Commentary: IBM's CEO highlights industrywide problem

By Diane Tunick Morello, Gartner Analyst

IBM CEO Louis Gertsner's remarks underscore what is an open secret in the information technology services market: Demand for e-business and other services exceeds the IT work force's capacity to meet it all.

The gap between the demand for IT workers and the supply was bound to hit external services providers, such as IBM Global Services. Several factors are at work:

•  Businesses now focus more on core business processes and competencies, so they outsource or shed the rest.

•  Businesses recognize that they cannot meet demand directly through their own resources, so they seek alternative sources to fulfill new initiatives. In some cases, businesses may have little choice as project loads pile up after completion of year 2000 projects and conversions.

•  Many businesses seek assistance from companies with well-recognized names--so the brand name that IBM has so successfully established puts substantial pressure on its resources.

	See news story: IBM laments labor crunch in analyst meeting

Those trends will continue to affect the market palpably. By 2004, Gartner expects that approximately 60 percent of businesses will use externally sourced workers to perform more than half of their IT activities.

At the same time, Gartner projects that through 2005, global demand for relevant IT skills and know-how will likely outstrip supply by about 25 percent.

In this tight job market, services providers will likely not do better at recruiting IT workers than other businesses. Gartner estimates that mistakes in gauging the capabilities of services providers--including their ability to staff IT projects adequately--will cause less than half of ESP projects to be delivered on time and on budget through 2004.

It's not surprising that the worker shortage will trim the growth of most ESPs, and especially the large ones. Consider the revenue that a unit such as IBM Global Services records.

IBM Global Services brought in revenue of $8.2 billion in the third quarter of 2000 alone, up 4.2 percent compared with the third quarter of 1999. Each percentage point of growth equals more than $80 million in revenue. Moreover, IBM Global Services had an $81 billion contract backlog at the end of the quarter. That represents a huge amount of business for anyone to staff.

IBM Global Services is not alone among the major services providers in wrestling with the IT worker shortage. Probably all major services providers suffer from the work force constraints that Gerstner cited--they just don't have CEOs blunt enough to talk about the problems.

(For related commentary on recruiting in the IT worker shortage era, see TechRepublic.com--free registration required.)

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