2004 InfoWorld Compensation Survey: What are you worth?

Hidden among drab statistics about the IT economy and salaries in the last 12 months, key signs point to some encouraging indicators

After three years of uncertainty, salary freezes, and budget cutbacks, IT professionals see signs of better days ahead.

The 2004 InfoWorld Compensation Survey of 1,092 IT professionals reveals that a majority expects IT spending in their enterprise will stabilize or increase in the coming year. Fewer executives plan hiring freezes or layoffs in the coming 12 months, a marked improvement over the penny-pinching that dominated IT thinking in the past two years.

The downward slide of salaries reported in InfoWorld Compensation Surveys in mid-2002 and mid-2003 ended in this year’s survey. The average salary reported this year was $83,651, down an insignificant 0.8 percent from the $84,312 reported in mid-2003 and down 4.3 percent from $87,385 in mid-2002.

Interestingly, the survey also uncovered a growing gap between upper management and those on the lower rungs of IT. Senior IT managers’ wages reported this year averaged $117,185, up more than 6 percent from $110,458 reported in last year’s survey.

By contrast, middle management wages dropped to $80,467 in this year’s poll, down more than 4 percent from $84,075 reported last year. IT staff received an average salary of $66,547, a 7 percent decline from $71,493 in the same period last year.

At the top end of the scale, the average salary of a senior vice president of IT/IS was $136,629 this year, up from $123,429 reported in the mid-2003 survey. Average pay for a CTO this year was reported at $119,609, up from $119,436 in mid-2003. Further down the ranks, an IS manager made $72,426 this year, down from $72,725 reported in mid-2003. An average help desk support specialist made $43,133 this year, down from $46,236 in mid-2003.

Enterprises were slightly more generous with bonuses. This year’s survey shows that 54 percent of respondents reported receiving $7,645 in bonuses in the past 12 months, up from 51 percent who reported receiving an average bonus of $7,586 in last year’s survey, and 53 percent who reported receiving an average of $8,645 in the mid-2002 survey.

Overall the data hints at a warming trend, says Janet King, director of research at IDG Research Service, who organized the survey. “The data seems to show that the downward trend in salary and overall compensation is slowing,” King says. “We seem to have hit the bottom and hopefully it [compensation] will go up. The overall trend is more positive than negative.”

Indeed, what has been a flat market for skilled IT professionals now seems to be opening up. The dour economic indicators that cast a pall over IT shops are giving way to healthier economic numbers that are beginning to drive IT expenditures, many respondents say.

Jason Dempsey, IT manager at Synoptics, an imaging systems manufacturer, describes the need to ride out lean times in the past year. But he points to the coming year with optimism. “The last 12 months have been difficult but very productive. We’ve managed to keep sales up and overall IT spending down,” Dempsey says.

“I’ve experienced both ends of the spectrum in my time with respect to budgets,” Dempsey adds. “While the challenges are good to keep me on my toes, I’m very hopeful that the budget will inch its way back up to accommodate the internal needs of our company and a fair salary for our hard working IT team.”

Releasing the purse strings

There is a general sense that the economy — which grew at a steady 4.2 percent pace in the first three months of this year — is just beginning to create a demand for IT workers that in turn will drive salaries up, says Stacie Blair, CEO and co-founder of The Pacific Firm, an executive recruiting company that services the technology industry.

Blair says her firm was retained in March and April to fill 48 positions in tech. “We picked up business in the IT sector,” Blair says. “I think there is a sense that business is picking up and as companies look to IT, it won’t be just to support just current business, but to support long-term capacity.” Such expansion is bound to be good for wages, Blair adds. “As the demand for hiring increases, salaries are expected to go up.”

The long downturn that put a damper on IT expansion for many managers seems to have slowed and perhaps bottomed out, the Compensation Survey indicates. When asked to predict their company’s total technology spending in 2004, 25 percent of the IT professionals who responded said spending would increase, 32 percent said it would remain the same, 33 percent did not know, and just 10 percent anticipated a decrease.

