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July 5, 1999

Labor Intensive

An increasing IT labor shortage calls for creative ways to do more with less

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s if you didn't already know: The IT labor market is tight--and it's getting tighter. That's the conclusion of a report released last week by the Department of Commerce, which dealt primarily with IT labor in the vendor and services industries but also studied the impact of the growing demand for technology expertise on the U.S. economy overall. Unfortunately, the tight IT labor market isn't the only problem. The inability to fill critical IT positions is hurting profits by delaying key technology-driven projects or forcing businesses to hire costly outside help. That's according to a new InformationWeek Research survey, as well as extensive interviews with a wide range of IT and human-resources executives.

"We have quite a few openings," says Mike Thomas, VP of information services at Gulf States Paper Corp., a privately held forest products company in Tuscaloosa, Ala. "It's a very tight market." Thomas says the situation has worsened in the past year, particularly for high-demand skills. "It took us a year to find an Oracle database administrator," he says. Extended job searches have caused Gulf States Paper to delay projects and hire service contractors at ever-higher fees, Thomas says. And he sees no end in sight.

While the government debates long-term solutions such as more technical education for young people, IT managers face daily challenges. The biggest of these, they say, is the triple hit of fewer skilled workers, high recruitment and training costs, and paying people more to stay on the job. So far, IT departments are coping by aggressively tapping new and existing resources to fill vacancies. They're retraining IT staff and hiring non-IT people from other departments. They're bringing in temporary and contract workers, college students, and foreign workers, and are now shifting staff from completed Y2K work to other projects. Some IT managers even see this as an opportunity to learn to tighten their belts and work more efficiently.

They'd better. According to the Commerce Department report, the growth rate for computer systems analysts, computer scientists, and computer engineers will have topped 100% for the decade ending 2006. That translates into more than 1.3 million new IT workers needed to fill job openings and replace workers leaving the field in that time (see story, "IT Skills Gap Demands Action").

pie chart The Society for Information Management, which represents 2,700 IT executives, says the current labor shortage is the most severe in 50 years, and executives expect it to continue well into the next millennium. The society is taking measures to help member companies cope with the shortage and boost the supply of skilled labor (see sidebar story, "SIM Takes The Long-Term View").

Meanwhile, competition for talent remains fierce. "We have offices in Chicago, and it's incredibly competitive," says June Drewry, senior VP and chief knowledge and technology officer at $6 billion insurer Lincoln National Corp. in Fort Wayne, Ind., and president of the Society for Information Management. "You have to be on your toes to hold on to your people."

Staffing was one of the top three concerns for 150 IT executives surveyed in January by Darwin Partners, an IT staffing firm in Wakefield, Mass. Kerriann Vogel, VP and director of research at Darwin, says IT staff turnover rates at companies surveyed were between 11% and 20%. InformationWeek's survey of 200 IT managers with hiring responsibilities shows an average 12% of IT jobs are unfilled, and of these open positions, 37% are replacements for employees who've taken other jobs. For most of those companies, the vacancy rate is nearly the same as a year ago. But for 30% of them, it's higher--and for 7%, much higher.

More important, nearly half of the IT managers queried say the labor shortage is having a negative impact on profits. And 90% say projects are delayed or incomplete as a result.

United HealthCare Corp. in Minneapolis has about 100 unfilled IT positions, says CIO Paul LeFort. That means LeFort's IT team isn't able to commit to every new project. "Some of our systems reengineering projects have been postponed because of the labor shortage," LeFort says.

Companies are turning to a variety of innovative--and sometimes radical--measures to seek out, develop, and retain the IT talent they need. Inforonics Inc., an IT services firm in Littleton, Mass., is running employment solicitations preceding showings of the latest Star Wars movie. The series of three ads, which is running on 57 screens in the region, emphasizes the company's electronic-commerce and Web-application capabilities. Since the ads launched May 21, hits on the company's Web site have quadrupled.

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