Shortage? What Shortage?

Shortage? What Shortage?

"People. People who need people - are the luckiest people in the world." Unless, of course, the needy people are chief information officers looking for IT staff. But, asks Beverley Head, are they really as unlucky as some of the skills shortage bleaters would have us believe?

There is a skills shortage. There is not a skills shortage. Both statements are correct and both are false. This paradox is made possible because of the inherent breadth in the term "skills".

Trevor James, the CIO of Shell Australia, wishes he knew whether there was or was not an IT skills crisis. But James is at the coalface in a large corporation. How can he not know what is going on when it comes to skills? Again, because skills are not uniform, either in supply or demand - and nor are employers' perceptions of those skills. "From my personal experience, we have had no particular problems getting the people we want. In some new areas in the e-world, it is just a function of the market that there are not many people with those skills. But there's absolutely nothing new about that, " James says.

He is absolutely correct. Alleged skills crises have constantly dogged the advance of technology. And these crises have been allegedly on a global scale. Last November, the US-based United Engineering Foundation published the results of its IT Workforce Data Project. The report noted that "according to much of what one hears in media reports and policy debates in the Congress, the US never seems to have enough high-tech workers. Warnings of shortages of engineers, scientists, and now information technology specialists have appeared regularly since the 1950s."

It continued: "However, there is a problem: in all these years; there is no evidence that any serious shortages of technical professionals - engineers in the past, information technology specialists now - have ever occurred. To be sure, there have been ups and downs in supply and demand as normal business cycles of boom and recession affected general levels of employment, and as demographic trends influenced supplies of newly trained workers. In the early 1970s and again in the early 1990s, there were serious problems of weak demand for technical people. There have been obvious cases of ‘spot' shortages: scrambles for people with especially hot specialties, experience in particular industry sectors, or favoured geographic locations. But on the national level, data on trends that reflect supply and demand for technical professionals have been mainly notable for their stability. This applies with special force to measures of pay, the best indicators of actual shortages of workers. If shortages exist, compensation should rise sharply as employers bid for scarce talent; but when adjustments are made for inflation, technical pay has remained remarkably consistent since the 1950s, even with allowances for such factors as bonuses and stock options."

If the skills crisis is a mirage in the alma mater of IT&T, can it be any more real in Australia?

One of the fiercest defenders of the notion that Australia is in the grip of a severe and worsening skills shortage is Brian Donovan, Telstra executive and executive director of the Australian Information Industry Association's IT&T Skills Task Force. Donovan points to a survey of the IT&T sector in 1999, orchestrated by the task force, which identified 360,000 people in Australia (or 4.2 per cent of the nation's working population) that the Australian Bureau of Statistics claims work in IT&T.

The survey predicted that this year demand for skilled IT workers would rise by a further 31,460 people. By 2004, the survey predicted, the nation would need another 180,190 IT&T employees. This would take the total population to more than half a million people, 50 per cent more than currently employed in this sector.

Donovan bases his argument on the report's findings that Australian companies would need 30,000 more IT workers for each of the next five years. The skills demand will not, he says, be met by graduates from tertiary institutions, who would satisfy only half that figure. "If we don't respond, then Australia will lose the opportunity to capture the growth from the new economy," Donovan says.

The industry itself is responding. Donovan is behind the proposal to create a virtual skills exchange. Here employers would post details of the skills they are seeking, and potential employees could use the information as a guide for updating their skills. The "skills needed" information would also aid training organisations in tailoring courses more closely matched to employer requirements. Other industry initiatives include Microsoft's $6.5 million project to train school, TAFE and university students to certified professional level; and Oracle's $400,000 RestartIT initiative, which aims to bring unemployed people in for IT training.

But even though these companies and individuals believe the skills crisis is real, it does not as yet seem to be unduly impeding the advance of the IT&T sector. According to Australian Bureau of Statistics figures released in late May, the IT&T industry's total income in 1998-99 was $59 billion, up a creditable 21 per cent from 1995-96. However, the ABS found that employment in those IT&T businesses had over the same period actually fallen by 4 per cent to 195,580.

It is a finding apparently at odds with the IT&T Skills Task Force review of 1999, which found most organisations surveyed reported a significant problem in attracting the right people. Four out of five companies claimed they had real difficulties getting people with Internet programming skills. "I find it hard to think that these companies are making this up," Donovan says.

