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IT talent crisis redux: This time, it's about business analysts

The Second Coming of an IT talent shortage is upon us, but this time it's at the higher end of the job scale.

As unbelievable as it sounds, the Second Coming of an IT talent shortage is upon us. This next talent gap won't show up at the entry level, however. It's emerging much further up the food chain, where more sophisticated projects require something midmarket companies are increasingly hard pressed to find.

"I'm having a heck of a time filling business analyst positions," says Joe Tait, vice president of information services at R&B Inc., a $250 million aftermarket automotive parts distributor in Colmar, Pa. The shortage will be unlike any that technology executives have seen before, even during the talent wars of the late 1990s. Those were the days when CIOs would give BMW sports cars as signing bonuses and hire anyone who could design a Web page.

This shortage isn't actually in the numbers yet. Earlier this year, the American Electronics Association reported that high-tech employment is slowly turning the corner, with job losses finally tapering off. The U.S. high-tech industry lost 25,000 jobs last year to finish with 5.6 million; that pales in comparison to the 333,000 jobs lost in 2003 and the 612,000 jobs lost in 2002.

And for the first time since the start of the millennium, software services and engineering and technology services have added new jobs to the economy. New York-based Monster Worldwide Inc.'s March 2005 employment index also showed a massive spike in online demand for high-tech workers, jumping more than 20% from the same period last year.

Talent pipeline slows to a trickle

Once the talent shortage punches holes in midmarket CIOs' IT departments, industry watchers don't foresee relief anytime soon.
With fewer qualified candidates at the highest echelons of IT, all eyes turn to the next crop of tech whizzes in hopes that someday -- five or 10 years down the road -- they'll fill the gap. But the number of computer-science graduates is shrinking across the country.

Georgia State University's J. Mack Robinson College of Business in Atlanta reports that enrollment in computer information systems programs has fallen by more than 60% in recent years.

"In August of 2000, when unemployment among computer professionals was at 1.9%, we had nearly 2,000 students in our information systems programs," says Richard Baskerville, chairman of Robinson's department of computer information systems. "Today, there are fewer than 700 Robinson students preparing for careers in this area. ... It will take years to spool up our programs again."

Joe Tait, vice president of information services at R&B Inc., a $250 million aftermarket automotive parts distributor in Colmar, Pa., also volunteers at the computer science departments of nearby Temple University and La Salle University. He notes that a myriad of factors contribute to slack enrollment. Chief among them is technology's shaky future. "One of the theories is that the dot-com bubble burst has parents telling their kids not to pursue an IT job," he says.

--T.K.

Echoing these findings, Staffing Industry Analysts Inc., a Los Altos, Calif.-based research firm covering the temporary staffing market, predicts 10.5% growth in spending on temporary IT staffing services this year, after three years of decline following the dot-com bubble burst in 2000. "It looks like the IT market has recovered," says Barry Asin, executive vice president at Staffing Industry Analysts. "There's a big backlog of IT projects, and companies are finally getting the budget to address them." Forrester Research Inc. of Cambridge, Mass., expects IT budgets to grow by an average of 7% this year. Hence, the demand for IT work is clearly growing.

But there's not necessarily an increased demand for all IT workers, and that is what lies at the crux of the talent shortage. Many backlogged projects incorporate novel technologies, such as Web services, Linux and business intelligence tools, and thus require IT workers skilled in those areas (see "High-Tech Skills in Demand"). Today's technology projects also need so-called business analysts, an emerging class of worker who's cross-trained in business, technology and corporate culture. "The shortage of the 1990s was a phenomenon driven by Y2k and the dot-com boom, and pretty much anyone with IT on their resumés was getting hired," says Craig Symons, an analyst at Forrester. "Today, it's much more focused on key areas ... and the number of people with this experience is always limited."

While many casualties of recent layoffs will no doubt seek training to move up the value chain, Symons warns that "some probably just don't have the raw material because these [higher] positions require different competencies."

