May 2001 Bulletin Networking Skills Shortages in EMEA Analyst: Andrew Milroy In recent months there have been signs of an economic slowdown in North America and in Western Europe. Additionally, many technology companies have faced significant challenges in their marketplaces. However, despite these economic indicators, an increasing proportion of today s organisations are leveraging networking technology in order to make their business processes more efficient and/or effective. In order to ensure that networking technology successfully supports the business processes for which it was purchased, networking skills are necessary. Organisations require skilled professionals who can plan and design an effective networking infrastructure, implement networking technology, support this technology and manage it. IDC research reveals that, despite the threat of an economic downturn, the shortage of skilled networking professionals in Western Europe is set to grow from approximately 200,000 skilled networking professionals in 2000 to approximately 550,000 professionals by the end of 2004. Equally, IDC expects significant networking skills shortages to become apparent in most emerging markets in Eastern Europe, the Middle East and Africa. Networking Labour Market Dynamics Demand for networking skills is largely being driven by the rapid adoption of networking technology by organisations. This trend is clear in most EMEA geographies although the rate of adoption does vary. Demand is also significantly influenced by shipments of networking products, GDP growth, increasing dependence on IT by small and medium sized enterprises (SMEs), and xsp models of computing such as the ASP model.
Shipments of networking products are not expected to grow as rapidly as previously predicted and in some geographies the amount of networking equipment shipped in 2001 is actually expected to decline. This is clearly reflected in IDC s skills shortage projections. For most Western European countries, the relative shortage (shortfall in supply of skilled networking professionals as a percentage of demand) is expected to remain the same or fall between the end of 2000 and 2001. However, the shortage, in terms of absolute numbers will increase. GDP growth is not expected to be as high as previously anticipated over the next two years in most Western European countries which suggests that capital investments by European organisations will be lower than previously anticipated. However, in an increasingly competitive business environment, companies will undoubtedly continue to leverage networking technology to address cost issues. In turn, a growing number of networking professionals will be required to ensure that this technology is assimilated and used effectively. A growing proportion of organisations are using networking technology to interface with their suppliers and partners. Suppliers and partners which are unable to interface with these organisations electronically place themselves at a competitive disadvantage. For example a number of automotive manufacturers have established Covisint, an emarketplace, which is designed to enable them to procure supplies cost effectively. Suppliers that do not use this emarketplace are likely to face challenges when engaging with their customers. Hence, IDC expects the adoption of networking technology and demand for associated networking skills to increase in the SME community. Over the past year, many organisations have opted to use less labour intensive means of computing as a way of addressing the skills shortage, to manage costs and to provide greater flexibility. The most widely discussed new computing model is the Applications Service Provider (ASP) model of computing. This enables users from different organisations to source application functionality from a remote server located at the ASP s site. The economies of scale offered by this model reduce the requirement for skills significantly. Other similar models of computing have emerged whereby customers can source other types of IT functionality such as storage and commerce services leading to the widespread use of the term xsp. Quoting IDC Information and Data: Internal Documents and Presentations Quoting individual sentences and paragraphs for use in your company s internal communications does not require permission from IDC. The use of large portions or the reproduction of any IDC document in its entirety does require prior written approval and may involve some financial consideration. External Publication Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2001 IDC. Reproduction is forbidden unless authorized. For additional copies please contact Andrew Milroy, +44 (0) 20 8987 7100. Check us out on the World Wide Web! http://www.idc.com - 2 - A IDC