In the US, however, Dr Norman Matlof, of the University of California's computer science department, thinks some companies are, in fact, making up the extent of the skills shortage; that although there may be specific pockets of shortfalls, there is no widespread crisis. He believes IT companies and large corporate users of IT have talked up the skills crisis as a ploy to engender more political support for increased levels of immigration of skilled workers; overseas workers, he argues, who won't be able to demand the high salaries that their US peers might.

In a recent paper presented to a US Senate hearing on the skills issue, Matlof claims that, in the US, companies have been too picky. As evidence, he points to statistics which show that employers hire only about 2 per cent of applicants for any software position advertised - rejecting most without even an interview. This pickiness reveals employers wanting just one of three classes of employees, says Matlof: new or recent college graduates on low salaries; foreign multinationals on work visas with lower salaries; and a small number of programmers with highly specialised skills.

Ploy or not, the US corporations who had trumpeted their concern about an IT skills shortage were heard. In May, the US Administration proposed doubling the number of H-1B visas, which allow skilled workers access to the US, to around 200,000 per year. There remains a political gulf between proposing the idea and getting Congress to pass it, but the issue is very much on the table.

In Australia, the IT industry was quick to respond, warning that this would prompt a brain drain as local skilled workers dashed off to the US. Richard Ellis, author of the United Engineering study, considers this a furphy. "The current academic literature suggests that there is no brain drain in IT. Migration seems to be going both ways, probably at least in part because of a completely shattered system for getting onto permanent residency tracks here in the US," Ellis says. "Our employers welcome temps, but one suspects that part of their appeal is that it will not be necessary to keep them around as they get older and more costly."

Age was also something which Matlof focused on in his report to the US Senate. He noted that ageism had crept into the skills equation, with anyone over the age of 35 finding it harder to get work than their younger peers.

It is an issue in the dotcom world. Martin Warren is the IT recruitment manager for Intellimark, and although he rails against a suggestion of ageism on the part of employers, it is clearly the youthful who will succeed in this new world. "I think one of the recruitment trends is emerging as companies head down the e-commerce track. They want Web developers and people who can exploit the Internet. They are looking for senior experienced people in their late 20s or early 30s."

What of the experienced 40s, 50s, and 60s? "Age does not come into it, it's experience with the technology," says Warren. He believes that there is a real skills crisis in the e-commerce space. "These people [dotcom employers] are very fussy about what they want. The culture side is very important. They are all very young and creative and wear casual dress. People who have been in a suit environment for 15 years would not fit in. That's probably a bit of a reason why some of these [mature candidates] are not getting jobs."

It appears it's not their skills that are at fault, rather their mode of dress.

Multiple Skills Needed

Earlier this year, Intellimark conducted a survey into demand for permanent and contract positions. The organisation predicted that there would be a significant increase in the number of these positions in the next 18 to 24 months. A permanent creative director might command a salary of up to $160,000 a year and a Web architect up to $150,000 a year. By comparison, the survey predicted that an IBM mainframe developer could expect $70,000 a year tops.

Miriam Ryan is the CIO of Oracle Australia. In her 50s herself, Ryan swiftly counters any suggestion of ageism in her 28-strong IT shop. But then, she isn't looking for Java programmers. What she is seeking is flexibility - and that, she says, is not a function of age. Like many of Oracle's own customers, Ryan says that the company is looking for a blend of technical and business skills for IT staff.

"We are looking for the person who can bridge the gap between the predefined packaged software and our business processes. There are a lot of people who are coming out of universities with C++ and Java skills and they are all keen to write programs. What we are doing is trying to avoid writing programs, but rather to implement a package.

"Yes, it is enormously difficult to find people. The people from the user side don't have the technical skills, and the technology people don't understand the business," says Ryan. "What we want are people with strong technical skills and an MBA." It's a big call, but she says that "I have found it an awful lot easier since Y2K has gone by". The easing of the Y2K pressure has also taken a lot of the heat out of the salaries being demanded, says Ryan, who has just successfully appointed three new IT people.

Recruitment firm DMA Australia is also seeing a cap starting to be applied to IT salaries. Managing director Ian Woolett claims that it is indicative of a new pragmatism emerging from employers. On the issue of the skills crisis, Woolett says that there are two camps of employers: one of which will definitely suffer a crisis, and another more realistic camp which will not suffer to anywhere near the same extent.

"The first camp says we have to have real experience with people who have rolled out businesses online and supply chain integration. Then sure, you have a very small group of people [available]," says Woolett, adding that this camp will experience what they consider to be a skills squeeze. "But I think the more predominant approach [to the skills shortage] is pragmatic. These companies say they will not pay a premium for what are essentially traditional skills - although those skills may be applied differently."