Business analysts in demand

One such position is the aforementioned business analyst, which stands at the epicenter of the talent shortage. Consider the rarity of the candidate: He has worked on the business side of a company for at least several years, developed intimate knowledge about operations and has an affinity for technology. These professionals are often plucked from obscurity to act as liaisons between the IT department and the business-user community, to match technical specifications with business requirements and to serve as that crucial link to project success.

Despite the rarity, their ranks continue to swell. R&B, for example, employs 10 business analysts within its 35-person IT staff. At ValueOptions Inc., a $1.1 billion provider of behavioral health care services in Norfolk, Va., CIO Bob Esposito notes that many of his 200-person IT staff are business analysts. "I think they're absolutely critical," he says.

Yet because of their depth of experience, business analysts tend to be older and thus closer to considering retirement. For those who plan to stay the course, as demand grows they'll have their pick of employment opportunities if they're looking to job-hop.

And they might be eager to do so. After hanging on through rounds of layoffs and more and more work, many of today's top IT employees are exhausted -- and ready for change. In a sure sign of worker frustration across all industries and professions, Monster's job board received a record-setting 3.3 million new and updated resumés this January. "It's a very real issue," Symons says. "That's certainly going to be a problem in the next 12 to 18 months."

Some geographies may be more vulnerable than others. Esposito believes tension in the workplace will heat up a lot quicker in the Washington, D.C., metropolitan area, for example, as demand for technical services in defense and government security continues to increase. "I expect the temperature of the IT staff and the working environment here to rise in the early part of 2006," Esposito says.

Yet the shortage may surprise some CIOs, who were gutting IT departments and sending jobs offshore only a couple of years ago (even if many laid-off workers were low-end software programmers and infrastructure caretakers). A programmer job posting today still elicits hundreds of resumés. "I don't see a talent shortage on the traditional PC and networking side," says Charlie Chiodo, vice president of IT at $1.8 billion Pall Corp. of East Hills, N.Y., a manufacturer of products that filter liquids and gas. "There's an awful lot of terrific talent out there."

In the same breath, though, Chiodo admits that finding high-quality business analysts is a big challenge. He shakes his head at the thought of losing the ones he already has. If a business analyst familiar with the purchasing module of a custom application left the company, he wouldn't be able to make changes to that module for a while.

Chiodo got a small taste of what it would be like when one of his analysts did leave six months ago. "Psychologically, that was a tremendous blow," he says. "But we haven't missed a beat, thanks to the heroics of our other business analysts. If two or three or four left, though, it would be catastrophic." (Pall's 188-person IT staff consists of 90 PC/networking people, 80 business analysts and a handful of operators and managers.)

High-tech skills in demand

Unlike the sweeping talent shortage of the 1990s, the next one will be focused on key areas. Among them, according to Forrester Research Inc., are emerging platforms as well as positions that will keep business goals and technology projects in lockstep.

Enterprise Architects: The need for enterprise-wide architecture and standards will keep demand for enterprise architects high for the foreseeable future.

Business Analysts/Relationship Managers: Individuals who comfortably move between business and technology are key to consistently deriving value from IT investments.

Security Specialists: With security-related incidents remaining one of the largest business risks, specialists who can build bulletproof IT infrastructures, systems and processes are critical. Those with CISSP or CISM/CISA certifications will remain in particularly high demand.

Web Services Experts: For the next several years, demand will outstrip supply for individuals with SOAP, XML, .NET and WebSphere experience and certifications.

Linux/Open Source Pros: The open source movement gains momentum every day, and those with experience will be highly sought after.

Agile Programming: With approximately two-thirds of the large organizations working with Forrester adopting some form of agile processes for application development, individuals with hands-on experience will be in great demand.

Business Intelligence/Web-Enabled Analytics: Expertise in business intelligence and analytic tools is top of mind for hiring managers. They need people who can turn data into knowledge to increase revenue, capture market share and improve profitability.

