IT Job Market Looking Good

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The job market for tech workers has rebounded considerably since the dark days of 2000 and 2001, according to a recent report by outplacement firm Challenger, Gray and Christmas.

John Challenger, the firm’s CEO, tells Datamation that he’s bullish on tech hiring. “It’s a strong job market for IT,” he says. “It’s picked up in the last two to three years — quite heavily.”

During the bloodletting of 2000 and 2001, tech job cuts averaged a massive 100,000 per quarter. In one horrible quarter of 2001, there were 213,000 tech job layoffs.

Compare that to the improved — if not quite robust — picture in 2006. Between the first and second quarters of this year, job hiring announcements spiked 184 percent, according to Challenger figures. In Q1, companies announced 4,944 new jobs, while in Q2 that figure grew to 14,090.

Leading the way in tech job creation were computer firms, which announced plans to hire 11,770 workers in Q2.

Also helping improve the job outlook were Internet firms, notably Google, which will hire 1,000 people for its Michigan facility. Online advertising is booming, encouraging more Internet start-ups — all of which need IT workers.

You Can’t Cut Forever

Zeus Kerravala, an analyst with The Yankee Group, is cautiously optimistic about today’s tech hiring trends. “I think you’re starting to see a little bit of a resurgence in IT,” he tells Datamation. “I think it’s been coming back slowly.”

“I don’t want to say the deep freeze that we’ve faced is over. I think companies are still a lot more careful about what they deploy. But we’re finally out of the phase where everybody’s just trying to cut costs all the time.”

Many companies are now cut to the bone. “You can’t cut forever,” he notes. “And if you’re trying to grow your market share…you’ve got to hire the people to do it.”

This year’s healthy IT budgets are fueling job growth, says IDC analyst Steve Minton. So far this year, IT spending is on track to grow approximately 6 percent over 2005 spending, he tells Datamation.

This growth rate “supports a good environment for hiring. Companies are increasing their IT budgets and they’re hiring new staff to implement this.” Furthermore, he says, “Those companies that are doing pretty well from selling IT are hiring staff as well.”

Over the past 18 months, many companies have upgraded hardware — purchases that were delayed in recent years. While this is beginning to tail off, “The industry has gone pretty well this year, mainly because the economy has held up — so far — in spite of all the negativity around oil prices.”

Minton cautions, however, that there are a lot of wild cards in terms of what’s going to happen in IT over the next 12 months.

The ROI of Doing Nothing

Looking ahead, “I think the next couple of years will be good for IT,” The Yankee Group’s Kerravala says. Tech heavyweights like Microsoft, Cisco, and Intel have had good quarters. Businesses “are buying more infrastructure, which means someone’s got to install and manage it.” Hiring is inevitable.

Furthermore, a lot of today’s IT tools have run their course, he says. New initiatives in information management, collaboration, and virtualization will likely produce a spike in IT spending. “It won’t be like a 1999 spike, but you will see more IT projects focused on being able to use IT resources better.”

Still, there continues to be hesitancy in tech spending. At the end of last year, for example, some companies left part of their IT budget unspent. Many firms still view IT expenditures as an evil to be avoided.

“There’s an awfully strong ROI in doing nothing,” Kerravala says. Doing nothing is far safer than spending — or so many managers feel. “A lot of IT managers and CIOs feel that discretion is the better part of valor.”

Less Bad News

In addition to job creation, the slowing pace of tech job cuts is also producing a better employment picture. Driving this decrease in Q2 job cuts are a resurgence in consumer spending and an expansion of Web 2.0, according to the Challenger report.

Consequently, job cuts in the tech industry have plunged to their lowest level in nearly six years. The number of job cuts in the second quarter fell 26.4 percent from the same period a year ago.

The greatest number of job reductions are in the telecom and computer sectors. Running a distant third in the job cuts category is the e-commerce sector.

Job Loss Due to M&A

A dark cloud hanging over the job market is the effect of mergers and acquisition. When firms consolidate, they tend to cut staff to eliminate redundant positions. Significant merger activity is “a fairly large possibility because we’re in a more mature industry now, and there’s a pretty strong likelihood that there will be those types of mergers happening,” Minton says.

Indeed, the Challenger report shows that M&A activity has been the leading reason for tech job cuts so far this year. Based on Challenger numbers, mergers have already caused 24,821 cuts in 2006. Also causing job reductions have been “restructuring,” prompting 18,838 cuts, “closing,” causing 6,832 cuts, and “cost cutting,” responsible for 6,681 cuts.