Woolett believes more and more employers will migrate to the sensible camp as they eventually recognise that their demands are unrealistic, and that there is simply not a large pool of talent which has already rolled out new economy applications. As this previously "demanding" camp become more pragmatic employers, they too will seek to harness traditional IT&T skills and apply them in new and novel fashions. "Pragmatism will creep in because people will say that they can't afford 20, 30 or 40 per cent added on to their cost base to pay for very scarce skill," Woolett says.

But before that lesson is learned, some companies will go to quite dizzy heights in their search for particular skills. Woolett recalls one large multinational company seeking a particular skills set to implement a Siebel customer relationship management application. An individual was found who was demanding a package of around $180,000. At about $60,000 a year more than the CFO of a company with a $50 million turnover might expect, it was a steep demand and the CEO had to be asked to sign off on the appointment.

In another instance, Woolett says an employer might demand someone with retail banking experience. Such an individual can't be found, so the recruiter returns with the suggestion of someone who has wholesale banking and telecommunications carrier experience. The skills set matches the requirements, but the employer refuses to budge from his demands for experience. In that case, Woolett says, the employer is left to go to the skills market on their own and try to hunt down such a needle in a haystack.

Some Gaps

Shell Australia's James would fit neatly into the pragmatic camp. Much of his IT infrastructure has been outsourced but he still needs key IT&T staff on his team. He recognises that there are some skill shortages, but stresses that these are not shortages across the board. "When it comes to SAP skills and so on, then there is no particular problem [with staffing]. But for the more obscure modules of SAP, then there are fewer people," James says.

"Clearly in some emerging competency sets - and this has always been the case - there are not heaps of people around with those skills sets." And, he confirms, where there is a shortage, the laws of supply and demand also apply to the salary an IT worker can command. "Two to three years ago people were saying that there was no ceiling for people with two to three years' SAP experience. They didn't come cheap, but they weren't getting $10,000 a day."

That's the view from one side of the coalface. At the other are the IT professionals themselves.

Paul Reedman is a Brisbane-based contractor and runs a special interest group for contractors within the Australian Computer Society. "A lot of people in the US are beginning to say this IT skills shortage is a load of rubbish. Most are saying that poor hiring practices by employers and hype generated by the IT recruitment agencies are the key reasons," says Reedman. "This is consistent with my experience in Australia, and many contractors feel the same way."

Reedman questions the extent of the skills shortage, given that some members of his SIG report they can go two months without a contract, which seems somewhat at odds with the notion that there is a widespread crisis.

For agribusiness Monsanto Australia there has been little evidence of a skills shortage either. Network and communications manager Gary Robinson, who has been with the company for five years, says "we haven't had that much trouble. But then we're looking for general support people."

Monsanto's skills requirements are being well met by the market as it is. If the company suddenly plunged into a major e-commerce project, implemented customer relationship management, integrated its supply chain, and demanded its IT people wore polo shirts and conformed to a particular culture, then it might have more of a hiring problem.

As United Engineering's Ellis notes: "I do not doubt that lots of employers want to hire brilliant genius-level software developers. There is always a shortage of brilliant people. Whether anyone else should care about that problem is another question altogether."

To Skills and Back

It's still impossible to tell whether there is a skills crisis in Australia, says one Queensland-based contractor questioned by CIO magazine, who has 20 years of IT experience, much of it in one of the world's largest international IT companies. He was even unwilling to define the skills situation as a shortage, let alone a crisis, says the individual, who is unwilling to be named and has over the years been closely involved in the hiring of IT staff.

"I've been involved in hiring technical people for projects, and the focus was very much on finding an individual with specific skills. In one project we interviewed several dozen people in order to make offers for about three positions," he says. "I think more than a skills crisis it is an attitude amongst IT companies that they won't train up people for the positions; they would rather find the exact skills they need for the short term. We interviewed plenty of people, but were only willing to put on those who would be productive immediately."

Those who do have the much sought-after skills are commanding high salaries. "I've seen evidence of considerably higher salaries," the contractor says. "A manager of a high-tech company in Sydney told me recently that he has had people turn down an offer of $190,000 annual salary partly because the figure wasn't high enough."

Yet at the same time, "there are levels of under-employment, particularly in the contracting area. I know of several contractors who have been unable to find work quickly. One of them took a permanent position, another is still looking for work after being out of work for five weeks."

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