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ComputerWorld

Taking Shots at the IT Labor "Shortage"

Despite widespread coverage, not everyone agrees the IT industry is facing a manpower crisis. Others find the critical shortage to be one of skills. Dominique S. Black, author of The IT Elite, explains why.

By Dominique S. Black

(IT Careers, March 23, 1998) The National Information Technology Workforce Convocation recently held in Berkeley, Calif. was organized to address the information technology worker shortage, termed a "crisis" by many in attendance. Spearheaded by the Information Technology Association of America and supported by the U.S. departments of Commerce, Labor and Education, the convocation called for a variety of initiatives to target, recruit and train more workers for the IT industry.
Although the goals of the initiatives deserve praise, much information being used to describe the current IT labor market is rooted in an outdated view of this critical workforce and its workplace.

The old labor model, human effort proceeding at a predictable, linear pace using a static workforce based on continuing, stable employer-employee relationships, doesn't track with market reality. As a result, many of the views expressed at the convocation continue to address the wrong problem. The old rules no longer apply. A new paradigm is rapidly emerging.

We are in a time-compressed, hypercompetitive economy based increasingly on knowledge. Today's IT workforce challenges represent the future. As competitive work environments based on IT knowledge and skills grow at unprecedented rate, human effort typified by the IT workforce is the new order.

Top IT professionals are creating intellectual capital, not mere "labor." Because IT pros understand this, they have become the means of production. Large numbers of IT workers have become independent, part of a growing flexible workforce. These professionals want new contractual relationships with enterprises — they want rewards and incentives to match their contributions.

The emerging knowledge economy is both a high-skill and high-wage marketplace. The real agenda: cost controls, workforce retention and knowledge development.


Cost controls
It is true that in specific job market sectors there are severe shortfalls, but much of the touted "labor shortage" is really a cost-control and workforce-retention challenge. Truly skilled IT professionals are in high demand. After all, enterprises rely increasingly on knowledge-based IT systems for their strategic initiatives and ultimately their long-term survival.

But these well-skilled professionals are in limited supply. This has enabled the higher-skilled IT pros to move to a much higher wage structure, whether working full-time or as members of the rapidly growing independent IT workforce. This trend has dismayed corporate, technical and human-resource management within enterprises.

As Robert Rivers, Manpower Committee chairman at the American Engineering Association in Orange, Mass., says: "If you can find a [worker] supply at any price, there is no shortage."

Workforce retention vs. pay inequity is the real current management dilemma. The interaction between economic and technological forces is revolutionizing traditional work. It is creating a relentless demand to get to market faster with superior products and services, while raising productivity and lowering costs. Add to this effect the fact that more than half of enterprise initiatives fall short of their objectives or fail, in an environment where IT productivity may be falling. No wonder there is turmoil in the IT workforce today.

If that were not enough, consider management's need to understand and explain the escalating market value of highly skilled IT workers. And also consider the equally rapid decline in value of many traditional enterprise responsibilities, as IT-based solutions usurp time-honored tasks, positions and responsibilities.

These realities are driving high-skill IT professionals, who understand the supply-demand algorithm as well as management, to increasingly choose independence and self-direction, through contracting and consulting. Management's dilemma: IT workforces deliver essential work and new knowledge that drives competitive advantage, so management must motivate its IT workers, whatever their status. The risk: loss of vital corporate IT knowledge as advanced-skill IT specialists become more valuable and increasingly independent.


Knowledge development
As technology accelerates, the IT workforce contributes to two divergent skills sets: current operations and "tactical" IT system development on one hand, and long-term strategic planning and execution on the other.

The former skills are relatively easy to find or develop. In some cases, they can be developed in less than two years. The latter skills take seven or more years to develop. We're talking the level of contributing new core knowledge without which an enterprise may fail. Growing market valuation of IT knowledge is an irreversible trend. But who are these IT workers?


