Despite recent layoffs, experts see strong signs of life - at least for tech jobs.
By Mathew Schwartz | February 2009
Is the tech job market destined to head anywhere but further into the dumps before 2010?
At all levels - personal, corporate, national, global - the situation seems dire, the economy in shambles. Congress is debating an $800+ billion stimulus plan. Brand-name companies Caterpillar, Sprint Nextel, and Home Depot collectively slashed more than 62,000 jobs in a day. Technology sector bellwether Microsoft plans to cut 5,000 jobs over the next 18 months. Intel, with fourth-quarter 2008 profits down 90 percent, will eliminate 6,000 jobs and close several factories, including one in Oregon. Even Google has cut back on perks and hiring.
In short, everyone is stressed out, overworked, maybe bitter - and that's just the people who still have a job. But there's this: All is not bleak in the tech jobs sector. In fact, far from it, say experts.
No IT Death Knell
To understand why, consider what happens when a technology company. "They are typically laying off people throughout the organization, not just IT workers," notes Todd Thibodeaux, president and CEO of the Computing Technology Industry Association (CompTIA). "That means all types of jobs are affected - IT, sales, marketing, white collar, administrative."
Furthermore, far from being unexpected, the current layoffs reflect more of what's financially already happened as opposed to what's going to happen. "The numbers certainly aren't good, but the headlines we're seeing now on layoffs and earnings decline are based on 2008 fourth-quarter performance, which we knew would be bad,"says Thibodeaux."In that regard, they are trailing indicators."
Layoffs Come in Three Flavors
Even so, the specter of layoffs at companies like Microsoft, Sony and Intel is alarming. But David Mitchell, senior vice president of IT research at researcher Ovum, cautions that "all job losses are not equal." Rather, the recent layoffs fall into three broad categories, not all of which are scary:
- SOS: "Some companies are in genuine financial distress and need to make immediate cost reductions in order to make payroll," says Mitchell. Smaller companies comprise the bulk of this category, and he warns that for many, job cuts "will still not guarantee their survival."
- Course corrections: "Larger companies have used redundancies to refocus their efforts - these are planned course corrections to improve future results rather than decisions forced upon them." Examples include Microsoft (minor correction), as well as Intel (major correction required due to longer PC-refresh cycles, and the popularity of lower-margin netbooks).
- Streamlining: Eliminating duplicate jobs after a merger or acquisition, for example at Hewlett-Packard.
On balance, says Mitchell, "big (IT) companies continue, for the most part, to do well." He cites recent results: Microsoft's fourth-quarter net profit of $4.17 billion ("a large number in anyone's books"), Google's "quarter-on-quarter revenues up 18 percent," rising profits at IBM, and strong revenue growth at HP.
Many small technology concerns are also doing fine, says CompTIA's Thibodeaux. "Some segments of our business, especially small (businesses) that sell to other small (businesses), have not been as affected as the large enterprises," he says. "These companies generally run lean to begin with, so they aren't as susceptible to some of the problems larger companies face."
Waiting for the Upturn
Unfortunately, when the economy will recover is anyone's guess. "When will the credit markets loosen up? That will have a lot to do with how soon a turnaround begins," says Thibodeaux.
"The best experts are saying it's going to be six months, 10 months for this to end," says Jerry Luftman, distinguished professor and associate dean at Stevens Institute of Technology in Hoboken, N.J., and vice president for academic affairs at the Society for Information Management. But of course, it could take much longer.
Revising the IT Hiring Outlook
Until then, how will the recession affect IT hiring? When SIM surveyed its members in June 2008, respondents said their plans for 2009 included increasing their IT budget (for 44 percent of respondents), increasing IT hiring (43 percent), and higher IT salaries (75 percent). More than six months later, do those results hold? "That head count will be on the rise ¿ seems to be holding firm," says Luftman. "Will it be as much as was suggested in our study? Probably not."
Ditto for overall IT spending: It will likely still increase, just not by as much as people had hoped. But compared with non-technology sectors, "that's reasonably good news for the field," he says.
Furthermore, Luftman predicts demand will exceed supply for many tech positions. "We know that the shortfall for IT people with appropriate skills is falling far short, and will get worse over time."
Why Businesses Rely on IT
For example, in 2007, the Bureau of Labor Statistics predicted that through at least 2016, demand for numerous tech positions would see the biggest levels of any job growth. It even forecast that demand for networking would outstrip nursing.
Relatively speaking, those predictions still seem to hold because IT skills remain crucial to corporate success - especially during a downturn. "While organizations may have slowed their spending on new IT projects, they're still pushing to squeeze more out of the systems they have in place," says Thibodeaux. "That requires the expertise of IT professionals who can identify ways to use technology to make the business operate more efficiently or less expensively."
IT Careers: Much Growth Potential
Of course, some IT careers are destined for faster growth than others. Says Thibodeaux: "There's a need for systems engineers, application developers and database gurus. Security credentials and wireless skills are in high demand and short supply as organizations move to become more mobile without compromising security." Also, don't discount the help desk. "Many employers still struggle to find computer support technicians, which is still the best first job for new workers to break into the IT industry," Thibodeaux says.
Mathew Schwartz writes about technology and business from Pennsylvania.