The lack of skilled IT workers is hurting the deployment of emerging technology, according to a new survey from Gartner. In areas from cloud to cybersecurity, this crisis is expected to last for years to come.
By 2017 at least 9,000 new technology jobs are expected to be available in the Austin area (otherwise known as "Silicon Hills"), says Julie Huls, head of the Austin Technology Council. Already one in eight jobs in Austin is in the technology sector, and since those jobs pay well, they account for a quarter of the local payroll, says Drew Scheberle, vice president of the Greater Austin Chamber of Commerce. The chamber estimates that there are about 4,700 technology companies in the Austin area and that 110 people are moving to the area every day.
Why? "There are no quakes, floods, hurricanes or fires here," says James Bindseil, president and CEO of Globalscape, a San Antonio-based provider of file transfer software. "We occasionally get weather from the Gulf of Mexico, but it's short-lived. We are in about as good a place as you can get." With a subtropical climate, the average daily day-night temperature is 68.6 F, ranging from 84.8 in August to 48.8 in January.
"The general personality is that it is a place where a growing family can afford a home, education is available and abundant, and traffic is not bad," says Sheridan Chambers, principal at Denim Group, a cybersecurity and custom software company with offices in both Austin and San Antonio. New recruits get to choose which office they want to work in. "Austin has a reputation of being a place for college-age or slightly older people, with an incredible music scene," he notes, but family-oriented new hires typically choose San Antonio.
Do the Math
IT jobs in the Southwest may not pay as well as jobs on either coast, but calculating the value of compensation is a two-part process.
Here's the first half of the equation: According to the 2014 Computerworld Salary Survey, base pay plus bonuses for IT workers averaged $97,188 in the Southwest region, which was only slightly above the national average of $96,943. The average for New England was $111,265. For the Pacific region, it was $105,783.
The differences were starker for individual cities with strong IT markets. The average total compensation in San Jose was $125,829, and in Boston it was $131,624. In the Southwest, Austin led at $105,799, but that put it 20% below Boston and 16% below San Jose. Other examples were $98,365 in Dallas, $95,205 in Las Vegas and $101,240 in Phoenix.
Incidentally, IT pay in the Southwest may be catching up to the rest of the country, as compensation increases were higher here than elsewhere, according to Computerworld's survey. Compared to 2013, average compensation was up 2.6% in the Southwest, while the average rose 1.8% in New England and 2% in the Pacific region.
But the second part of the equation, the cost of living, is what really closes the gap. While salaries in the East Coast or West Coast technology centers might be 20% or higher than in specific cities in the Southwest, the cost-of-living differential (especially including housing) on the coasts is much more significant, according to figures from the U.S. Census Bureau's Cost of Living Index.
The index uses a weighted composite of the local cost of groceries, housing, utilities, transportation, healthcare, and miscellaneous goods and services to gauge the price of day-to-day life in different parts of the country, with the national average set at 100.
According to Census Bureau figures from 2010, the most recent year for which data is available, Boston's overall composite index rating was 132.5, San Jose's was 156.1, San Francisco's was 164 and Manhattan's was a giddy 216.7.
Meanwhile, San Antonio came in at 95.7, Austin's index figure was 95.5, Houston's was 92.2 and Dallas' was 91.9. Outside of Texas, index figures were a little higher, with Phoenix at 100.7 and Las Vegas at 101.9, highest in the Southwest.
The comparison gets even starker when considering only the cost of housing, which the Census Bureau used as 29% of the cost-of-living composite in its 2010 calculations. Seattle's housing index figure was 140.3 and Boston's was 152.7. And in San Jose, San Francisco and Manhattan the figures were off the charts, at 260.3, 281 and 386.7, respectively.
But in the Southwest all the figures were under 100: Dallas was lowest, at 70.7, followed by Houston at 82, Austin at 85.1, Phoenix at 90.4, Las Vegas at 94.1 and San Antonio at 95.3. So even disregarding Manhattan, the cost of housing in the Southwest can be as little as one-third of that in some major technology centers.
Companies in Austin's tech sector specialize in areas such as semiconductor design, mobile apps and devices and biotech equipment, says Scheberle.
Gomez notes that San Antonio's main IT niches are security (thanks to local military operations and institutions of higher education) and cloud technology (thanks to the presence of Rackspace).
"The competition has heated up for key resources and skills," says Jake Dominguez, CIO at Austin-based chipmaker Advanced Micro Devices. "There is a lot of demand for developers [and people with expertise in] semiconductors, SAP or ERP solutions, and the competition is heating up around security." There are a lot of people with security expertise in San Antonio "due to the Air Force and the University of Texas at San Antonio," he adds.
"Local recruiters are looking more and more for people in the world of mobile applications, and people with good skills in data integration, big data, Drupal and . . . visualization and data analytics," Dominguez adds. "There is fierce competition for design engineers, for manufacturing and new technology, and we are seeing a lot of design centers being built."
For general business development, AMD has been able to find the people it needs in the Dallas/San Antonio-Austin/Houston triangle. But it has had to go outside the state for people with specialized skills, such as Sarbanes-Oxley app development, Dominguez says.
He says he has also seen a rethinking of outsourcing and offshoring, as managers decide it's better to keep key skills at home. "Changes are happening so quickly they can't afford losses of time in handoffs with [people in other] time zones," he says.
USAA has had a big appetite for developers, especially those with expertise in Java and mobile platforms, big data, business intelligence, and people who can use ETL (extract, transform and load) tools for data warehousing, says Jackie Head, the insurer's assistant vice president of application development.
More Numbers to Crunch
Of course, there would be no technology jobs without companies to create those jobs. And in Texas, one of the things that brings companies to town may be the low tax rate.
"As for what brings corporations here, the No. 1 reason is taxes," says Michele Skelding, a senior vice president at the Greater Austin Chamber of Commerce. She calculates that the per-capita tax burden is 16% lower than the national average.
There is no personal or corporate income tax in Texas. For non-utilities, a so-called franchise tax amounts to 1% of revenue for larger businesses, 0.575% for businesses with revenue of less than $10 million, and 0.5% for retailers and wholesalers. Franchise tax bills are waived if they're less than $1,000.
"It's a relatively minimal, insignificant factor," says the Denim Group's Chambers. Texas raises the bulk of its state revenue through sales tax. And at 6.25%, "it's a relatively small tax," Chambers says, noting that local jurisdictions can levy their own sales taxes on top of that. "Products that are sold are taxed, including custom software and software delivered on a disk, while consulting and advice is not taxed," he explains.
In addition to the incremental sales tax, local governments raise revenue through property taxes.
Beyond the Numbers
But jobs, salaries, the cost of living, weather and taxes turn out to be increasingly superficial considerations. "Today the trend, very specific to the millennial generation, is to first decide where to live and then find a job there," says Gomez. And what young people look for are cities where they can walk to work and walk to stores, restaurants and recreational sites.
"They do not want to be beholden to a car," he notes, and therefore they prefer high-density urban areas.
Weston agrees, saying, "They want to live in a vibrant urban core, with high-quality and affordable housing, plenty of restaurants and bars and music clubs and other entertainment venues, good parks and bike paths and other outdoor recreation, and good public transit options."
Many locales in the Southwest may not fit the bill. The region has what Gomez calls "sprawl cities," spreading over cheap land to the horizon, making a car indispensable. However, both Austin and San Antonio are trying to do something about that.
Regardless, "Austin is the creative center between the coasts," says Patoski. "Young people continue to flock here."