As Tech Job Cuts Decline, Employers Chafe at Demands of Workers

New data shows that job cut announcements in the tech sector are waning. Employers, though, hardly needed a research study to tell them that hiring has new challenges.

Q1 2006 represented the fourth consecutive quarter in which tech-sector job cuts were below their year-prior levels, according to a report from Challenger, Gray & Christmas. Between March 31, 2006 and the same date a year earlier, announced layoffs at telecommunications, hardware, software, e-commerce and electronics companies dropped 34 percent. In the first three months of 2006, there were only 39,379 compared with 59,537 for the same time period in 2005.

This trend is occurring despite the mega-mergers in the sector of late, perhaps most notable among them, the merger of AT&T and SBC, followed by AT&T’s acquisition of BellSouth.

“Despite the inevitable job-cutting that typically follows mergers, the job market picture for the nation’s tech workers is definitely improving,” says John Challenger, CEO of the outplacement firm.

Employers recognize that this means bidding wars for qualified prospective employees. The lean years reduced the number of workers still employed in tech companies. Overall, nearly 44 percent of Challenger’s job-seeking clients changed industries in 2005 alone in order to secure new jobs. “Most should stay within their fields and explore other industries,” he says. But now traditional tech firms are at a loss.

Out of Work, Out of Touch With Technology

“What we’ve lost over the past decade is the availability of a trained, qualified workforce,” says Jeffrey Rosengarden, CEO of HighTower, a business management technology developer based in Skokie, Ill.

“The only way to really master something is to plant your feet and stick with it,” he tells CRM Buyer. However, as tech companies finally recover from the dot-com blowup earlier in the decade and the recession that followed in short order, workers don’t necessarily have the skills jobs require. Some employers may be so desperate for staff that they take a chance on out-of-date tech workers.

Others confront knowledgeable prospects who want to write their own tickets into a new position. “Many job seekers in high-demand fields such as storage systems administration and information security are probably finding themselves in the driver’s seat when it comes to negotiating employment terms,” Challenger says.

“If demands on the managerial staff don’t allow for properly teaching a new employee the job, the employer solves the problem with its checkbook, hiring experience and paying for it,” Rosengarden agrees.

Those without the big salary line items to support their recovering pursuits may have a difficult time finding IT and other tech workers. “Some businesses may in fact regret some of the job cuts they made in recent years, which, in retrospect, may have been too deep,” Challenger says.

No Regrets

StarCite, a technology developer for meetings management based in Philadelphia, launched in 1999. While its birth coincided with the dot-com boom, the company did not suffer the same fate as tech cousins of its generation. “Since StarCite’s launch, we have maintained a very stable technology platform that we continue to invest in,” Jason Atlas, chief technology officer, tells CRM Buyer. “So we haven’t run into the issue of job skill obsolescence.”

Instead the company maintained its tech workers through the rough years and currently is hiring software developers and testers, project and product managers. “If you have the patience and the willingness to sift through candidates you can always find quality people,” Atlas says. “We may be lucky, but we have been able to be quite selective in our hiring practices. There are very few customer- or client-facing software companies in the Philadelphia area. For people who are attracted to the idea of having their software used by millions of people around the world, we are one of the few games in town.”

He’s wary about the future of the tech workforce, however. “We believe that it will become more difficult to find qualified technology workers in the future,” he says. “One major reason is the stricter legal immigration laws that have made it harder to invite and retain foreign technology employees.” So StarCite has made outsourcing part of its technology development and maintenance strategy. “We use it for the cost-efficiency advantages it provides in areas such as maintenance and for some one-off projects.”

When Outsourcing Isn’t the Solution

Companies that want to keep their technology development and maintenance in-house are substituting training for globe-trotting. “Due to the forces of technology, we’ve grown accustomed to hiring staff that aren’t really capable of the job at hand and hoping that expensive on-the-job training makes up for the deficit,” HighTower’s Rosengarden says.

StarCite’s Atlas hasn’t reached this level of frustration yet. “Companies just need to have patience so they can find the best people,” he concludes. “We’ve found that one very effective approach is to take advantage of networking relationships to identify qualified candidates.”