In-Depth

Careers: IT Hiring Limited to Replacing Employees

Salary growth is flat, and IT hiring is primarily limited to plugging gaps. Shops are cutting back on -- or eliminating -- discretionary spending, too.

• By Stephen Swoyer
• 06/24/2008

No one seems to know whether we're in the midst of a minor economic bump in the road, an economic downturn, or an all out recession. However, if IT salaries are any indication, employers seem to be hedging their bets.

According to salary researcher Janco Associates Inc., IT compensation growth is more or less flat, while IT hiring is primarily limited to plugging gaps (e.g., hiring replacements). Moreover, shops are also cutting back on -- or in some cases eliminating -- discretionary spending.

Janco collects its salary survey data every six months. Six months ago, its look at the pulse of IT salaries and compensation showed that things didn't appear so dire. After Q1, however, companies cut back dramatically on IT spending, Janco officials say. "As we collected compensation data for our mid-year 2008 IT Salary Survey, we found that at the end of the first quarter businesses turned off the faucet for IT spending," said Janco CEO Victor Janulaitis, in a statement.

"Many businesses, in response to economic projections, slowed down and halted discretionary spending for software and hardware as well as placed hiring requisitions on a slow track."

Elsewhere, Janco finds plenty of cause for alarm. Consider hiring demand, which is a good indicator of IT growth. Today we're seeing IT stagnation: according to the Janco survey, companies are now hiring fewer new employees than at any time since 2004. Many shops have all but stopped hiring (with the exception of filling replacement positions), while those that are bringing on new employees are doing so at lower salary levels.

Discretionary spending is likewise off, which -- in the current economic climate -- is increasingly endangered. Many companies have eliminated IT discretionary spending altogether, and the vast majority of firms seem to have at least reined in their spending ambitions. The upshot, Janco reports, is that companies are initiating fewer projects, cutting back on (and in some cases eliminating) the use of outside consulting or integration services, and slowing down (if not halting) projects that were already in the pipeline.

Furthermore, according to the Janco report, the average 12 month increase in compensation for most IT pros was outstripped by the rising cost of living.

IT pros who've fled to the notionally safe harbor of technologies such as Web 2.0 might want to look again. According to the Janco report, specialties such as Web 2.0 development -- which were in high demand in Q4 of last year -- are now only seeing average demand. Meanwhile, companies are starting to look at which IT administrative positions are expendable.

The Janco report is more pessimistic than a recent survey from IT staffing specialist Robert Half Technology, which projected a net 10 percent hiring increase in Q3 of 2008. Robert Half's findings are based on a quarterly survey of about 1,400 North American CIOs. Its latest projections are slightly down from the net 12 percent increase it predicted for Q2, but still well ahead of Janco's finding of a stagnant hiring situation. Even Robert Half alluded to a prevailing wariness among CIOs, however. "While the forecast remains strong overall, a more cautious hiring climate prevails," said Katherine Spencer Lee, executive director of Robert Half Technology, in a statement. "Employers want to ensure business demands support full-time staff additions. Shorter-term initiatives are being completed on a project basis in some instances."

According to the Robert Half survey, larger companies are more optimistic about boosting staffing levels: 20 of CIOs at firms with 1,000 or more employees anticipate hiring expansion, while just 6 percent envision cutbacks.