The ongoing global semi-conductor shortage offers a cautionary tale of how high-tech bottlenecks can constrain growth. Experts fear the IT talent market may be next.
In a curious byproduct of the lockdown, the global chip market has been plagued by a nagging supply chain breakdown. As the virus raged, demand for consumer electronics soared while interest in new automobiles (a surprisingly voracious chip consumer) fell of the table.
As recovery began in early 2021, automakers around the world scrambled to restart just-in-time chip contracts, which had been cancelled during the recession. The fallout is measured at an estimated 1 million missed deliveries and $100 million in lost revenue in the US alone.
Worse, the biggest losers have been the pickup trucks and SUVs which are key to carmaker profitability. “Our normal has changed,” Ford CEO Jim Farley acknowledged recently at virtual industry event.
The Great Silicon Shortage has no end in sight. Could the same effect occur for other critical inputs, such as software engineers?
Turns out, it already is.
An HR crisis hiding in plain sight
For those paying attention, the global IT talent shortage was raising concerns even before the pandemic twisted the digitalization dial all the way to 11.
“Companies are finding their fortunes – and futures – increasingly tied to their ability to attract a limited pool of qualified technology workers,” warned the International Monetary Fund in 2019.
“That shortage is expected to become more acute in coming years as the role of tech continues to expand across industries,” the IMF added.
The situation comes down to a simple matter of supply and demand (especially for the most-skilled IT workers) and is likely to become even more acute as spending on digitalization projects intensifies competition for those elite technical workers.
How big is the problem? Huge, says the international HR advisory firm Korn Ferry.
“A major crisis is looming over organizations and economies throughout the world. By 2030, demand for skilled workers will outstrip supply, resulting in a global talent shortage of more than 85.2 million people,” wrote the company in a much-cited 2018 study.
“Signs are already emerging that within two years there won’t be enough talent to go around,” the report warned in those pre-COVID days.
Korn Ferry explained that three knowledge-intensive industries would be the hardest-hit, including: financial and business services; technology, media, and telecommunications (what they call “TMT”); and manufacturing.
Around the same time, the US Bureau of Labor Statistics forecast last year that developer HR market would grow by 22%, much faster than any other occupation.
Even before COVID-19 made hybrid work the norm, the writing was on the wall.
With transformation go the laurels
As we’ve discussed at Pentalog since the start of the COVID-19 crisis, smart IT investment is the catalyst to post-pandemic growth, in particular, initiatives focused on improved software and business agility.
Case in point, according Gartner’s Q2 update to its market databook, spending is seen topping $4.1 trillion in 2021 and continuing to rise thereafter. Growth is predicted in every sector, with software engineering and in particular elite services growing fastest.
In a digitize or die economy, it’s easy to understand the stress in the C-suite, with some 77% of companies still working to deliver mission-critical transformation projects, according to Gartner, a topic we’ve explored previously.
While economic recovery remains beset with worries, investment in digital transformation has reached historic levels – and will continue to increase for years.
But there is a big risk hidden in plain sight: the high-tech labor market.
“While this news is largely positive for IT companies, the pandemic is also taking its toll on the upstream supply of…software developers,” observed Travis Breaux and Jennifer Moritz, writing for the engineering trade group ACM.
All that work takes engineering talent, which is harder to find every day.
With demand for critical resourcing spiking amid the global recovery, digital companies and software publishers may find themselves in the company of chip-dependent industries such as the automakers. The results could be just as serious.
“These effects could constrain hiring and innovation over the next two to three years,” Breaux and Moritz dryly predict.
In other words, the race to transform is a race to hire.
How to respond to a scarcity market
At a macro level, increasing the supply of engineering talent will take responses from governments and the private sector to invest in training and adapt to new ways of working, note the Korn Ferry authors.
“In the new networked economy, organizations will increasingly rely on an extended ecosystem of workers rather than a large permanent workforce, using people, technology, and partners to execute their strategies in different ways,” the study concludes.
At Pentalog, we think these are sound ideas, and it’s why we continue to engage with technical universities in the cities where we operate delivery centers. As a leader in IT services, it’s also why we’re pleased to see the rest of the world catching on to remote collaboration.
Hiring great engineers is hard these days and shortfalls in talent pose a serious risk to the ability of companies to deliver digital initiatives, now more than ever. Companies need help.
With this experience in mind, we offer our 7 Insider Tips to Beat the Developer Hiring Crunch. (See boxed section below.) Here we distill some of the key lessons of our most experienced leaders. We hope it helps.
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