News

Skilled Labor is Biggest Challenge Facing IT

• By Linda L. Briggs
• July 6, 2005

The biggest challenge today’s IT organizations face isn’t selecting the right technologies—it’s finding skilled developers to perform complex, multi-platform integration tasks, often involving legacy systems. That need, in turn, is helping drive the outsourcing of application development.

As the platform wars have settled down, and Java and .NET have taken a clear lead, pure tool-and-technology issues have become far less of a concern for IT than staffing and training, according to Gartner VP Joseph Feiman.

The technology challenge today, Feiman says, is application integration, especially with legacy systems. “That’s manual work that [requires] serious skills. You have to take different kinds of technologies and connect them.”

Although IT organizations often spend great amounts of time choosing application development technologies, Feiman says, capital expenditures typically represent less than 20 percent of the overall cost of an application. The remaining cost is labor: development expenses, typically 50 to 60 percent of costs; and maintenance, typically 20 to 35 percent.

Organizations considering outsourcing continue to miscalculate and overestimate potential savings on labor costs, Feiman says. For example, simply comparing the direct cost of labor is misleading when considering whether to outsource. Feiman cites Gartner numbers showing that factoring in issues such as communication is critical in evaluating a project’s true cost. Poor communication can increase costs when an offshore labor source is used, because time differences, language and distance, among other things, become a factor. “If communication is low, then in order to compensate for poor communication, you have to either work longer or have more people to do the same jobs,” Feiman says.

Feiman also points out that even if an entire project is outsourced, an organization continues to have a number of in-house labor costs, many of which are typically underestimated. For example, programmers will almost certainly have to meet with onsite business people to analyze the project—and that in-house labor cost is seldom included in outsourced project estimates.

Figures from Gartner show that retraining legacy programmers is often inefficient—a key reason that more and more firms are turning to outsourcing as an attractive solution. “Yes, it’s quite possible to migrate your legacy developers to new technologies,” Feiman says. “But practically, it’s expensive, lengthy and a risky proposition.”