Techland's Tentative Job Recovery

Hiring at small, venture-funded tech firms is on the rise, raising hopes for an industrywide turnaround by 2010

By Rachael King

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As recession forces many tech companies to cut jobs, pockets of the industry are adding workers en masse. Consider Platinum Solutions, a provider of software and IT services to the government. In the past 12 months, Platinum has boosted its workforce by more than half, to about 130 employees, after receiving large multiyear contracts from government agencies, including the Food & Drug Administration. As of mid-August, the company had more than 50 job openings. "We're recruiting heavily, we have four in-house recruiters working around the clock," says Platinum Solutions Chief Executive Officer Laila Rossi. And this is to meet demand for ongoing projects, she hastens to add—not jobs borne out of one-time federal stimulus.

Amid the worst recession for tech jobs since the dot-com bubble burst, companies are eagerly adding workers in such fields as cloud computing, computer security, business analytics, and IT services for government and health-care providers. Even some companies hit hard by recession are slowly reopening their doors to new employees amid signs that the tech sector may rebound before other areas of the economy. "We're hiring people while we can before the economy swings back and the best tech employees will be hard to find," says Don Vaccaro, CEO of TicketNetwork. Vacarro says the 220-person company is bulking up now in anticipation of demand six months from now.

In fact, two-thirds of senior technology executives recently surveyed by audit, tax, and advisory firm KPMG said they thought their industry would fully recover from the current economic crisis ahead of the overall U.S. economy. That survey, released Aug. 19, found that while 68% of those executives said the downturn forced them to reduce staff during the past year, only 14% of respondents said they are planning further reductions in 2010. Nearly half expect industry employment to be better in 2010.

The jobs outlook could scarcely worsen. Tech companies eliminated 118,108 jobs in the first half, the largest six-month total in seven years, according to a July report by employment consulting firm Challenger, Gray & Christmas. The computer industry led in job losses during the period, followed closely by electronics. Telecom fared better, buoyed by the popularity of wireless devices, especially smartphones such as the iPhone, made by Apple (AAPL) and distributed by AT&T (T) in the U.S., and the BlackBerry from Research In Motion (RIMM).

Small Companies Are Tech Bellwethers

Some of the biggest losses emanated from such giants as Microsoft (MSFT), IBM (IBM), and Hewlett-Packard (HPQ), each of which cut thousands of workers earlier this year. And larger companies are unlikely to take the lead in adding workers. "You're going to see a resurgence happening with smaller, privately owned companies first because the larger publicly traded companies are going to have to report and be accountable to shareholders," says Eric Dickerson, partner at executive search firm Kaye/Bassman International. So far he's not seeing high demand for jobs from large firms such as Google (GOOG). Simply put, large companies take longer to respond to turnarounds than smaller companies that are more nimble, Dickerson says.

But smaller firms don't take hiring lightly, says Todd Thibodeaux, CEO of industry trade group Computer Technology Industry Assn. (CompTIA). It usually means those companies have a clear sense that there is demand for their goods and services, he notes. "My bellwether is the small tech company," he says.

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