Lets talk about jobs

There is a lot of handwringing about jobs at the moment. There is a very real expectation that Australian industry will shed jobs during 2009 and that this may lead to a rise in unemployment from 4.2% to around 8% or even more.

This is potentially a big deal but there was a much bigger deal that happened in one particular industry between 2000 and 2005 – in a situation that most Australians are unaware of even today.

That is the IT industry.

Two events caused employment to collapse in Australia – firstly post Y2K there was significantly reduced demand for IT people and secondly the dot-com crash of 2001 finished off a lot of jobs.

Neither were related but the effect of both was to decimate an industry that was once seen as the entry point into the smart jobs that were needed by a clever country.

Believe it or not - in Australia in 2005 the actual number of IT jobs was around 28% of the number of people employed in the industry in 2000.

Think about that for a moment – employment in this industry had shrunk by over two thirds in less than 5 years.

So in terms of the IT unemployment rate – if we assume that in 2000 that we had full IT employment - that is a 0% unemployment rate, then in 2005 assuming no growth in jobs, the IT unemployment rate was 72%. This is a record that is unlikely to be beaten by any other industry – ever.

This was clearly a big deal and yet neither the industry association, nor the government of the day were able to deal with the resulting crisis – and so they did what any self respecting politician or political organization would do - they ignored it.

Large numbers of smart, well educated and senior people lost their jobs over this period – many of whom have never recovered and who today are wondering what went wrong and why they were ignored by their association and their government.

In the wreckage of all of this we saw the opportunistic rise of the Indian outsourcing companies – they promised to do all the things that the in-house staff had been doing but at significantly lower cost – one of these companies that I evaluated at the time said they could provide equivalent services for just 33% of the in-house cost!

Of course now we know that it was all BS – but at the time it was attractive to the many lightweight CEO’s and CFO’s who were only concerned with costs and the bottom line. No-one cared too much about "risk" or their "people".

That is why the current Satyam situation is so interesting.

I can imagine that there are hundreds, perhaps even thousands of displaced senior, experienced, smart, capable and pissed off – ex IT executives who are all hoping that the whole "house of cards" will go belly up – just so they can experience some "revenge".