For the first time since the Internet boom began, the supply of IT workers exceeds demand. IT salaries are not dropping -- but the days of free BMWs and oxygen bars are over, at least for now.
For most of the last decade, I-managers have fought an ongoing battle to recruit and keep talented technology workers. With the business revolution brought on by the emergence of the Internet, IT workers were able to dictate terms to potential employers, demanding and receiving double-digit salary increases, stock options, signing bonuses and various other perks.
But in our annual survey of IT salaries, Interactive Week
has found that the tables have clearly turned. For the first time since the Internet boom began, supply exceeds demand. IT salaries are not dropping -- we need to be clear about that -- but the days of free BMWs and oxygen bars are over, at least for now. (Survey results on change in average IT salary by region: click here)
Is it payback time for corporate I-managers and technology vendors?
Not exactly, says Tim Arnold, a Bose IT manager who has been charged with implementing a large customer relationship management project for the Framingham, Mass., speaker and home theater manufacturer. Arnold says he has to be careful not to damage relations with existing staff or new hires by trying to turn the screws too tight. But at the same time, hes enjoying the fact that he has a much greater talent pool from which he can choose new hires, and his current staff isnt looking for greener pastures.
"A year ago, I was eating so much cake [from farewell parties] that I couldnt stand to look at it," Arnold says. "My staff turnover rate was in the range of 25 [percent] to 35 percent. People are staying now, and I even have people that left -- good people -- asking to come back."
Holding the Line
The news isnt all bad for champagne-and-caviar-fed Internet workers. Interactive Week
, in association with Advantage Business Research, conducted a survey of close to 2,500 IT workers and found that most continued to receive pay increases this year, in the range of 1 percent to 5 percent. (Survey results: click here)
One category, security administrator -- which may come into even stronger demand as a result of the Sept. 11 terrorist attacks -- saw a 12.61 percent increase. (See related sidebar on security-related increases: click here)
Managers most closely tied to Internet and electronic commerce projects received salary increases amounting to an average of 1.9 percent. Interactive/new media managers were at the top of the heap, with increases of about 5.95 percent, and Webmasters pulled in increases of about 4.62 percent -- but electronic commerce project managers pulled the group down with a drop of 3.66 percent in average salaries. Keep in mind though, that these executives are still earning a respectable average salary of $78,500 per year.
While increases of 1 percent to 5 percent seem acceptable in an economy that appears to be in recession, they are downright sobering to technology workers who may have gotten used to factoring big pay increases and bonuses into their lifestyles. By comparison, the Department of Labor earlier this month reported that workers across all industries have received average salary increases of 3.4 percent this year.
"It just shows the new economy does not mean new economics," says Harris Miller, president of the Information Technology Association of America. "The laws of supply and demand are still in place."
Its difficult to add up all of the technology job losses that have taken place, partly because many more are happening in the wake of the Sept. 11 attacks. Outplacement firm Challenger, Gray & Christmas said last week that announced job cuts in September alone topped 248,000 -- the most recorded in any month this year. That was across all job segments, not just technology. Previously, Challenger Gray had tallied 175,000 job cuts in the telecommunications sector this year and 101,000 layoffs by computer companies.
Miller says his fear is that the picture could deteriorate further and result in a situation similar to the early 1990s -- the last "tech recession" -- when it was difficult to encourage students to seek careers in computers.
"We finally have a situation where supply [graduates from tech schools] is trending upward, but its happening at the wrong time. My fear is that our efforts to drive up that supply will be reversed . . . and when the economy picks up, we could find ourselves in a shortage again," he says.
In our survey, 36.4 percent of respondents said their companies had participated in layoffs this year, letting go of an average of 14.7 percent of the work force. The survey was conducted in August, but at that time, 26.4 percent of respondents were expecting more layoffs at their companies in the months ahead. (See results: click here)
On the Rebound
Mark Greenberg is one of the thousands of tech workers who thought they had hit pay dirt with the Internet. Greenberg had a high-paying job as a software development manager at Information Builders, a business intelligence software vendor in New York City. He had invested 11 years with the company, but a year ago September, Greenberg decided he couldnt pass up the opportunity to get rich with a hot dot-com. He quit his job and joined a Web-based financial services startup on Wall Street.
It was late in the Internet game, but the company -- its still in business, so he preferred it not be named -- had a great management team and appeared to be well-funded. Greenberg signed on as vice president of software development and got a sizable increase in pay, as well as stock options and an arrangement that paid bonuses if quarterly development targets were met.
In May, the companys investors got cold feet, and he was laid off with almost all of the software development team. Greenberg found himself unemployed in the worst technology market in a decade.
"I never, ever thought Id have a hard time finding something, but at the level I was looking for, nothing was available," he says. After months of searching, Greenberg made a call to his former co-workers at Information Builders, who were glad to have him back.
Greenberg says hes getting paid basically the same amount as when he left, and is in a similar role. The big gain is a renewed sense of job security. "You cant begrudge someone who wants their shot at becoming a millionaire," says Lila Goldberg, Information Builders director of human resources. "As an HR director, I feel like Im getting a break. There was a period of time there when people could write their own ticket. It was such a competitive field, you had to give double-digit salary increases."
Through much of this year, raises have been kept in the 5 percent to 6 percent range, Goldberg says, and she expects it will be "similar or less" next year. (Survey results on alternative compensation: click here)
Most HR directors and executives in charge of hiring who were interviewed by Interactive Week
think their salaries will be held in the 2 percent to 3 percent range next year. Raises handed out this year were based on budgets drawn up last fall, before the tech slowdown had firmly set in. Budgets are now being drawn up in a much worse climate.
Headhunters are also feeling the pain in the current market. Many of the companies interviewed in the survey said they have stopped using recruiting firms, except for highly specialized positions. They simply dont need them.
PayPal, a Silicon Valley company that offers an electronic payment service, is among a handful of firms still aggressively hiring. Its currently trying to fill 30 open positions, primarily for software engineers.
Sal Giamvanco, PayPals vice president of HR, says the company is getting 200 to 300 résumés per day from "top-notch" candidates. (Survey results on job hunters: Click Here)
PayPal recently attended the BrassRing technology job fair in Silicon Valley, where in the past it has had to compete against as many as 400 different companies for candidates. This time around, there were only 18 companies participating, Giamvanco says. "There was a 20-minute lineup just to drop off a résumé at our booth -- and it was the same at all of the booths," he adds.
Internet job site JustTechJobs.com has noticed a similar trend. Fred Hobbs, the companys "marketing nerd," says after a dismal first half of the year, the company had actually started to see glimpses of a turnaround in July and August. There was an 11 percent increase in companies posting jobs, and a slight decrease in the number of job seekers. However, the Sept. 11 attacks brought an abrupt end to the gains. "For a week there, we did nothing," Hobbs says. "I was fairly confident that things had turned around, but now I just dont know."
Belle of the Ball
While it might be tempting for companies such as PayPal to turn the screws on potential job candidates, Giamvanco says that would only result in short-term gains. "You dont want to create inequity in your work force and hard feelings. Its tempting to try to offer lower salaries, but we dont want to take advantage of the market that way," he says.
Besides, like most other technology companies in Silicon Valley, PayPal fears that when the economy improves, the technology sector could go into overdrive again. It doesnt want an office full of dissatisfied workers looking for their chance to jump ship.
For now, PayPal will just enjoy being the belle of the ball.
"Negotiating power rests with the company right now," Giamvanco says. "And let me tell you, thats a huge change from the situation a year ago.