Business Process Modeling Experts: The ability to quickly model and automate business processes is becoming an absolute necessity for IT organizations looking to build competitive advantage.

--T.K.

Midmarket companies more vulnerable

Midmarket companies, with their intimate staffs, are indeed more vulnerable to departures than larger organizations. Consider the value a single business analyst brought to R&B. On a visit to a Hong Kong supplier, he found ways to improve transaction processes between the trading partners. After studying the supplier's business operations, he designed a Web portal for the supplier that connected to R&B's system. Though this move didn't overhaul the supplier's business processes, it did enhance efficiency by replacing typewriters and fax machines with the portal. "The only way to figure it out was having a businessperson who understands technology to see the pain points," Tait says.

Replacing a business analyst who leaves can be daunting. Most have hard-earned "domain" knowledge about how their specific companies operate that can take five years or more for a new hire to acquire. Thus midmarket CIOs have become minor league scouts of sorts, scouring their companies for potential candidates and developing them. It's slim pickings, and Chiodo confides that he hasn't been as successful as he'd like at cultivating new ones. All of this spells trouble if any more leave. "You cannot replace them," Chiodo says. "You can only compromise."

Work, life or money?

Prescient midmarket CIOs can counter tomorrow's talent shortage with worker-retention efforts today. One carrot used during the last IT talent shortage, and still widely used now, is the promise of certification-based training. "I fought hard for training in the budget, but last year we didn't spend any of it because we were screaming like banshees to get projects done," R&B's Tait concedes, adding that he plans to spend the budgeted money for training this year.

Largely, however, current retention tactics should be slightly different than those used in the 1990s because the worker mindset has changed. Generally speaking, IT workers care less about money now than about finding work-life balance. An R&B worker recently left the company and moved to Washington, D.C., to work for the Republican Party, in pursuit of his lifelong dream to go into politics. Another worker left to work at a company that allowed her to telecommute from home three days a week.

"I can't argue with that," Tait says.

Despite these cases, R&B has pretty high retention rates. Tait attributes this success to the company's fostering of a work-life corporate culture. If a worker needs to take his or her child to school in the morning, R&B accommodates the worker's schedule. There's pizza on Fridays, the occasional indoor golf event and birthday cards with money in them. Tait even dressed up as Santa Claus at last year's Christmas party. "I meet with the CFO biweekly, and morale and retention are on the agenda every time," Tait says. But he adds that, "Giving people more money doesn't help the morale issue."

Of course, money still matters. As the talent shortage heats up, workers will demand salary increases or take their services elsewhere. Chiodo's supervisors review salaries every six months and recommend bumps in pay to reflect current market values. ValueOptions recently modified its employee bonus policy to permit spot bonuses after the completion of a project rather than waiting until the end of the year. "We found immediate acknowledgement to be more effective," Esposito says.

Understanding the areas and impact of this coming talent shortage can help midmarket CIOs map out hiring strategies and avoid a skills crunch. "[CIOs] need to think more strategically about where they're headed and what kind of people, resources and skills they'll need to get there," says Forrester's Symons. "Typically today, hiring is reactive."

Symons believes many CIOs have their heads down, dealing with day-to-day survival issues, and remain largely unaware of the high-end IT labor tempest brewing around them. Frustrated workers. Fewer computer-science graduates. Retiring baby boomers. And, of course, the rise of the business analyst and other uniquely skilled IT workers.

Paul Fingerman, chief architect of Applied Biosystems, a Foster City, Calif.-based subsidiary of Applera Corp., speaking to a roomful of members of the Society for Information Management at San Francisco State University recently, says, "I remember when technology was more expensive, or at least more valued, than people."

"There's no question now that people are much more expensive than technology," he says.

Tom Kaneshige and Ellen O'Brien were senior editors at CIO Decisions. To comment on this story, email editor@searchcio.com.

This was last published in June 2005

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