From a supply side perspective, new variables to consider in addition to demographic and college educational patterns include labour mobility and public, private partnerships. In Western Europe, there is relatively little movement of labour. In the United States, a much higher proportion of workers re-locate in different states than is the case in Western Europe. In fact, even within Western European countries, there is relatively little movement across regions. For example, in Belgium, there is a greater skills shortage in Flanders than in Wallonia. However, relatively few Wallonian skilled workers choose to work in Flanders. This has a negative impact on addressing the networking skills shortage from the supply side. Many Western European governments have also sought to address the skills shortage by encouraging the immigration of skilled IT workers from outside the EU. However, the United States continues to face a skills shortage and European governments have found that they must compete with the United States in order to attract talent which is proving to be a challenge for many. Additionally, in Germany and some other North European countries, there is some resistance to re-training in order to change careers. Finally, the participation of women in the skilled networking space is relatively low. Encouraging women to develop skills in this area could also relieve supply side constraints. Many ICT suppliers such as Cisco, IBM and Microsoft have sought to partner with the public sector in order to support efforts to address the overall ICT skills shortage. Many of these partnerships involve establishing training schemes together with governmental organisations. The typically seek to address the skills shortage in the medium term. Many of these schemes which were initiated two or three years ago are beginning to have an impact on the supply of skills. This impact is expected to increase in coming years. Geographical Variations Significant variations exist across Europe which can be clustered in the geographical areas. Germany Germany is by far the largest economy in Western Europe. Hence, not surprisingly, IDC expects the German economy to be impacted most significantly by networking skills shortages.. Additionally, Germany has the largest manufacturing sector in Europe and it is in this sector where demand for networking skills is particularly high at present. Companies such as Daimler Chrysler, BMW and Bayer have seen how automating much of their supply chain activity on Internet technology can deliver significant cost efficiencies in their highly competitive industries. eprocurement activities and the use of emarketplaces are used increasingly often by large manufacturing companies in mature sectors in order to lower transaction costs with suppliers and solicit the most cost effective supplier engagements. A IDC - 3 -
From the supply side, the German government, like most other European governments now seeks ways of partnering with ICT suppliers and educational establishments in order to address supply side needs. Moreover, it has also relaxed the supply side of the ICT labour market by actively seeking 20,000 skilled ICT professionals from outside of the European Union. Although Germany will experience the most severe networking skills shortages by 2004, IDC expects the rate of growth of these shortages to slow as training and partnering initiatives begin to benefit businesses and the German economy. France The use of Minitel in France and some resistance to the use of the English language and Anglo-Saxon business practices slowed the development of the French Internet economy in the 1990s. However, over the past year, the rate of Internet adoption amongst businesses and private individuals has grown dramatically. Indeed, many French multinationals such as Vivendi, AXA and Elf have been taking full advantage of Internet technology for backoffice, supply chain and customer facing activities. Hence demand for networking professionals has been outstripping supply significantly. However, the tradition of using Minitel for electronic engagements has created a business environment where an understanding of the ways in which the Internet can benefit business activities is greater than that in most other European countries. Professionals who are familiar with the benefits of Minitel can often also understand how Internet technology can benefit organisations. Hence, the supply side