Careers: Job Recovery Reverses Course

Analysts suggest that an IT spending slowdown is in the offing

Remember those rosy predictions about a suddenly resilient technology sector, or those optimistic surveys which concluded that tech companies would add significantly to their workforce rosters this year?

The situation isn't so rosy after all. Technology companies slashed almost 60,000 jobs in the U.S. during the first quarter of 2005, according to outplacement specialist Challenger, Gray & Christmas. While almost all IT sectors lost jobs, the telecommunications vertical was particularly hard hit, researchers say, accounting for more than half of all job losses.

This flies in the face of estimates from two leading job placement firms, Robert Half Technology and Both organizations recently published encouraging IT hiring forecasts for the upcoming quarter, and Robert Half suggested that IT professionals have renewed clout with employers that are hard-pressed to retain top talent.

All told, computer industry firms gave pink slips to 16,100 workers. Workers in the software industry weren’t immune to hardship. Thanks to stagnant earnings or mergers and acquisitions (M&As), many software firms recorded job losses. Oracle Corp., for example, eliminated nearly 5,000 jobs as a result of its consolidation with the former PeopleSoft Corp.

Why was the telco industry so hard hit? Blame it on heightened M&A activity—in this case, on two blockbuster deals: Cingular Wireless’ purchase of AT&T Wireless and Sprint’s merger with Nextel.

The telco sector may not have stopped bleeding jobs, says Challenger, Gray & Christmas. SBC Communications, for example, recently announced plans to cut nearly 13,000 positions, while Qwest Communications' pending acquisition of MCI could result in the elimination of almost 15,000 positions.

What’s more, the software industry could be in for hard times as well. Last week, systems, storage, and network management specialist BMC Software Corp. eliminated 12 percent of its global workforce, citing lackluster revenue and earnings projections.

Most alarmingly, BMC has twice warned on slumping sales of several key products, including its Patrol systems management software for non-mainframe environments. In February, for example, BMC said that lackluster sales of Patrol were responsible for a sizeable shortfall in its Q3 earnings. Last week, BMC acknowledged that it had failed to close on several pending deals in Q4, and cited weakening demand in the EU.

Elsewhere in the software space, RSA Security also posted less than encouraging growth.

The upshot, says Challenger, Gray & Christmas chief John Challenger, is that we could be entering a fallow period in technology spending. "Consumers and companies have been buying iPods, laptops, portable DVD players, cell phones, BlackBerries, etc.,” Challenger said in a statement. "Their technology cup is overflowing, which may lead to a cooling off period until a major technology breakthrough comes along.”

Related Article:

Careers: Business Growth Fueling Stronger IT Job Market

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.

Must Read Articles