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The Global Search For Brainpower (Int'l Edition)

International -- Cover Story


A shortage of programmers is hobbling technology growth

As a headhunter, George Van Derven has an unlikely connection: Russia's former state airline, Aeroflot. Not that Van Derven trades in pilots, airplane mechanics, or surly flight attendants. But in a former career, he sold a computerized reservation system to Aeroflot and came to know the talented programmers stashed in the back offices. When Aeroflot broke up into regional carriers in 1992, Van Derven promptly tapped its old brain pool. Now, as president of Alternative Technology Resources in Sacramento, Calif., he's mining a rich lode of programming talent and busily dispatching it to understaffed computer departments throughout the Western world.

Other recruiters should be so lucky. High-tech headhunters for Andersen Consulting tramp through technical schools in Budapest and job fairs in Manila. At a recent training session for programmers in the Netherlands, Microsoft Corp. hired bouncers to keep headhunters at bay. And a recruiter for IBM's Global Services Div., who is trying to hire 15,000 software hands this year alone, introduces himself as James E. Bunch, "as in bunch of jobs."

The Information Revolution is racing ahead of its vital raw material: brainpower. As demand explodes for computerized applications for everything from electronic commerce on the Internet to sorting out the glitch expected in the year 2000, companies are finding themselves strapped for programmers. In the U.S. alone, which accounts for two-thirds of the world's $300 billion market in software products and services, some 190,000 high-tech jobs stand open, most of them for programmers, according to the Information Technology Assn. But recruiters are having fits filling jobs nearly everywhere. "Worldwide, there are more than 400,000 positions open," says Sushma Rajagopalan, head recruiter for Mastech Systems Corp., a Pittsburgh-based outsourcer.

That's sending companies on a wild hunt for brainpower. They're cajoling talent around the world--and raiding one another. "I had this one programmer from China," laments an official at Electronic Data Systems Corp. "I took him through the whole immigration process, got his papers. Then he got a better offer." More ominous yet, the squeeze on software talent is pushing up wages--by an average of 13% in the U.S., with similar rises elsewhere. Experts worry that ballooning salaries could wind up damaging the global tech machine as margins are squeezed and investments postponed. "This is a real limiting factor to growth," says Avron Barr, a researcher at Stanford Computer Industry Project who is investigating the programmer shortage.

And relief is nowhere in sight. Barring some dramatic, labor-saving breakthrough in software, the gap between computer-science students and expected demand isn't likely to ease for a decade. Trouble is, too many bright young people, especially in Europe and the U.S., consider programming "geek" work and choose other careers. In the U.S., the number of computer-science graduates has plummeted in the past decade or so, from 48,000 in 1984 to an estimated 26,000 this year. In the rush for talent, any talent, temp companies are offering programming training to high-school math teachers and downsized nuclear physicists. And they're raiding retirement homes for old mainframe hands. Says Margie Mader, human-resources director at Netscape Communications Corp.: "Everybody's going crazy trying to find these folks."

Indeed, for high-tech companies, the dearth of programmers is the greatest threat to expansion in the coming year--far more menacing, they say, than an economic slump or competition in the marketplace. And it's not just a problem for tech companies. Plenty of other businesses are desperate for the same talent. Auto makers from Tokyo to Detroit are packing more computing power into their cars and factories. Banks, brokerages, and phone companies are rushing to outdo one another with the zippiest online services, all requiring herds of programmers. Those who choose not to install the new technology, says Owens Corning Chief Information Officer Michael D. Radcliff, are "creating a competitive liability."

DRUDGE WORK. How did the shortage get so bad? For years, tech companies had little reason to fret. In the early '90s, the industry snapped up hundreds of thousands of tech workers who were dropped into the job market when large corporations slashed middle management--a source now running dry.

At the same time, the process of writing software hasn't sped up, despite the computer revolution and the terabytes of information hurtling around the globe. Today, even top programmers sometimes turn out a mere 10 lines of code a day. To whip up today's software programs--even a cellular telephone requires some 300,000 lines of code--takes armies of programmers laboriously writing away. Consider this: There are some 6 million software programmers and counting in the world today, 2 million of them in the U.S. and 1 million in Japan. As an industrial model, it's akin to pre-Gutenberg monasteries with their legions of scribbling monks.

