Despite a steady rise in the number of IT jobs being outsourced, demand for workers with Internet-related skills such as Java and networking is helping to drive IT compensation higher, according to a report released today by Meta Group Inc.

According to the 2004 IT Staffing and Compensation Guide, which is based on surveys of more than 650 large and midsize companies, 45% of the companies surveyed plan to pay premiums for IT skills that are difficult to find or retain. Skill shortages are most acute in highly specialized areas such as wireless computing and information security, according to the Stamford, Conn.-based market research and consulting firm.

Nevertheless, 72% of the respondents said poor morale among IT workers -- much of it fueled by budget and staff cuts -- is a big problem in their organizations. To try and improve morale, 45% of the respondents said they have employee recognition programs in place, while 40% offer training and other skill-development opportunities.

The growing demand for certain types of IT skills is leading companies to generally pay IT workers more than their nontechnical peers. This year, 76% of the survey respondents said they plan to pay IT workers more than other workers, about the same as last year.

Fifteen percent of the survey respondents cited a continuing need for Internet-related skills such as application development and Java application management, while 11% said networking skills are highly sought after. However, demand for e-commerce skills continues to ease, with only 15% of the respondents indicating a strong need for those capabilities, down from 22% who said that last year and 25% who cited a demand for e-commerce skills in 2002.

Twenty percent of the Meta Group survey respondents are involved in offshore outsourcing, while 40% of this group said that 5% or less of their IT workforce is deployed offshore.

Although 81% of survey respondents have added IT staff this year, hiring is far from robust and there's no net gain in the number of new IT workers, Meta Group said.

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