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By Jim Baer
THE
GREAT RACE IS ON.
The race among
employers, that is, for access to enough high technology talent.
According
to a recent report “Responding to the Technology Talent Shortage:
The Balanced Portfolio Approach” by KLG, a consulting firm specializing
in corporate location strategies, demand for information technologists,
engineers and other high tech workers remains strong and the supply
of this talent is not growing fast enough to satisfy demand.
The report
points out that many companies have responded by hiring workers
offshore in developing economies, but, in many cases, supply limits
have been reached or exceeded and the functions that can operate
successfully in these markets are already there. To continue to
meet their talent needs, companies are increasingly focused on
establishing operations in near-shore locations with deep pools
of qualified tech workers. Those embracing this strategy will
quickly establish a competitive advantage over those who are not.
KLG’s mission
is helping companies around the world develop strategies to respond
to just these kinds of challenges. Here is how Tim Nitti, KLG
Principal and author of the report, looked at two key near-shore
IT growth markets; Raleigh-Durham and St. Louis.
| EXAMPLE:
ST. LOUIS, MISSOURI |
Raleigh-Durham
continues to evolve into one of the nation’s premier IT employment
growth markets. Even with major expansions by firms like Cisco,
Network Appliances, Red Hat, SAS, IBM, Credit Suisse and. Fidelity
Investments (interestingly, both of these financial services firms
have established a presence in Raleigh-Durham for their IT functions’
expansion needs) costs remain at approximately the overall national
average, wage escalations are likewise in line with the national
average, and top employers are experiencing IT workforce turnover
in the low single digits. At the same time, it is rare to speak
with an IT executive in the more traditional, long-standing employment
centers who does not complain about a severe shortage of high
quality IT talent. Even during the “.com” bubble in the late ‘90’s
through ’01, employers were executing major concurrent IT workforce
ramp-ups in Raleigh-Durham without experiencing high wage rate
escalation, talent shortages, or high turnover rates. Cisco, for
example, approximately doubled its workforce in Raleigh-Durham
every year for three years during the height of the .com bubble
from ’98 through ’00. At the same time, employers in more established,
traditional markets such as New York, San Jose, Boston, and D.C.
were desperately implementing HR strategies such as mid-year raises,
stock options, telecommuting, and creating “.com workplaces” replete
with pool tables, video games, and formerly class A real estate
stripped down and refurbished to mimic .com start-up loft space.
Even with all of this, these employers were regularly handing
out lavish raises to their current workforce, engaging in bidding
wars for new talent, using outside agencies for more than 80%
of their new hires, and still failing to hit staffing goals.
Raleigh-Durham’s
capacity to supply a deep labor pool to top IT employers is easy
to understand. Strong in-migration of people with the necessary
skills is being fueled by attractive job opportunities, reasonable
cost of living, high quality public schools, and attractive lifestyle
amenities. Top quality local universities and colleges such as
North Carolina State, The University of North Carolina at Chapel
Hill, and Duke are producing highly skilled workers with the types
of skills required by high technology industries. The state and
local municipalities bolster this by providing a strong business
climate with reasonable taxes, pro-business policies, competitive
economic incentives, and strong investment in infrastructure.
Raleigh-Durham
has emerged over the last ten years to be seen by IT executives
as a proven option, and it fits the current “sun belt” demographic
trends, but some other options are more surprising and less intuitive.
| EXAMPLE:
ST. LOUIS, MISSOURI |
St. Louis
is a particularly strong IT employment market that is currently
under-utilized. It is HQ to a number of large blue chip firms
(e.g., Anheuser-Busch, Enterprise, Monsanto, Edward Jones, AG
Edwards, Emerson, Express Scripts) and is also home to a number
of divisional HQ’s for the Fortune 500 (Boeing’s Phantom Works
R&D Division, MasterCard’s Technology headquarters, AT&T, Reuters).
It has an IT workforce of approximately 40,000 (similar in scale
to Raleigh-Durham’s). Within the Metro is a number of top- quality
Universities with strong IT and IT-related departments (Washington
University, Saint Louis University, and Southern Illinois University
Edwardsville). It is also surrounded by large research universities
that, while outside of the Metro boundaries, serve as strong feeders
of new talent because St. Louis is the most proximate large employment
center. Finally, for a large portion of the nation’s population
that is resident in the Midwest, St. Louis is viewed as an attractive
lifestyle option and new talent continues to move into the market.
While—on average—it makes sense to focus on the geographic shift
to the Southeastern and Mountain states, there is a place for
contrarian strategies implemented carefully and prudently. In
the case of St. Louis, it is useful to remind ourselves that Midwesterners
did not flood out of that region until economic shifts resulted
in jobs disappearing and moving elsewhere starting in the ‘70s.
Providing local, in-region employment opportunities to the large
base of the U.S. population still in the Midwest is likely a very
smart strategy. The Midwest contains in excess of 22 percent of
the U.S. population; 11.3 million more people than reside in the
Northeast of the country.
Despite a
very different history and current popular perception than Raleigh-Durham,
St. Louis has some interesting parallels. Major employment expansions
among IT employers regularly occur with no discernible market
impact, wage rates are often even more attractive than in Raleigh-Durham,
and inflation in wages is likewise slower. In fact, when local
top IT executives are polled for major challenges they often point
to too little competition in the market; turnover is too low to
cross-pollinate talent, local grads should consider opportunities
elsewhere prior to returning for career opportunities in their
hometown so they have a broader understanding, it’s difficult
to get employees to relocate to other locations within the company.
KLG is a consultancy
dedicated to helping the world’s leading companies develop strategies
for utilizing geographic location to achieve key business objectives;
ensuring access to talent, improving performance and efficiency,
enhancing revenues, reducing costs, and mitigating risk. The firm’s
practice has spanned virtually every industry and has involved
assignments around the globe.
KLG was founded
in 1993 and is headquartered in New York City.
To view the
full report, visit www.klginc.com.
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