The Case For Pessimism -- And Optimism -- In The IT Labor Market

I have long been an armchair economist.

I did a full economics sequence in school, found it to be utterly fascinating, and have continued to read intently on the topic ever since.

Such is the life of a geek.

However, I've always wondered why none of the typical IT analyst firms spend any serious effort studying the structure and dynamics of the IT labor market.

Sure, there's all sorts of great analysis on various technologies, vendors and consumption models, but what about the people who are responsible for making the magic happen?

How is their world changing?

It's relevant because change is in the air. Cloud, baby.

Public cloud is not only arbitrage on technology costs -- which everyone talks about -- but also labor costs.

Cloud is already busily at work disrupting the IT technology market. I would argue that -- before long -- it will do the same for the IT labor market.

I don't know whether to be pessimistic or optimistic about the changes to come, so I'll present my case for both -- and let you decide.

But one thing is certain; change is coming.

The Case For Pessimism

One of the best ways to understand an industry transition is to go looking for reasonable historical parallels. Yes, there's no such thing as a perfect analogy, but it's still a useful exercise.

My best example is what happened in US manufacturing near the end of the last century ("Why Enterprise IT Will Go The Way of US Manufacturing").

TL; DR: in a short period of time, US manufacturers were forced to transform from laggards to leaders, or perish in the process.

But what happened to the US manufacturing labor market as a result?

In the recent US elections, much emphasis was given to manufacturing jobs going overseas. While that might be true in some degree (and certainly a red meat election topic), the data shows that automation is responsible for the decline of manufacturing jobs in the US.

Robots, folks.

As a result, US manufacturing productivity is now at an all-time high. And US manufacturing jobs are at an all-time low.

Such is the way of the world.

If one considers enterprise IT as a "factory" for delivering value-added IT services, the implications might be grim.

Increasing levels of automation -- whether on-premises or in the public cloud -- will likely decimate the IT employment ranks over time in a similar way.

Although productivity per worker will be at an all-time high.

Pessimistic, yes.

The Case For Optimism

The comparison between IT and manufacturing only goes so far.

With manufacturing, we're talking about tangible things -- and there's only so much demand for TVs, cars, widgets, jet aircraft and so on. You fight for your fair share by delivering a better widget at a lower cost than the other guy.  

Besides, how many flat panel TVs can you own? I think I've hit my limit.

IT services are a completely different beast, I would argue.

There seems to be no finite boundary for our appetite for newer IT services.

Look what's on the plate now: advanced analytics, IoT, machine learning and more.

And when we're done with those, I'm sure there will be even more bright shiny things we'll want to spend money on.

Furthermore, I'd argue that the market for IT services is highly elastic: the cheaper they become to produce, the more aggregate demand appears for those services.

I'd never would have imagined a 10GB data plan would be insufficient for my daily needs, but there you have it.

OK, maybe there are some practical limits on how much personal technology we are willing to  wear, or how many apps we can have on our phones, but -- generally speaking -- the appetite for better tech in the business world shows no sign of slowing down.

All that technology magic will always require smart people to make it work.

Yes, they'll have different skills and roles than before, but the jobs will be there -- maybe even more so than today.

For example: how many people who work with IT tools every day are esconced in business units outside of a traditional IT function?

A whole lot, and I would argue their ranks appear to be growing.  We can't get enough of a good thing.

A potential analogy might be healthcare in the US.

Over the last fifty years, there have been incredible breakthroughs in both outcomes and productivity.

And -- at the same time -- remarkable growth in the demand for healthcare workers.

We tend to care about our health, so I guess we spend more on it over time.  

We can't get enough of a good thing.

A Mixed Bag?

Combining equal parts of pessimism and optimism gives you an interesting scenario.

Like manufacturing, many of our traditional IT jobs are going away, and they're not coming back. Once they've been automated -- cloud or otherwise -- that's that. If you believe in finite demand for enterprise IT services, it's a grim scenario for the career IT professional.

But, like healthcare, maybe we just can't get enough of a good thing. The focus shifts to using IT in innovative ways to create better outcomes vs. heavy investments in simply keeping the lights on.

That means plenty of satisfying IT career opportunities abound, they just look very different than the ones from decades past.

Such are the perils and promises of the cloud era.

I guess you could count me as an optimist.

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Comments

[Dan Fisher]

This is a terrific piece. I've harbored many of the same thoughts and ideas but you have presented them far more eloquently than I ever could. I absolutely agree with you and share your optimism for the future. I would like to offer an analogy of my own in reference to the influence of Cloud. I point to the assembly line process of the early 20th century. Henry Ford did not invent the continuous-flow process, but he did improve it, popularize it, and demonstrated its value to manufacturing. As a result, most manufacturers adopted it as the new way of doing things (http://www.history.com/this-day-in-history/fords-assembly-line-starts-rolling). As a result, within 20 years any manufacturer that was not using the assembly line was not in business (https://www.britannica.com/topic/history-of-work-organization-648000/The-assembly-line#ref539120). I think cloud (and the cloud operating model) is that disruptive of an influence to IT, but I also feel that it won’t take 20 yrs to have the impact felt. Change is essential, cloud is the new change, and both the technologies and work force will be impacted. We talk a lot about the changes in technology, so thank you for reminding us that there is a human element too.

[Michael Endrizzi]

Great piece.

Physical infrastructure people are going away along with the industries that support it as businesses collapse their data centers into centralized clouds.

Other than that, there will always be customers wanting yet another shiny button on their webpage page....just like Americans who continue to eat more donuts and endlessly consume health services.

Thanks
dreez