challenges faced by French businesses are less severe than those in other European countries. Interestingly, the French government has sought to intervene the supply side less than most other European governments and partnerships between IT suppliers and educational institutions are less commonplace. However, most French organisations provide regular training to their employees and typically have sizeable internal training resources. Largely for supply side reasons, the French skills shortage, although acute, is not and is not expected to be as severe as that in other major European economies. The United Kingdom The proportionately large services and banking sectors in the UK economy have precipitated high demand growth for all types of ICT skills. The services and banking sectors were and are typically early adopters of new technologies. Furthermore, the fact that English is the dominant language used on the Web made acceptance of Internet technology greater in the UK than in other European countries at least in its early stages. This trend is also driven by the relatively large number of US companies which operate in the UK. Demand for networking skills is particularly high in the South-East of England with much lower demand in other UK regions. Hence, it - 4 - A IDC
is in this area where the skills shortages are most severe. Although migration to the South-East of England from other UK regions continues, the cost of living is particularly high in this region which is putting considerable pressure on salary levels. Indeed, high employee mobility and staff turnover are high in this region due to the competitive ICT labour market which is compounding the trend towards ever higher salary levels. The UK has been one of the earlier adopters of ASP and Web hosting services which offer organisations a less labour intensive means of sourcing ICT functionality. Additionally, cultural acceptance of outsourcing is relatively high. These factors should contribute to a slowdown in demand growth for networking skills in the next few years. In common with the German government, the UK government has been quick to intervene in order to address labour market supply side constraints. The government has sought to liberalise immigration policy in a way that encourages skilled professionals to work in the UK. Additionally, the UK government has shown a willingness to work closely with IT vendors such as Microsoft and Cisco. For example UK has the second largest number of Cisco Networking academies in the world after the United States. Also, Microsoft has spent over $50 million on a research centre at Cambridge University. These initiatives are expected to enable supply to meet demand more closely in the medium to long term. Southern Europe and Belgium Southern European and Belgian economies are characterised by a relatively high proportion of SMEs. Until recently, SMEs tended to be less ICT dependent than larger organisations, hence demand for networking skills has been lower than in other European regions. However, as an increasing proportion of large companies seek to source their supplies electronically through emarketplaces and integrated supply chains, smaller companies will need the ability to engage electronically to remain competitive. Largely for this reason, IDC expects demand for networking skills in Southern Europe and Belgium to be driven by the SME sector in the next few years. Additionally, the Southern European and Belgian economies have been relatively slow to deregulate their utilities and telecommunications sectors. This deregulation is now taking place rapidly and can be expected to further drive demand for networking skills. From a supply side perspective, the pattern varies more by country. The Italian and Spanish governments have been responding to demographic changes within their populations which also affect the supply of IT skills. Spain and Italy have the world s lowest birth rates and have experienced relatively low birth rates for nearly two decades. For this reason, the supply of labour across these economies is shrinking significantly. Both governments are seeking labour from outside the European Union to address labour shortages across several areas of their economies. A IDC - 5 -
