New job realiities ahead for IT workers

Next time, an economic downturn may be different for tech

The change in IT hiring was illustrated this week by General Electric Co., which announced it is moving its headquarters from Fairfield County, Conn., to Boston. In doing so, Jeff Immelt, GE’s CEO, said Greater Boston is home to 55 colleges and universities, and “attracts a diverse, technologically fluent workforce.”

Four months prior, GE announced formation of a new business, GE Digital, a $6 billion unit with a goal of becoming “a top 10 software company by 2020,” said Immelt at the announcement. To help staff up for this initiative, GE is hiring technology workers capable of new product development.

This isn’t happening just at GE. IT employment is broadly shifting away from infrastructure support, which is increasingly vulnerable to offshore outsourcing and migration to cloud services.

“GE is basically reinventing itself and trying to become the leading industrial software company in the world,” said Erik Dorr, vice president of research at management consulting firm Hackett Group.

For GE this means building platforms to support new technologies, such as Internet of Things-enabled products. “They recognize that all of this is predicated on having access to top talent,” said Dorr.

IT employment has, in the past, followed the economy. The Great Recession resulted in massive IT job layoffs, as companies cut back-office operations. But today’s shift to “digitization” of products — turning consumer wares into connected products, adapting to mobile and utilizing business intelligence, robotics and social media — have all increased demand for people with these skills.

This means that if the global stock sell-off and crashing oil prices result in new waves of layoffs, tech workers who develop new products, markets and digital experiences may be in the best position to survive.

Firms “are going to hire these people no matter what happens to the economy,” said David Foote, the CEO of Foote Associates, which researches the IT labor market. “If there is a downturn, they work even harder to keep the people they’ve got,” he said.

Technology jobs are now embedded throughout organizations, and many CIOs may not have the control over technology spending they once did. But they still are responsible for a sizeable part of IT spending.

Estimates of the number of new IT jobs added last year range from 125,000 to about 180,000, similar to what happened in 2014. This is based on an analysis of government labor data by labor market analysts.

In 2016, IT budgets “are still growing, but only at 2% at the median,” said Frank Scavo, the president of Computer Economics, a research firm. That’s down from 3% IT budget growth in 2015.

“We do not see layoffs on the horizon,” said Scavo, whose firm runs ongoing surveys of IT managers. “It’s not a hiring boom by any means, but tech staffing is still healthy,” he said. Only 7% of IT executives expect to see staff cuts in 2016, while 40% plan to hire more staff members, said Scavo.

But Victor Janulaitis, the CEO of Janco Associates, said IT hiring, which slowed in the last few months of last year, will be impacted by the financial market turmoil. “I think we’re seeing the first phase of a new downturn in the economy,” he said. He expects IT hiring to be flat this year.

For his part, Mark Roberts, the CEO of TechServe Alliance, which also tracks IT hiring, doesn’t see the recent softening in IT hiring as a sign of impending economic decline.

“IT employment has been growing at a very steady clip and still outperforms the overall workforce,” said Roberts. “At some point, the significantly elevated rate of growth is not sustainable,” he said.

There’s another factor that may have had a role in GE’s move to Boston: GE has been angry over Connecticut’s rising tax rates, creating a political storm.

The tax climate is more favorable in Massachusetts than Connecticut, says the Tax Foundation, an independent tax policy research organization. Massachusetts is ranked 25th nationally, versus Connecticut, near the bottom of tax favorability at 44. But the tax climate is even worse in California, which is ranked at 48, and that’s the state with the nation’s highest concentration of technology jobs.

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