Companies that have put off upgrading their IT infrastructure may view the improving economy as the time to upgrade IT infrastructure, says Maria Schafer, program director of the Meta Group’s IT Human Capital Management Strategies program.

“I think we are on the cusp of change, where things are beginning to ease up,” Schafer says. “In general, people are optimistic, but in some ways it still feels like a recession because jobs lag behind the rest of the economy. And you see that where the IT workforce is concerned. By the end of 2004 it will be quite a different situation. By mid-2005, there will be quite a demand for IT,” she says.

Some suggest that part of the nascent recovery derives from increased government spending, particularly on anti-terror measures. Homeland Security outlays helped Roger Quarles, IT system manager of the Talladega County Emergency Management Agency, launch a long-awaited IT upgrade this year.

“In the last several years, we haven’t had the finances to upgrade our IT systems,” Quarles says. This year, the agency is deploying a new wireless backbone for emergency communications. The agency has also been able to keep pay for IT employees steady. “Our salaries are in step with the government pay scale in the rest of county government,” he says.

Easing job worries

A brighter picture of staffing issues also seems to be emerging, where hiring freezes, layoffs, and salary freezes are less common.

When asked what staffing issues they expect to face in the next 12 months, 21 percent of respondents said they expected to deal with a hiring freeze, down from 42 percent who said they actually faced the issue in the past 12 months, and 49 percent who reported in the mid-2003 survey that they had faced the issue in the previous 12 months.

Similarly, 21 percent of respondents expected layoffs in the next 12 months, down from 37 percent who faced it in the last 12 months and 44 percent in last year’s survey. Likewise, 18 percent of respondents said they expected to face a salary freeze in the coming year, down from 28 percent who faced it in the past 12 months and 30 percent in the mid-2003 survey.

But improving numbers don’t make waiting for the upturn any more pleasant when you need a job. Just ask Brad Mitchell.

Mitchell worked for seven years as a full-time information systems consultant at Bookspan, a marketer of book clubs such as Book-of-the-Month Club, until he was laid off in May 2003. After five months, he found work at the state of Pennsylvania’s Department of Transportation — until March, when the program he worked on was completed.

“I think there is a glut in the market [of available IT professionals],” Mitchell says. He was making a salary in the mid-$80,000 range when he was let go by Bookspan. “There are so many people out there on the street that companies right now can get what they want.

“Companies seem unwilling to make an investment of their own. They want people to walk in the door with exactly the skill set they are looking for,” Mitchell adds. He has worked in a variety of positions, including as a programmer and a project manager.

Such conservative hiring practices may be on the decline. Tim Dion, CTO of IT consulting company Riverton, says he plans to hire 10 to 12 people for his company, which employs slightly less than 100 people.

“The demand for workers is going up,” Dion says. “We are fully utilized right now, and we have a backlog of work to keep us busy going forward.” Although there are available workers, Dion is willing to pay for the right set of skills. “We are paying competitively,” he says.

Many of those lucky enough to be employed through the down years have confidence that their jobs are safe. When asked how secure they felt in their jobs, 51 percent answered they felt secure, and another 23 percent “absolutely secure.” Only 19 percent said they were concerned about job security, and 6 percent said they could be laid off at any time.

A decent wage, all things considered

Job security is one thing; satisfaction is another. Our respondents were slightly less happy about what they were being paid than they were in the recent past. When asked if they were fairly compensated, 51 percent said yes, compared with 41 percent who said no. Last year, 53 percent said they were fairly compensated and 40 percent they were not. In 2002, 56 percent they were compensated fairly while 37 percent said they were not.

Curtis Brown, CTO of the Princeton Review, an educational services company providing books and test preparation materials to schools and students, says many valuable employees stayed in place, accepting their salaries and riding out the recession.

