Doom and boom

The IT workforce, once lavished with high salaries, large sign-on bonuses and generous perks, learned the meaning of austerity with the dot-com bust of the late 1990s.

For some IT managers, the subsequent recession has offered up high-quality workers at bargain salaries. But for others, budget cuts and staffing reductions have stalled or stopped IT projects.

At the start of this year, some of the 2003 Premier 100 IT Leaders were putting last year in their rearview mirrors and hoping that better times lied ahead. Take Bernard Gay, vice-president of enterprise technology and operations at Royal Caribbean Cruises Ltd. in Miami, a company hit hard in the aftermath of Sept. 11. Within a few weeks of the attacks, Royal Caribbean had cut about half of its 400 IT workers – nearly all of its contractors and a third of its permanent staff.

But while the organization was leaner in 2002, Gay says it was more efficient as well. The remaining staffers were trained to fill gaps after the layoffs. Some took on roles that contractors had filled; others were trained to fill technical support and development jobs. “We found ourselves actually managing much more efficiently than we’ve done in the past,” Gay says.

Gay foresees incremental growth in Royal Caribbean’s IT staff this year and hopes to do more projects focused on customers. “We want to have a simpler view of the customer” — that is, tourists and travel agents, he says. “And we want the customer to have a simpler view of us.” That includes upgrading the company Web site, integrating more enterprise-wide applications and simplifying the way Royal Caribbean compiles analytical data.

Retrain to Retain

Bill Thomas, a senior vice-president at Providian Financial Corp., a US$5.8-billion credit card provider and financial services company, has also dealt with layoffs recently. San Francisco-based Providian cut approximately a third of its IT staff, or about 250 people, starting last spring. Meanwhile, the IT organization launched a major strategic shift from building systems to integrating systems in an effort to improve efficiency, which changed much of the needed skill sets. At the same time, Providian reorganized IT from a decentralized to a centralized structure, Thomas says.

The layoffs hurt morale, he says, but the effect was less severe than he had expected. And although he believes morale has since improved, he acknowledges that it’s not as high as it was in the late 1990s, when Providian had three straight years of double-digit profit growth.

This year, Providian will have a flat or declining IT budget of about US$450 million, according to Thomas, with a promise to management that projects will have a clear return on the bottom line. To that end, the IT department has dumped some of its application development work and outsourced other functions. It will also re-deploy personnel into other, higher-value roles and boost their training.

Grab Hiring Opportunities

For some cost-conscious IT leaders at growing businesses, the recession’s effect on salaries has been a help.

Greg Schueman, vice-president and chief technology officer at Mercury Insurance Group in Brea, Calif., has increased his IT department by 10 per cent since 2001, to about 130 workers.

“It’s actually very easy to find people, because there’s such a pool available,” he says. These seasoned workers have the appropriate certifications and are willing to work for less than what they could earn in a booming economy, Schueman says.

For example, he recently hired an Oracle DB2 database administrator, whom he calls “one of the best on the West Coast,” for less than what he would have earned two years ago. Schueman says such talent commanded annual salaries of about US$160,000 then; today, they’re earning about a third less.

The recession has also brought good news for John A. Bielec, vice-president and CIO at Drexel University in Philadelphia. With the higher-education industry growing, he says, Drexel is finding it easier to fill IT positions at wages that are in line with candidates’ expectations.

Bielec says his IT organization is lean, which in boom times can hamper efforts to find – and keep – qualified people. Whereas his annual turnover rate was about 20 per cent to 30 per cent two years ago, he estimates it to be five per cent today. And, he says, “I don’t see anybody leaving in the next six months.”

Maria Schafer, an analyst at Meta Group Inc., says she doesn’t anticipate that IT spending will rebound anytime soon, at least not for the next few months.

“There’s going to come a point where something is going to have to give,” she says. For now, IT demand is in a lull, and some IT shops are “selectively hiring” experienced help where it’s needed, such as in network, security and database administration, Schafer says.

Canuck cutbacks

The Canadian IT sector has also been forced to adjust to hard economic realities in the last few years. Quarterly reports increasingly written in red ink and the resulting slashed budgets have forced Canadian firms to tighten their wallets when it comes to computer equipment and the skilled workers required to operate it.

“IT departments are cutting back on the amount of money that they’re spending,” says Julie Kaufman, an analyst with IDC Canada Ltd. In Toronto. “They’re trying to be a bit more fiscally responsible. They’re not too sure what’s going on and they’re trying to conserve resources.”

Part of that conservation effort has taken the form of fewer dollars being spent on efforts to train staff that remain on the payroll.

“The IT training industry has seen a significant drop in terms of spending with regards to training IT professionals,” says Kaufman. “Companies were not putting the money into creating the skill sets that they need.”

The silver lining in such a dark cloud, however, is that Canada is doing better than other nations when it comes to reductions in training budgets, Kaufman adds.

“While the Canadian market has slowed, it has not slowed as much as some of the other countries around the world. The U.S. saw training spends drop by approximately 14 per cent last year; we saw only a third of that in Canada.”

Take a skills inventory

The recession has taught some companies a hard lesson about budgeting and the difficult task of reducing staff, according to Craig Symons, an analyst at Giga Information Group Inc. in Norwell, Mass.

To prepare for an economic rebound, IT organizations will be more “aggressive and proactive” in taking a skills inventory and deciding what they need for the future, he says.

So, how much will they rely on existing staff as opposed to contractors, outsourcing or hiring new full-time employees? The primary factor, says Symons, is availability.

“If you can grow them in-house, then you’re ahead of the game,” he says. “Typically, contract employees are more expensive.”

That’s where training looms as a critical factor.

Because Mercury Insurance is moving from a Cobol-centric to a Java-centric environment, its IT professionals are being retrained, says Schueman. He adds that Mercury is also trying to provide career paths for employees to keep pace with those technological changes.

Royal Caribbean’s Gay says his IT organization will continue to grow staff through training, although the company will be looking at more efficient online training opportunities.

At the Tennessee Valley Authority in Chattanooga, the largest public power supplier in the U.S., retraining is a cornerstone of its human resources strategy, says Diane J. Bunch, senior vice-president of information services. She says her training priorities for this year are security, Web-enablement and project management.

Communicate About Changes

A tough economic climate can inflict pain on many organizations. If ignored, that pain can spread to the point where it affects even the most content workers. That’s why some IT managers continue to stress the importance of treating people fairly and with candour and honesty.

At Royal Caribbean, morale after its IT layoffs in late 2001 was “abysmal,” Gay says. But CIO Tom Murphy gave an impassioned speech and vowed to stay with his staffers during the changes they were facing. That, plus ongoing communication with the staff, helped boost morale, he says.

And despite the recession, IT management scored high in a survey of staffers, Gay says. But rather than being complacent, he adds, Royal Caribbean managers want to build on that momentum.

When Providian’s IT staff was told about the organizational changes that would result in layoffs, “we overcommunicated to [them about] why this was being done,” Thomas recalls. “That made all the difference in the world” and kept them focused on their work, he says. And because those who lost their jobs were treated with respect and given good severance packages, he adds, that also had a positive effect on those who were left, though “it didn’t mean it was easy.”

Little things like those go a long way for IT leaders like Thomas. “IT people are different from everybody else,” he says. Being able to focus on important, interesting work that can help advance their careers is often more important than money, he notes.

And something quite simple is just as important: “We say thank you when [they] do good work,” Thomas says, “and that’s the most important thing you can do that [acts as a] magic wand for IT people.”

Saia is a freelance editor and writer for Computerworld (U.S.) in Shrewsbury, Mass.

– With files from Greg Enright

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