|
Every year at this time we devote our Newsletter to predicting the market for technology professionals: IT, Engineering and Pharma people. We’ve done this for the last 15 years. Before we look ahead and predict the future, let’s revisit some past predictions, both good and bad.
1991 - in the midst of a pretty bad recession we predicted that within 2 years we would see the beginning of the greatest economic explosion the country had ever seen. Accurate prediction.
1999 - in the middle of the great IT boom, during a time when if you could spell "VB" companies would fight over you, we said that within a year most of the companies that provide IT consulting services would be out of business. Accurate prediction.
2001 - in the middle of a lousy IT investment slump and the collapse of the Internet world, we predicted that if broadband became more common it would revitalize the market and the IT hiring boom would begin again. Bad prediction. We counted too much on consumers driving new technology and not enough on business investment.
This year we will make a few predictions about the market. Let’s look at each area separately:
IT: The IT market has changed dramatically and permanently. It’s not good news. Software code is now a commodity. In 1996-1999 you had companies using multiple platforms/languages because commonality was years away. As things coalesced around a few large suppliers (Microsoft, JAVA, etc) it became easier for companies to manage the technology that they were purchasing. Many of the peripheral technologies and the skill sets that supported them went away (Informix, Foxpro, Ingres, etc). As IT technology became more common, it was easier to turn into a commodity. As our friends in manufacturing learned years ago, commodities eventually move offshore. We first noticed this a few years ago when we would regularly get e-mail responses to recruiting ads from firms in India and Russia offering software services cheaply. Back then, when we asked in a Newsletter if this was a potential threat to US IT jobs, no one thought so. I think that the trickle we saw then will soon be a torrent.
More and more generic code will be done overseas. Companies who significantly customize their software may choose to keep a development effort here but there will always be pressure to consider moving it, similar to the constant fear of plant closures in the manufacturing world. If a new technology/language appears, the development will begin here but will almost always move overseas. I think it will be difficult to maintain a secure career in IT development anymore. Anyone who wants to looks at a historical analogy need only to look at the design/drafting world. In 1980, a company might need to employ scores of draftsmen and designers to support their engineering efforts. The emergence of Computer Aided Design (CAD) cut that number by 80% in some companies.
On the plus side, with code being written overseas, there will be a continuous need for those who can bridge the gap between the developer and the user. With the code being written offshore, that gap will be pretty large. This function (Project Manager, Business Analyst, System Analyst) will become even more critical. It will require a strong knowledge of the unique features or industries that the software is designed to support. In other words, the position will require a level of expertise and specificity that it may not have needed a few years ago. It won’t be enough to have just managed projects. You will need to have managed a certain type of IT project within a certain type of industry.
In general, the nature of the IT market will be like the Engineering market has always been. It won’t be enough to just have a skills checklist – VB, ASP, Oracle - "OK he’s got that, hire him". Imagine the difference between two engineers with the same resume but dramatically different intangible skills (personality, communications, common sense). Some will move up to be VPs and others will drift from firm to firm. It will be a more quality conscious employment market.
Engineering: Engineering is a broad market. It encompasses every industry and a staggering number of disciplines. Other than electronics, the engineering market weathered the slowdown reasonably well and should benefit positively from the current uptick in the economy. From an engineer’s standpoint, the PA/DE/NJ/MD area is a great place to be. The diversity of the economy here acts as a cushion to any downturn. Since 1980, whenever the national economy has softened our broad-based economy has created some regional engineering hiring. This has not been the place in parts of the country that are dependent on one hot industry (Denver/Telecomm, Houston/Oil).
I think over the next few years Engineering will be what IT was in the late 90’s. Engineers will be sought after and hard to find. Here is why:
1. In complex products or processes, engineers are irreplaceable. Well-managed US businesses have learned that they cannot stop creating new products nor can they stop improving production efficiencies. Those are the two basic definitions of an engineer’s job.
2. There are firms who have not replaced people in 2 or 3 years. As business picks up, the need to add staff will increase dramatically, if just to replace people who have been lost due to attrition.
3. There are not a lot of engineers out there. Other than in telecomm, the engineering layoffs have not been widespread during this downturn. The problem has been the length of the downturn (3 years vs. normal of 9 months) not the severity. Those who have been laid off have been out of work for longer than normal but not as many have been affected affected as in 1982 and 1991. This means that as companies begin hiring, the slack in the engineering market should be sucked up quickly.
4. A BS Eng degree is a tough degree to get and there are fewer engineering graduates each year. Let’s face it, if you started college in 1996-2000, the degree everyone told you to get was Computer Science, not Engineering. That means there are fewer engineers out there at the 3-8 year level than usual. Add that to the fact that one of the most difficult academic courses out there is engineering and the dearth of engineers should intensify. No offense to our IT brothers and sisters, but it takes Chubb about 6 months to churn out a VB/Internet Developer or Network Admin. As much as anything else, that speed in turning a novice into an entry level professional is what has hurt the IT market. It still takes a 4-year program to get a BS in Engineering, a major personal commitment in a rigorous program.
For these reasons, and more, we are very bullish on the Engineering market.
Pharma: The pharmaceutical industry is a unique world. While generally considered a secure industry, it can have it’s own fluctuations and cycles. It’s a tough market to predict because it does not follow the normal economic cycle. When things are bad in the economy, the pharmaceutical industry looks very big because it is often the only industry visibly hiring. Over the last few years, it has been a consistent positive force in the regions economy. Predicting the future will depend on two things:
1. Venture Capital Money - While most people think of the pharma industry as only large companies like Glaxo, Merck, etc., a significant part of the driving force recently has been VC funded firms. As they have grown, these firms have provided a lucrative market for Validation, Reg Aff, QA and Clinical people. Any market that can grow by venture money can die by venture money (see Internet stocks 3/2000 as an example). While they are not a large part of the pharma world, it’s the smaller companies that create the new jobs. In creating and filling those jobs, they in turn create jobs at larger firms to replace the people the smaller firms have hired.
2. National Health Care - The last time a national health care plan was seriously discussed was 1993. Health care costs were skyrocketing and political leadership was calling for a national plan to help cut costs and insure more people. At about that time, many pharma companies stopped hiring and went into hibernation. That may or may not have been a coincidence but if you owned a business, would you continue to add people if you felt the government was about to dictate to you how much you could charge for your product. How could you plan for future investment or growth if you had no control over prices? What if the prices you were mandated to charge did not even cover your costs? Public policy aside, without judging whether national health care is good or bad for society, I don’t see it as positive for employment in the pharma world. If that possibility gets larger, I see a softening in employment in the pharma world.
Final Analysis: In general, for almost everyone I see an improvement at least through 2004 and probably longer. The next few months should be interesting. As companies begin to re-enter the employment market, they often bring with them a certain complacency. They feel that they are the only companies hiring so that they can pick and choose at their whim. At some point, they begin to realize that the same improving economy that helped their business improve has helped other businesses improve. The realization that they need to compete for employees again will add an intensity to the market.
On the candidate side, over the next few months, I expect a lot of job changing. All those companies who took advantage of a weak market to "low ball" unemployed people into marginal jobs will need to re-evaluate their hiring philosophies as those people leave for better situations. This "bunny hopping" should last into 2004 until people return to the right levels again.
Basically, we are very bullish on the market moving forward. In other words, if you are planning on hiring do it soon before you have lots of competition.
|
