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Is IT hiring picking up?

A number of signs point to increasing demand for tech workers, but not all the clouds have been driven away. Gain or drain?

Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Ed Frauenheim
7 min read
Joe Fuller is looking for a few good techies in the United States.

Fuller is chief technology officer of online classified-ad company Trader Electronic Media, a division of Trader Publishing, which expanded its information technology staff from 60 to 70 in the last quarter. And the Virginia Beach, Va.-based firm isn't done hiring IT employees. "We're planning to add probably eight more in the next six months," Fuller said.


What's new:
Online ads for tech jobs are increasing, IT services companies are hiring and analysts are warning companies to take steps to retain prized workers.

Bottom line:
Not all the clouds have been dispersed. Declining tech employment, job cuts and "offshoring" paint a less optimistic picture.

More stories on this topic

Fuller's IT expansion is one piece of a puzzling set of data about whether the job market is improving for U.S. techies. On the one hand, online ads for tech jobs are increasing, IT services companies are hiring, and analysts are warning companies to take steps to retain prized workers as the job market tightens.

Diane Berry, an analyst at research firm Gartner, goes so far as to predict a shortage of technology professionals in the United States in the near future, thanks to factors such as declining student interest in the tech field. "Within the next three to five years, the labor problem in IT (for example, unemployment) will reverse course, and there won't be enough IT workers in the United States to satisfy the demand," Berry said in an e-mail.

The unemployment rate for people in computer and math occupations has dropped to an average of 4.5 percent for the first three quarters of this year, from an average of 5.6 percent during the first three quarters of 2003, according to U.S. Department of Labor data.

But not all signs indicate that the job market is turning around for techies, who weathered massive job cuts earlier this decade. For example, the average number of people employed in computer and math occupations during the first three quarters of this year slipped to 3,094,000, down 7,000 from the same period in 2003. That, coupled with the lower unemployment rate, suggests that some techies left the field, possibly discouraged by grim job prospects.

Ken Warner, who has 15 years of experience as a Unix programmer, is a case in point. The Mammoth Lakes, Calif., resident hasn't been able to get work since mid-2001, despite applying for more than 100 jobs. "I doubt if I ever will work as a programmer again," he said in an e-mail. "I've pretty much stopped sending out my resume."

Offshore tsunami coming?
Other factors working against tech professionals include the rise of so-called "offshoring"--when tasks such as programming get sent to low-wage nations. Research firm IDC on Monday predicted that the worldwide market for offshore information technology services will more than double between 2003 and 2008 to $17 billion, suggesting that U.S. techies will lose jobs to countries such as India and the Philippines.

In addition, announced job cuts in the technology sector hit 54,701 in the third quarter, up 60 percent from the second quarter, according to a report this week from an employment services firm.

That study comes on the heels of a report from the Information Technology Association of America trade group, which found that hiring managers have less ambitious plans for filling IT posts this year compared with last year.

But ITAA's report came from data collected early in the year. Bob Cohen, ITAA vice president, said he's since heard anecdotal evidence of a hiring pickup. "It certainly is encouraging," he said. "A lot of it is tied to the economy and discretionary spending by businesses."

Help wanted in services
Technology services companies like IBM and BearingPoint are hiring in the United States, though they are increasingly looking for employees who can combine technology chops with business savvy. According to the Labor Department, payroll employment in computer systems design and related services hit 1.14 million in September, up 32,700 since September 2003.

Internet job board Monster.com, meanwhile, has seen a surge in tech-related job ads. Postings for "information technology" jobs increased 48 percent during the first eight months of 2004, compared with the same period last year. Postings for "computers, software" jobs jumped 72 percent, while those for "computers, hardware" rose 67 percent. A recent search on Monster for computer software jobs in the United States yielded more than 5,000 postings.

Although the offshore trend on its face threatens to siphon off much of the tech work done in the United States, some observers argue that positions in America will exist for people doing things such as high-level systems design. In addition, the scope of offshoring may have been overblown in the media.

Trader Electronic Media, for example, hasn't taken the overseas route with its IT tasks and doesn't plan to do so. "The examples we've seen of companies using that approach have not had a good result," he said. "The communication issues are too great."

Morris Communications is also beefing up its IT staff domestically rather than overseas. Between this past March and early April of next year, the Georgia-based media company plans to add 15 IT employees for a total head count of 75. Chief Information Officer Steve Strout said he expects to send IT work abroad eventually, but not before his department documents all its processes. Until then, offshoring could be an expensive management headache. "Going offshore, at this point, would actually cost us money," he said.

Morris is implementing SAP software, and Strout has been seeking programmers and database administrators.

Fuller said his company's recent hiring stems partly from it acquiring two Web sites, Homes.com and Boats.com. The new hires are primarily Web programmers, though the company also brought on two database analysts.

Hiring easy or hard?
Hiring 10 techies recently wasn't terribly difficult, Fuller said. "It was much easier than it was three years ago," he said.

But some analysts think hiring or retaining IT workers is about to get harder. Research firm Meta Group recently predicted that salaries of IT staff will increase by as much as 15 percent over the next three years. As the economy improves during the next 12 months, key IT employees will seek "greener pastures" with competitive firms, Meta predicted.

To keep important employees, CIOs will need to pay closer attention to human resources management programs, such as employee morale programs and compensation strategies, Meta recommended.

Gartner's Berry agreed that companies ought to be doing things to retain employees, such as offering training programs. She also advocates flexible work rules. "You better start planning for that uptick," she said.

One reason Berry predicts an IT labor shortage is that students are less likely to enter the field, thanks to negative publicity over outsourcing. Strout of Morris Communications also said there could be a shortage of tech workers in the United States in the near term and pointed to two other factors. The share of women in the computer field has fallen, and IT veterans who came into the industry during the 1960s and early 1970s are about to leave. "The Baby Boomers are starting to retire," he said.

This isn't the first time a shortage of tech workers has been predicted. But a study earlier this year from research organization Rand countered such claims. "Despite recurring concerns about potential shortages of (scientific, technical, engineering and mathematics) personnel in the U.S. work force, particularly in engineering and information technology, we did not find evidence that such shortages have existed at least since 1990, nor that they are on the horizon," the report said.

One development that may indicate a tighter IT labor market came Oct. 1, when the annual cap of 65,000 H-1B guest worker visas was reached on the very first day of the federal fiscal year. Historically, many of those visas have been used by employers to import IT professionals. But critics of the visas say employers have used them in large part to undercut the wages of American techies, rather than make up for a labor shortage.

John Miano, founder of the Programmers Guild professional group, estimates that more than 180,000 new H-1B workers in the computer field came to the United States between 2001 and 2003, while computer-related jobs in the nation increased by 27,380. "This suggests any gain of jobs have been taken by H-1B workers," he said.

Times are not good for techies, nor are they likely to improve, said Miano, who has left the programming profession himself and taken up law.

Trader Electronic Media's Fuller doesn't see the labor market tipping in favor of techies, at least in the very near future. During the next three or four months, he expects that it will be "relatively easy to recruit good talent."