For years, digi-tal savants pooh-poohed the pending programmer crunch by pointing to India, which boasted a seemingly bottomless reserve of tech talent. India, they believed, would be to software what Saudi Arabia was to oil. And true, with 50,000 programmers pouring out of tech schools and universities every year--twice the American total--India is a valuable labor pool.

But with global technology spending bursting to $3 trillion this decade--four times higher than in the '80s--India's supply isn't enough. In fact, Dewang Mehta, executive director of India's software-industry association Nasscom, predicts that the country will suffer its own shortage of programmers within five years.

Meanwhile, no other plentiful source of software skills appears on the horizon. Russia has promise, but it's limited: Few of its programmers speak English or understand business applications. China is a possibility, but it's likely to employ most of its programmers over the next decade for its own massive development projects. And high-tech havens, such as Israel, Ireland, and Sri Lanka, are struggling with shortages of their own. The Irish, for example, fret that they may lose investments from Hewlett-Packard, IBM, and L.M. Ericsson unless the country comes up with some programmers in a hurry. The government has set up a $7.6 million emergency fund for programmer training.

In this frenetic market, there's a clear pecking order. At the top are programmers for hot Internet-technology companies, who are swimming in stock options. Just a small step below are top-shelf consultants, earning from $85,000 to $400,000, who travel the world installing the latest networking systems. These stars are linked, by satellite or Internet, to legions of lower-paid programmers who write code in software factories. Starting pay for programmers in Bangalore, India, is $7,000 a year--though it's rising rapidly.

Naturally, India loses many of its brightest programmers. Even with local industry growing, far more than half the computer-science grads of the prestigious Indian Institute of Technology move abroad. And India isn't the only victim of brain drain. Corporate info-tech departments around the world now know that if they install a popular system, bringing their staff up to date on something new from, say, Oracle Corp. or the German software giant SAP, they get raided in no time. Don Yates got his hands on SAP, a leading software package for business, while helping to install the system in the early '90s at Royal LePage Ltd., a real estate company in Toronto. Within a year, the 18-person department was picked clean. "I was the last one to go," says Yates, who now makes three times as much money, some $150,000, as an itinerant programmer for EMI, a Pittsburgh-based company that rents out software talent.

Meanwhile, companies are using the very technology they're creating, including the World Wide Web, to reach out to potential hires around the globe. Michael L. McNeal, human-resources chief at Cisco Systems Inc., knows that most of the techies he's after, from his neighbors in Silicon Valley to digital havens in Dusseldorf and Cape Town, are surfing the Net. The trick is to find their favorite Web pages and then buy an ad banner that will funnel traffic to Cisco's page. He has staffers identifying popular sites: Airline and travel pages are the rage in Asia and Europe, while Dilbert is big in the U.S.

BUSY LAWYERS. The Web brings Cisco 500,000 visitors a month. Surfers can flip through some 500 current job openings. Applicants around the world can hit hot buttons to translate the page into Cantonese, Mandarin, and Russian. And, by filling out a short questionnaire, they can create a resume and zap it to Cisco. This provides Cisco with gobs of data about the job market--not only which country or region the hits are coming from, but often which company. "Recruiting is like trying to sell a product," McNeal says. "The more you target, the better you sell." Armed with the data, McNeal turns to Cisco employees for help. Germans, for example, call on fellow Germans and sell them on Cisco. The global pitch seems to work. Cisco keeps a stable of immigration lawyers busy, processing some 400 worker visas a year, about 10% of the company's U.S. hires.

Like the others, Microsoft recruits on the Web and snaps up startups for talent--some 20 companies in 1996 alone. But the software giant's most pressing need is for technicians to install Microsoft products for its big corporate customers. Indeed, once developers such as Microsoft come up with software, they can produce it by the millions. But to get the software up and running throughout the world, they rely on service companies that are grossly understaffed. At a conference of 6,000 service companies, says Sam Jadallah, a Microsoft vice-president, "we asked everyone with a job opening to stand. There was nobody sitting."

Microsoft calculates that its service partners are short 41,000 professionals trained to install Microsoft products. This is forcing the company into the education business. With an effort known as Skills 2000, Microsoft is pushing into 350 schools and colleges around the world, where it's hammering out curricula that will produce more programmers. In the past six months, Microsoft has trained 30,000 people.

A big part of the effort is in Europe, a major market that has 18 million unemployed workers. Microsoft's plan is to invite jobless Europeans in 11 countries to enroll in free training programs. In the past year, 3,000 Europeans have gone through the program, with 98% of them landing jobs.