“I believe the best people were hiding out and hunkering down, and they didn’t want to come up,” Brown says. “But that situation may change as opportunities for IT professionals increase. I’m finding it’s more competitive to get people at a fair price,” Brown says. He plans to add people to his 70-person staff in the coming months.

Similarly, at Golden Gate University, CTO Anthony Hill has avoided any layoffs in the past three years for his staff, which includes 28 full-time and 12 part-time workers. Raises of “a few percentage points” were issued in 2003 and are expected in 2004.

The university endorsed investment in IT as a strategic priority, so Hill’s budget, at more than $5 million, has allowed him to invest in IT infrastructure.

Still, Hill does not plan to expand his staff in the coming year. “My challenge will be to continue to evolve IT and to maintain salaries at the current levels,” he says. “I’ll make new hires as people leave, but I won’t be able to make new hires.”

In the current environment, most employed professionals were not actively looking to jump ship, according to our survey. Asked to describe their attitude toward seeking another job,

Forty percent said they weren’t looking; 35 percent said they were passively looking and open to opportunities; and just 13 percent were looking at another company. Six percent were looking within their company; 3 percent were passively looking at opportunities outside the IT field; and 2 percent were actively looking outside the IT field.

At Boeing, where more than 15,000 of its 150,000 employees are involved in IT functions, there is a demand for people with key skill sets, says CTO Gene Rogers. “It’s an employer’s market,” he says. “At the same time, key skills are in high demand. Competitors want to pluck out top ranks so we find ourselves under pressure to provide level increases to our staff.”

The fear of offshoring

Offshore outsourcing is on the minds of many IT workers as they ponder their place in the job market, the survey shows. But in practice, IT managers are not planning on tapping overseas markets as much as one might expect.

When asked to list their concerns about job security, 22 percent listed offshore outsourcing behind budget constraints (49 percent), reduced demand for the company’s products and services (32 percent), status as a senior-level worker or as one earning too much money (28 percent), and issues with co-workers or management (24 percent).

In practice, the use of offshore labor seems less of a real threat than our respondents feared. When asked how their company’s staffing needs will be filled in the next year, only 4 percent cited offshore outsourcers, whereas 85 percent said they will use full-time employees and 11 percent indicated use of U.S.-based contractors.

Meta Group’s Schafer agrees that fear of offshore outsourcing is outstripping reality. “The number of companies engaging in offshore outsourcing is really limited,” Schafer says. “If you are an average U.S. company with U.S. customers, do you want to complicate your life with language, culture, or time zone differences? The bulk of the work is by [IT] vendors making real economies of scale in development work and call center staffing.”

Even though he is out of a job, IT veteran Brad Mitchell refuses to blame offshore outsourcing. “I’m not so sure they [overseas workers] are taking away jobs,” Mitchell says. “Those positions often involve grunt-level code jobs,” he says. “For the strategic jobs such as business analysis and business engineering, you need to stay at home.”

Offshore outsourcing reflects the nature of the new global economy, where corporations hire workers where they please. Gene Rogers, for example, says Boeing relies on offshoring because of the company’s global reach. “We sell Boeing airliners worldwide, and if a [foreign] country is going spend billions of dollars, they want local participation.

“It’s a growing factor for us,” Rogers says. “In IT, we’ve had software development in Russia for over 10 years and we are continuing with new markets like India.”

Coming to grips with growth

Meta Group’s Schafer says that when the moratorium on IT spending and training comes to an end, pent-up demand for workers’ talents will be released. “Companies have not been doing what they need to do to keep their [IT] skills up,” Schafer says. “There will be a shift in perception that this needs to happen, and that will lead to a seller’s [worker’s] market.”

It’s not clear exactly when this shift will occur. Given that there have been so many fits and starts in the recent past, it’s risky to predict what direction the economy will take. But for now, the compensation survey at least shows that the bleeding has stopped.

Copyright © 2004 IDG Communications, Inc.

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