IT salaries: The numbers are up -- way up

Computer World –

To peer into the heart of the information technology hiring scene today, look no further than Applied Signal Technology Inc. in Sunnyvale, Calif. At this manufacturer of signal processing equipment, salaries rose by as much as 18 percent for existing employees this year, while new hires' salaries went up by 15 percent to 25 percent. That doesn't include sign-on bonuses for all new IT employees and stock options for some existing ones in key positions.

"That's what they've been asking for," says Eric Nelson, IT manager at the firm. "They're a lot braver than they used to be -- they know they can find a job on their lunch break."

In addition, "every job candidate usually has two to three offers in hand before we even see them, and probably 50 percent are no-shows," Nelson adds. "It's really competitive."

As in the past couple of years, companies are going to great lengths to attract, keep and motivate talented IT workers. At Lisle, Ill.-based Tellabs Operations Inc., which designs, manufactures and supports telecommunications equipment, a $1.8 million program gives employees a chance to win $4,500 if a referral gets hired. Just for submitting a resume, applicants can win a DVD player or new car.

Meanwhile in Dallas, a small Internet consulting company is moving to attract employees. "We're in a part of town that we have been told recruits do not want to work in," says the manager of e-business, who asked not to be identified. "They say, 'Why should I have to come west of downtown?' "

Call it pandering to prima donnas, but this is what it takes to hire the best and brightest IT talent today. And these moves are in addition to double-digit salary increases and ever-more-generous bonus plans.

But there are a couple of differences this year. For one, while companies will spend what's necessary to attract IT talent, they're not about to let IT workers lead them around by the nose.

"Some people are making outrageous demands in terms of looking for several hundred thousand for two years out of school," says Cathie Kozik, vice president of global information systems at Tellabs. "To those folks we say, 'Thanks very much, but we'll move on.' Prior to the fallout in the dot-com sector, I think they were finding it. But now the dot-coms don't have money to throw at them, so corporations like ourselves are not at as great a disadvantage."

"People are exploiting the situation right now," agrees Nelson. "I've seen junior-type Unix administrators asking for $80,000 to $90,000 who we'd offer $65,000 to $70,000 at the most if they were pretty good."

Tellabs raised salaries among IT workers by 5 percent to 15 percent after conducting its annual market analysis. Bonuses are in the 5 percent to 35 percent range, compared with last year's 5 percent to 20 percent range. Some workers, such as those with SAP and Unix administration skills, are seeing 50 percent salary increases. New IT employees are offered sign-on bonuses, and current employees get stock options.

Another difference is that stock options are starting to lose their luster. Instead, companies are turning to innovative bonus plans, which pose a number of advantages: They can attract, retain or motivate workers and -- because they are variable -- can help maintain payrolls through good and bad times.

"When times are good, the bonuses are great, but when times aren't, the company isn't committed to paying high salaries," says the e-business manager. Almost one-third of his own compensation is based on a performance bonus. "It's also a good way to keep people, because you have to stay a while to get your bonus, so it's easier to turn down other offers," he says. At the consulting company, bonuses range from 8 percent to 15 percent of an employee's salary, with the highest ones going to people with project management, XML, Java and Wireless Application Protocol/Wireless Markup Language skills.

The basic trend in bonuses is to drive executive compensation principles down into the ranks, says David Foote, managing partner at Foote Partners LLC in New Canaan, Conn. An example is a program that gives bonuses for performance over two or three years, not just annually, with a big bump in stock and cash.

"Companies are paying bonuses in creative ways, to contractors, consultants and full-timers to get the work done," Foote says.

San Francisco-based Embark.com -- a Web marketplace for students to interact with academic institutions and related businesses -- is also increasing its bonus pool.

"It's a change in our company's policy to be more generous in bonuses, and retention is one of the big factors," says Philip Joung, director of technology. Overall, Embark is increasing its performance bonuses, from approximately 5 percent to 10 percent of individual workers' salaries to about 10 percent to 15 percent. This is in addition to 20 percent raises for most positions this year.

But even with bonuses, many companies are careful not to throw their money around. "They are segmenting their worker populations into the 'will-performs' and 'won't-performs' to filter out the laggards," Foote says.

Certain jobs command higher bonus and salary increases than others. At Embark, the hottest positions are senior developers, senior project managers and database architects, Joung says. The most dramatic increase was for highly skilled database architects, with salaries jumping 30 percent to 40 percent.

According to Foote, the biggest salary increases nationally were for security managers and administrators, network engineers and administrators, all architecture jobs, cross-functional project managers, business technologists, enterprise infrastructure workers and business analysts. There were also significant salary increases for New Age database architects who can blend database, network, systems and specific application skills.

But simply having the right skill at the right time can give you a big boost. At the Dallas consulting company, a Web developer who was with the firm for six months doubled her salary when she joined another company, thanks to the experience she had gained with Austin, Texas-based Vignette Corp.'s Story Server. As a result, the e-business manager says, the company needs to conduct twice-a-year salary reviews. "If that's what can happen after six months of experience, the salary should reflect that," he says.

Perhaps the only downside for IT workers in today's climate is the profusion of job offers they have to consider.

"It's one of the most complex times I've ever seen, both [as] an individual evaluating job offers and a manager trying to retain them, because of the richness of offers that I'm seeing," says Tom Franklin, a vice president at Concours Group, a consultancy in Houston.

For example, which offer would you accept: One from a start-up with a low salary but lots of stock options; one from a traditional manufacturer with a decent salary but not much upside growth; or one from a public software company with a lower salary but the opportunity to exercise stock options in the short term? "It's a little hard to sort those out," Franklin says.

What's starting to happen is that people look beyond the monetary compensation and ask themselves whether the work looks interesting and exciting in the short term and how well the job positions them for the next job they take, Franklin says.

People will work for below-market salaries if other things are in place. For instance, in addition to looking forward to Embark's initial public offering, "people feel loyalty toward our company because they're working in the education arena, and they feel like they're here to make a contribution to that," Joung says.

These attitudes are encouraging companies to be creative about the types of compensation and rewards they offer, including "a three-month sabbatical, for instance," Foote says.

Applied Signal has managed to keep its turnover to a low 5 percent, and Nelson attributes a lot of that to its emphasis on training. "We've got a very generous tuition-reimbursement program, the best I've ever seen. We're also real big on letting people move around in the department and to keep them challenged and let them play with new toys all the time."

Kozik attributes high retention rates to Tellabs' success in its market and the growth opportunities it affords.

"We have a lot of cool things going on," she says. "We're coming up to speed quickly in e-business, so we're using the latest technologies, and we just finished an upgrade to SAP 4.6, so there's an opportunity to stay ahead of the technology curve."

Tellabs also runs a program called Dreamquest, in which supervisors work with employees on career programs. "The whole focus is to say, 'Where do you want to go, and what are the competencies to get you there?' " Kozik says.

Analyzing job offers is only going to get more difficult, especially with the shakeout that occurred this year for dot-com firms, Franklin says. "They don't have the drawing power with stock options they used to have, but they can't offer bonuses based on earnings because they don't have earnings in their early plans," he says. New models will likely emerge among start-ups, such as offering options redeemable in stock if the company goes public, and if it doesn't, options for another company's tradable stock.

But one thing is certain: Salaries and bonuses will continue their healthy increases throughout this year and well into the next, as companies remain willing to pay top dollar for true talent.

"The right person for the job can be more effective than three unsuitable candidates," Joung says. "So even though salaries may be high, there is still a better return to pay one very productive individual than multiple poorly performing workers."

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