Missing metrics: Who are the IT workers?
The Berkeley Convocation highlighted a profound metrics problem. Because IT knowledge and skill needs are growing so quickly and resist convenient job categorization, the skills problem cannot be calibrated credibly into tidy projection charts.

Defining and quantifying workforce segments was simple until the '70s. Today the government's classifications such as its Standard Occupational Classifications and Standard Industrial Classifications are 30 years out of date. With many vulnerable IT organizations experiencing large turnovers, vacancy rates of up to 50% and wage structures growing 14% per year in IT-related work, larger variations in work descriptions complicate matters still further.

Market dynamics change the job-classification structures faster than bureaucracies have, so far, been able to measure them. And independent IT professionals, an increasingly large labor pool, are being ignored. The obsolete classification schemes cannot either recognize or measure their existence or contributions. For example, self-employed IT workers and small IT consulting companies aren't counted or worse, are counted as a job opening, even though filled by an IT professional — a fact confirmed at the Convocation.


The free-agent nation
Driven by workplace realities, the overall independent workforce will number around 25 million by 2005. A significant proportion will be IT workers. The IT workforce is moving ahead in at least three areas: core IT staffs remain the knowledge-skill backbone of enterprises; but in the contingent area tactical IT workers will fill short-term, easily specified IT needs; advanced-skill IT consultants will create strategic, next-generation IT plans and systems.

Enterprise management wants to contain costs in all these categories, but it isn't happening, nor will it happen soon. Independent IT professionals understand the supply-demand algorithm. For them, free agency is logical.

Based on continuing analysis of the independent IT workforce, we have measured the realities of the IT labor shortage, the rewards system and the accompanying workforce migration to independent status. Typically, the higher the skill and education level of IT professionals, the more likely they are to seek independence. Without government intervention, which won't work, they are acquiring their own skills, creating their own careers. They are reward motivated, but quality of life is as important as money to them.

An example of workforce migration to independent status can be found on the U.S.-Canadian border. A Canadian IT worker can cross the border and get an immediate 25% increase by virtue of the exchange rate. If this worker leaves an older industry company to join a professional IT consulting company, he or she can earn 25% more; and going independent will enable this same worker to increase his or her earnings by another 25%.


Potential solutions in an accelerating IT world
Government can help change the image of the technology worker, in part by providing better metrics and providing educational motivation. Educational initiatives, specified now, will eventually prime the pump and fill the labor pipeline with computer-literate workers. And it will help promote the needed professionals with advanced skills based in computer sciences. But it cannot happen fast enough to address today's need, which is driving turnover and wages.

When the Industrial Revolution took 96% of workers from the fields, they acquired factory and office skills — over 250 years. The current paradigm shift in the IT workforce will take 1/20 the time. Accelerating technology, with a half-life of 12 to 18 months or less, confounds an educational process that takes four to seven years to produce contributors with advanced, strategic skills.



Endpoint
Market forces are already correcting the labor-cost issue. Business leaders must recognize that advanced, IT-based skills and knowledge can come only from an existing workforce for the immediate future. New workforce strategies must incorporate core employees, reward flex workers and establish new relationships with knowledge workers. These new relationships must include variable pay, pay for knowledge, training contracts and knowledge-development rewards.

The work environment, led by the contingent IT workforce, is being transformed. Intellectual capital is becoming the critical contribution, especially at the "specialist" or "advanced-skill" level. Where a single strategic-skills worker can contribute $20 million in equity "value" to an enterprise in a single year, it is natural to expect their value to rise.

IT workers, contributing intellectually, will implicitly hold the keys to enterprise effectiveness, productivity, competitiveness and therefore survival. What's happening in the IT workforce is an indication of what will happen in the overall economy in the next five to 10 years.


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Dominique Black is president and CEO of Advanced Technology Staffing in Redwood Shores, Calif. He will offer a series of columns throughout 1998, expanding on themes presented here and introducing new information.