Southern European and Belgian large organisations have, in common with France, typically had significant internal training resources and depended less on outside collaboration. However, this is changing as Southern European and Belgian organisations and educational institutions have now started to embrace ICT supplier initiatives. The Netherlands and the Nordic Region The Dutch and Nordic economies have been early adopters of new technologies for some time now. These economies were all quick to embrace the benefits of Internet technology and as such witnessed significant networking skills shortages at an earlier stage than other European economies. However, these countries, although still witnessing networking skills shortages, are starting to experience a stabilisation of their networking skills shortages. From a demand side perspective, this can partly be explained by the relative maturity of outsourcing and the use of less labour intensive means of computing such as the ASP model. ASP adoption rates are significantly higher in these countries than in other European regions. Given that many organisations in the Netherlands and the Nordic region have faced significant networking skills shortages for some time now, they have been quick to seek ways of reducing their need for skilled networking employees. From a supply side perspective, Dutch and Nordic governments have been quick work with educational institutions to respond to changing needs within their economies. Furthermore, these governments have not hesitated to work more closely with the ICT vendor community to address business needs. The Netherlands government has offered tax incentives to non- Dutch nationals working in the Netherlands for some time and this no doubt helps to relax labour market supply side constraints. Furthermore, Dutch and Nordic companies have been quick to implement elearning solutions which are essentially a cost effective and less labour intensive means of offering training to their employees. Hence, IDC expects the supply side of the Dutch and Nordic labour markets to be relaxed by a variety of trends and measures. Emerging Markets Most emerging economies are now beginning to experience networking skills shortages though typically these shortages are smaller than those in Western Europe. IDC expects organisations in most emerging economies to recognise the need for Internet technology in order to engage effectively with organisations with whom they interact in Western Europe and North America. Most emerging economies will continue to witness growing networking skills shortages both in absolute and relative terms until - 6 - A IDC
2004. The growth in the relative shortage will however fall. This can be explained largely by the expected adoption of less labour intensive technology. Essentially, IDC expects broadly the same trends to affect the networking labour markets in emerging economies but that these trends will take slightly longer to become apparent. The table below exhibits the skills shortages in Western Europe and selected emerging economies. Table 1 Networking Skills Shortages Country 1999 2000 2001 2002 2003 2004 5 Yr CAGR Austria Demand 32,609 43,064 49,072 63,589 82,337 97,333 23% Supply 26,576 34,548 39,731 50,561 60,769 75,844 22% Shortage 6,034 8,516 9,341 13,028 21,568 21,488 26% % Shortage 19% 20% 19% 20% 26% 22% Belgium Demand 26,333 37,930 44,657 57,281 72,308 84,570 22% Supply 22,452 28,963 34,172 41,539 48,988 59,995 20% Shortage 3,881 8,967 10,485 15,742 23,320 24,574 29% % Shortage 15% 24% 23% 27% 32% 29% Czech Rep Demand 4,573 5,883 6,863 9,069 12,154 15,092 27% Supply 3,520 4,752 5,650 6,964 7,799 9,687 19% Shortage 1,053 1,131 1,214 2,105 4,354 5,404 48% % Shortage 23% 19% 18% 23% 36% 36% Denmark Demand 7,803 11,621 13,906 17,666 20,071 22,235 18% Supply 6,288 8,678 10,347 12,643 13,253 15,320 15% Shortage 1,515 2,943 3,559 5,023 6,818 6,915 24% % Shortage 19% 25% 26% 28% 34% 31% Egypt Demand 1,851 2,655 3,337 4,263 5,308 6,890 27% Supply 1,633 2,293 2,716 3,255 3,631 4,616 19% Shortage 217 362 622 1,008 1,677 2,274 58% % Shortage 12% 14% 19% 24% 32% 33% Finland Demand 8,563 11,044 13,104 15,951 18,407 20,290 16% Supply 7,298 9,165 11,018 12,873 13,560 15,898 15% Shortage 1,266 1,878 2,086 3,078 4,847 4,392 24% % Shortage 15% 17% 16% 19% 26% 22% France Demand 90,425 110,623 115,135 134,930 160,846 173,756 12% Supply 76,979 93,566 97,890 105,292 115,916 127,744 8% Shortage 13,446 17,057 17,245 29,638 44,930 46,012 28% % Shortage 15% 15% 15% 22% 28% 26% A IDC - 7 -
