Manufacturing IT spending increases, but payrolls don't

Reluctance to add to staff results from increasing use of outsourcing, Computer Economics president says

Manufacturing employment has been a job bright spot for the economy, but IT workers aren't benefiting from it, a new report finds.

In the manufacturing sector, research firm Computer Economics found that about half of the manufacturers in their latest study are holding IT headcount level or cutting staff, even as they increase IT spending.

This is happening even though the White House continues to point to manufacturing as a solid plus for the economy.

Alan Krueger, the chairman of the president's council of economic advisers, wrote last month that the U.S. has added nearly 500,000 manufacturing jobs since Jan. 2010, which is "the strongest growth for any 28-month period since April 1995."

But IT managers in the manufacturing sector may have a different view. Computer Economics surveyed more than 200 firms of all sizes in the U.S. and Canada from January through April of this year.

Frank Scavo, president of Computer Economics, believes this reluctance to add to staff counts results from increasing use of outsourcing.

IT managers remain worried about the economy, and are preparing for the possibility that they may have to adjust spending before their budget year ends.

"They still do not have confidence that they will be able to spend all the money in their IT budget," said Scavo.

But while manufacturers aren't hiring staff, they are increasing their IT operational spending. The overall increase in IT operational spending is up 2.2% but for manufacturing it's in the 3.0% to 5.0% range.

Overall, 40% of all IT organizations plan to increase their headcount this year. But only about one third of manufacturers plan to add staff.

In terms of capital spending, there is an overall 2% improvement in spending at the median, and in manufacturing it is up about 4%.

Scavo believes that the caution IT managers are showing may be warranted, based on new and bearish index Monday from the Institute for Supply Management, which measures such things as new orders, backlog of orders, inventories, employment and prices. It reported that economic activity in the manufacturing sector contracted in June for the first time since July 2009, although the overall economy grew for the 37th consecutive month.

Other groups that analyze IT employment nationally across all sectors are also seeing some worrying signs, but overall IT employment still continues to increase month-to-month.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

Read more about outsourcing in Computerworld's Outsourcing Topic Center.

This story, "Manufacturing IT spending increases, but payrolls don't" was originally published by Computerworld.

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