skill to sew something. With the invention of the sewing machine, less skill was required of the seamstress. Clothes were first worn for very functional purposes and new we use them for both a functional and design purpose. The same was true with software development and especially with developing websites. The first software programs were for functional purposes only and now design does matter. Not long ago it took a strong understanding of html to develop a website but as tools improved the necessary technical skills diminished. (a nice graph here).
While the number of computer science degrees have plummeted the number of degrees in human factors design continues to grow. This is going to be a driving force toward understanding the business and understanding the user.
I have a heard a couple of themes from software developers for a number of years. The first is software development is somehow different from all other industries. No one can really give me a reason beyond “just because it is different.” As things shape up it appears that software development is just like every other industry.
The second thing and more to the point here is I have heard from many software developers they are better than their counterparts in India, China or eastern Europe. When I push and keep asking the question, “What are you better at?” They answer, “I am better at requirements, design and knowing the business.” This is true! Americans and western Europeans need to focus on what they are better at and move away from technical skills because there is no long term future in it.
The number of developers in Asia and eastern Europe continues to grow. They are becoming better educated too. It is going to be harder and harder for an American or western European to compete on skill and especially on price.