It's in this $170 billion market for global software services, including the Big Six consulting firms, IBM Global Services, Manpower, and many others, where demand for programmers is especially hot. That's because corporations need loads of help to link their far-flung operations with the latest in E-mail networks, inventory control, and finance packages. Computer hookups with suppliers and customers are vital for just-in-time delivery and quality control. "The productive sector of the economy is becoming absolutely dependent on software systems," says reengineering author Michael Hammer. "If SAP vanished, you couldn't buy a can of Coke."

In the finance capitals of London, Tokyo, and Hong Kong, banks are installing vast new systems to adapt to Europe's single currency and Japan's financial deregulation. Meanwhile, they're working overtime to sort out the massive glitch that could occur in 2000, if companies don't revamp their programs for four-digit dates. Mastech Systems sent a handful of programmers a year ago to follow a Citibank contract from Singapore to London (page 48). Once in London, they found a wealth of other business and started importing more programmers--from South Africa, Sri Lanka, India, and Australia. "We have 50 people now, and we'd hire another 50 today if we could find them," says country manager Guil Hastings.

"BODY SHOPS." The trouble with the service market is that it's labor-intensive. Service companies grow largely through hiring--always tough in a tight market. "We're looking for 50% to 60% growth in Eastern Europe," says Andersen Consulting's regional chief, Leslie Bergman. "So we have to hire people at the same rate." When Bergman started in Prague six years ago, a single newspaper ad would generate 500 replies and 10 hires. "Those days are over," he says. In this tighter market, competing recruiters bump into one another at career fairs or on the campus of Technical University of Prague. And they land their hires one or two at a time. For more talent, they plow into new markets. Bergman's next stop is Romania.

Meanwhile, outsourcing companies such as Manpower Inc. hungrily wait for programmers and scientists at the doors of troubled high-tech companies, from Apple Computer Inc. to Westinghouse Electric Corp. "We take these people in, train them, and redeploy them," says Jeffrey A. Joerres, Manpower's global-recruiting chief. With demand for brainpower booming, Manpower, with its high-tech temp workforce of 150,000, can bill $150 per hour for top programmers. "Desperation breeds these kinds of opportunities," says Joerres.

To make the most of their scarce brainpower, service companies are creating virtual factories. In essence, they're using the computer and telecommunications technology they install for customers to create round-the-world production plants for themselves. Ernst & Young, for example, links its Year 2000 factory in Costa Mesa, Calif., with Israel's Crystal Systems Solutions and a 7,300-programmer "body shop" in India run by Tata Consultancy Services. Programmers labor over millions of lines of code for 8 to 10 hours and then bounce them off a satellite to the next continent, where their colleagues are just arriving at work. "If a supplier of Year 2000 doesn't have a factory, he doesn't have a chance," says Bill Ruckle, who heads E&Y's Year 2000 business.

Service companies are patching together similar global networks to handle all kinds of programming work. As they struggle to staff them, they're focusing on regional specialties. The Russians are math whizzes. India's university at Pune has a strong Japanese-language program, which positions it well for Japan's Year 2000 workload. South African programmers learned to cope during the years of the anti-apartheid boycott with a motley collection of jury-rigged mainframes. This makes them especially adept at Year 2000 work, which is largely based on aging mainframe software.

Of course, governments from Britain to Thailand are pushing high-tech education, viewing a brainy workforce as a magnet for investment. The trick, as India would attest, is keeping those brains at home. To do that, the Malaysian government is embarking on an $11.5 billion high-tech corridor called Putrajaya. There, Malaysia aims to grow its own Silicon Valley. The government is putting up wiring and satellite hookups and pushing math and tech teaching in the schools. The hope is that investors will set up shop in Putrajaya and eventually employ a high-tech workforce of 150,000.

For programmers, the world is one digital oyster. In a computer lab in Austin, Tex., Natalya Bogataya and her husband, Konstantin Bobovich, both Belorussians and products of George Van Derven's so-called Russian connection, labor away on a mainframe program. They've left their two children with relatives in Minsk while they debug insurance software for Computer Sciences Corp. "We can't use our experience in our country," Bobovich explains, "and my wife said, `Let's see America.' Why not?"

In the information economy, and especially in today's fervid software market, brainpower is a ticket to just about anywhere.By Stephen Baker in Pittsburgh, with Gary McWilliams in Austin, Tex., and Manjeet Kripalani in BombayReturn to top

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