Table 1 Networking Skills Shortages Country 1999 2000 2001 2002 2003 2004 5 Yr CAGR Germany Demand 185,312 241,120 283,075 355,634 441,642 514,574 21% Supply 143,863 178,729 210,449 243,687 280,094 321,721 16% Shortage 41,449 62,391 72,626 111,947 161,548 192,853 33% % Shortage 22% 26% 26% 31% 37% 37% Greece Demand 1,601 1,813 1,898 2,252 2,621 2,919 13% Supply 1,209 1,324 1,351 1,505 1,642 1,822 8% Shortage 392 488 548 747 979 1,098 22% % Shortage 24% 27% 29% 33% 37% 38% Hungary Demand 1,824 2,813 3,585 4,641 6,016 8,189 31% Supply 1,582 2,262 2,692 3,289 3,585 4,487 19% Shortage 242 551 893 1,352 2,431 3,703 61% % Shortage 13% 20% 25% 29% 40% 45% Ireland Demand 4,216 5,466 6,380 8,165 10,644 11,936 22% Supply 3,270 4,189 4,708 5,516 6,343 7,367 15% Shortage 946 1,276 1,672 2,649 4,301 4,569 38% % Shortage 22% 23% 26% 32% 40% 38% Israel Demand 6,490 9,603 11,481 14,493 18,967 22,591 24% Supply 5,658 8,032 9,419 11,436 12,350 14,538 16% Shortage 832 1,570 2,062 3,058 6,616 8,053 50% % Shortage 13% 16% 18% 21% 35% 36% Italy Demand 64,939 86,653 102,509 123,076 149,786 173,840 19% Supply 55,880 72,734 85,341 97,289 110,053 126,053 15% Shortage 9,058 13,919 17,168 25,788 39,733 47,787 36% % Shortage 14% 16% 17% 21% 27% 27% Jordan Demand 2,071 2,895 3,479 4,487 5,591 6,724 23% Supply 1,842 2,465 2,813 3,460 3,774 4,325 15% Shortage 229 431 665 1,027 1,817 2,399 54% % Shortage 11% 15% 19% 23% 32% 36% Luxembourg Demand 1,140 1,230 1,275 1,389 1,500 1,528 6% Supply 1,024 1,054 1,085 1,118 1,151 1,206 3% Shortage 116 176 189 271 349 321 16% % Shortage 10% 14% 15% 20% 23% 21% Netherlands Demand 46,008 58,056 68,772 98,316 124,465 149,292 27% Supply 40,145 49,542 59,141 80,127 94,481 119,669 25% Shortage 5,863 8,514 9,630 18,189 29,984 29,623 37% % Shortage 13% 15% 14% 19% 24% 20% - 8 - A IDC
Table 1 Networking Skills Shortages Country 1999 2000 2001 2002 2003 2004 5 Yr CAGR Norway Demand 6,678 9,947 12,333 15,403 19,030 21,149 21% Supply 5,831 7,840 9,878 11,473 12,340 14,335 16% Shortage 847 2,108 2,455 3,930 6,690 6,814 34% % Shortage 13% 21% 20% 26% 35% 32% Poland Demand 6,996 9,206 11,387 14,405 17,629 21,104 23% Supply 5,923 7,581 9,013 9,954 11,262 12,803 14% Shortage 1,073 1,625 2,374 4,450 6,367 8,301 50% % Shortage 15% 18% 21% 31% 36% 39% Portugal Demand 8,080 10,062 10,546 12,380 14,309 16,037 12% Supply 6,646 7,709 8,634 9,518 10,893 12,148 12% Shortage 1,434 2,353 1,912 2,863 3,416 3,889 13% % Shortage 18% 23% 18% 23% 24% 24% Romania Demand 1,696 2,441 3,098 3,984 5,058 6,510 28% Supply 1,542 2,125 2,569 3,307 3,918 5,239 25% Shortage 155 315 529 677 1,140 1,272 42% % Shortage 9% 13% 17% 17% 23% 20% Russia Demand 20,880 31,402 40,807 53,309 67,475 89,344 30% Supply 18,404 26,573 32,938 43,105 48,036 60,509 23% Shortage 2,476 4,829 7,869 10,204 19,439 28,836 56% % Shortage 12% 15% 19% 19% 29% 32% Saudi Arabia Demand 4,985 6,981 8,517 10,509 11,527 13,798 19% Supply 4,773 5,822 6,754 7,929 8,844 10,423 16% Shortage 212 1,158 1,762 2,580 2,683 3,376 31% % Shortage 4% 17% 21% 25% 23% 24% South Africa Demand 32,877 42,001 51,258 67,305 85,232 104,343 26% Supply 22,169 25,381 26,730 30,055 32,696 36,376 9% Shortage 10,708 16,620 24,529 37,249 52,536 67,967 42% % Shortage 33% 40% 48% 55% 62% 65% Spain Demand 29,609 44,667 54,871 71,520 85,718 101,031 23% Supply 25,274 34,878 42,552 53,135 59,213 68,515 18% Shortage 4,335 9,789 12,318 18,385 26,505 32,516 35% % Shortage 15% 22% 22% 26% 31% 32% Sweden Demand 23,302 31,313 34,988 42,011 48,139 53,691 14% Supply 19,852 25,756 32,452 38,224 42,429 47,766 17% Shortage 3,450 5,558 2,535 3,786 5,710 5,924 2% % Shortage 15% 18% 7% 9% 12% 11% A IDC - 9 -
Table 1 Networking Skills Shortages Country 1999 2000 2001 2002 2003 2004 5 Yr CAGR Switzerland Demand 22,815 35,839 44,901 56,781 67,692 76,260 21% Supply 20,566 27,352 34,055 42,354 47,436 54,524 19% Shortage 2,250 8,487 10,846 14,427 20,256 21,737 27% % Shortage 10% 24% 24% 25% 30% 29% Turkey Demand 11,938 18,407 24,045 32,465 44,785 55,714 32% Supply 10,185 13,342 16,806 21,454 24,638 28,479 21% Shortage 1,753 5,065 7,239 11,012 20,147 27,236 52% % Shortage 15% 28% 30% 34% 45% 49% UAE Demand 2,636 3,428 4,009 5,063 6,182 6,872 19% Supply 2,176 2,728 3,027 3,603 4,008 4,332 12% Shortage 460 700 982 1,460 2,175 2,540 38% % Shortage 17% 20% 24% 29% 35% 37% United Kingdom Demand 169,437 209,287 238,777 312,347 340,871 349,801 14% Supply 133,367 160,094 186,774 230,360 240,009 251,977 12% Shortage 36,070 49,193 52,002 81,986 100,862 97,824 19% % Shortage 21% 24% 22% 26% 30% 28% Western Europe Demand 728,871 949,733 1,096,196 1,388,692 1,660,389 1,870,242 18% Supply 596,519 746,121 869,578 1,037,214 1,158,572 1,321,905 15% Shortage 132,352 203,612 226,618 351,478 501,816 548,336 28% % Shortage 18% 21% 21% 25% 30% 29% Total (all countries) Demand 827,687 1,087,448 1,268,063 1,612,686 1,946,313 2,227,415 20% Supply 675,924 849,479 990,705 1,185,026 1,323,114 1,517,718 16% Shortage 151,763 237,968 277,359 427,660 623,199 709,696 31% % Shortage 18% 22% 22% 27% 32% 32% Source: IDC, 2001-10 - A IDC