The Talent Crunch Will Define the Tech Industry in 2012

The unemployment rate in the U.S. is 8.6%, but you wouldn’t know that by looking at the tech industry. There is an all-out war for engineering and design talent here in Silicon Valley, and the battle is driving up salaries and making a lot of us wonder: where are all the engineers? The Wall Street Journal is just the latest to write about this phenomenon. It had an article last week about the battle for engineering interns, and this week it has a piece on how startups are finding it difficult to raise funding without having a full team of engineers ready to go. There are simply not enough qualified programmers to fill the rosters of tech’s biggest and smallest companies. Google and Facebook are rapidly expanding, while more and more engineers are deciding to strike it on their own and start their own company rather than work for one. This phenomenon has only grown with the falling costs of starting a company and films like The Social Network, which I believe have sparked a renewed interest in entrepreneurship. The talent crunch has been a problem in tech for years, but I believe 2012 is going to be the year that it hits the breaking point and the general public starts paying attention to the engineering talent wars. A couple of factors are going to make the race for talent even tougher:
  • Facebook’s Impending IPO: What do you do if you’re the Internet’s hottest company and you suddenly are given $10 billion? Simple: you hire a shitload of engineers. Facebook is well known for keeping its headcount relatively low, but it will always content for the top-tier talent.
  • Google Doubles Down: Did you know that 2011 was Google’s biggest hiring year ever?. Don’t expect that rate to slow down in 2012. The company is erecting new buildings to accommodate the new talent.
  • Starting Your Own Company Has Never Been Cheaper: Five years ago, you would have had to buy a bunch of servers and a whole team to manage them. Now we have Amazon EC2 and Rackspace to deal with that problem. All you really need is enough money for personal expenses and decent hacking skills, and you can launch something.
  • No Startup Visa: The U.S. is not doing enough to bring foreign technical talent into the country. The Startup Visa, introduced by Senators John Kerry (D-MA), Richard Lugar (R-IN) and Mark Udall (D-CO), has gone nowhere. It’s a rich pipeline of talent we are ignoring for some reason.
  • There are just not enough students becoming engineers in the U.S.
There will be a lot more stories about the lack of engineering talent in the U.S. in mainstream publications like The Wall Street Journal in 2012, and it will result in a lot more attention on the issue, especially as more people realize that their old jobs are never coming back. A laid-off manufacturer would be smart to retrain and rebrand himself as an IT guy. There will also be a greater focus on getting U.S. students trained in programming and engineering, especially as China and India continue to swell with bright engineering talent. It will take some time, but I hope and believe that U.S. schools will eventually make programming a required course in high school and/or college. Hopefully it’ll happen sooner rather than later. The result of this attention will eventually be more foreign engineers (can we please pass the Startup Visa Act already?) and more students who become engineers. But it will be years until these talent flows enter the pipeline. So for now, there’s going to be a talent crunch. The most innovative companies and savvy entrepreneurs will end up being the winners, while lots of startup ideas will begin to wither and die because they couldn’t recruit the talent needed to support them. Begun, the Talent War has.
  • Will Kriski

    It’s funny when people say there isn’t enough talent. They should clarify by saying ‘we can’t get experienced developers for really shitty wages that we want to pay’

    • Anonymous

      Will, are you really that ignorant or pretending to be one just to look cool?

      Facebook, Google, Microsoft etc pay their engineers way higher than the national average for software engineers. And the pay rate is the same whether you are a local citizen or engineer from another country. In fact, tech companies spend more money in both wages and legal fees to bring in foreign engineers. So I am not sure where you are getting the “shitty wages” idea from.

  • Anonymous

    hmm… interesting.

  • Richard Smith

    Will Kriski has a point about the low (and I would say *no*) wages starts-up sometimes pay, but they’ll give you 1% of something that only has a 5% change of paying off. Working full-time for a company has to be rewarded with a full-time salary – unless you are a founder and have significant shares. Otherwise you can work for a series of start-ups, each failing and a decade goes past and you haven’t had one decent salary. Too often the risk/reward maths just doesn’t work out for employees. 

    There’s not the such a talent wars in other countries. Here in the UK there’s a good number of software engineers available, and salaries have been dropping in recent years. Google, Amazon, Microsoft and others have opened development centres around the world and fund them with money earned there. The US doesn’t get the tax from those salaries and other payments and those salaries are spent on other products and services which again generate tax for the host country. So the Start Visa Act and increasing the ability to bring in talent from over seas seems like a no-brainer. But there will still be people that can’t or don’t want to relocate to the US, so non-US development centres still have a place for finding great talent. 

  • Kerry Rego @kregobiz

    I also believe that requiring data or programming classes in high school is an excellent way to emphasize these skills as mandatory. I just don’t think that the public school system is going to “get it” fast enough. This is a driving force behind what I do everyday. I walk around shaking educators, legislators, and business owners by the lapels. “Wake up!” It’s time to change or we will be left behind.

  • Jeremy Toeman

    great post Ben – I think there’s another unaddressed factor here – the social pressure for engineers to start their own companies is also extremely high.  Every VC and highly influential tech blogger has written some form of post basically stating that “working for someone else sucks, just start a company”.  

  • Andrew Kinzer

    And it’s not just about talent in general. Full time talent is where companies are feeling the hurt, because there’s tons of good developers and designers looking for project work. But there’s definitely a mentality out there that you *have* to have somebody in house.

    If 2012 really is the year where it reaches a breaking point, we may see more companies adopt a by-the-project mentality where they engage good developers or development teams for 1-3 months at a time to knock out a whole product, or a key section of it.

  • Eric Schwartz

    great piece.  Aside from a shortage of qualified programmers, part of the problem is we have moved to continuously deploying on at least three platforms – web, iOS, android…it all takes people with expertise and ongoing maintenance resources.

  • Wes Williams

    I think we are starting to feel the pain caused by large corporations moving developer positions oversees and moving sr. people into management. They have hurt our long term economy and innovation for a short term cost reduction.