Appearances can be deceiving, as demand for tech talent still significantly exceeds supply
Following numerous announcements of layoffs across the tech industry, many tech and business leaders have concluded that the tech talent crunch is over. Including the latest layoffs by Australian company, Atlassian.
However, appearances can be deceiving, as demand for tech talent still significantly exceeds supply. In fact, in a Gartner survey conducted in November and December 2022, 86 per cent of CIOs reported facing more competition for qualified candidates and 73 per cent were worried about IT talent attrition.
Mbula Schoen, Senior Director Analyst at Gartner, makes sense of the recent pattern of layoffs in the tech industry.
According to Schoen, the tech talent crunch is far from over. Current demand for tech talent greatly outstrips supply, which Gartner expects will be the case until at least 2026, based on forecast IT spend.
Contrary to what we’re seeing in the headlines, many of those being impacted by layoffs are in business functions, rather than tech roles. Additionally, there are increasingly opportunities for IT jobs outside traditional tech companies, so it’s important to look beyond just the tech provider community to truly grasp the state of the tech talent crunch.
Many of the reductions in force from the last several months were largely driven by public companies seeking to optimise share prices and to satisfy shareholders’ desire for reduced spending. While these layoffs have been described as an adjustment after over-optimistic hiring, data shows that new hires were not necessarily impacted.
Instead, recent layoffs affected a broader range of employees and initiatives as organisations prioritise key products and services to position their company for specific market opportunities. In fact, Gartner research found that the companies behind the 10 largest layoffs in tech talent still employ over 150,000 more people in total than at the beginning of 2020.
It’s critical that business and IT leaders do not misinterpret this current wave of layoffs. There will likely be more swings and volatility as the market works its way through economic turbulence, ongoing pandemic adjustments and a shift in prioritisation of skills. However, the tech talent crunch will continue long after current turbulence has subsided.
Shoen says Tech leaders responsible for mobilising growth through digitalization must look beyond the noise of headline-catching layoffs to see the signals coming from the market. The IT skills shortage is critical, with CIOs losing their talented employees faster than they can hire them. In key function areas, like data science, software engineering and cybersecurity, the talent supply remains as tight or tighter than before. IT leaders should expect increased competition in many talent pools and that the cost of IT talent will continue to rise.
Delivering on digital growth opportunities will only be achievable with the recognition that the IT talent crunch continues unabated. While the overall supply of tech workers in the labor market has increased by only a few percentage points at most, CIOs can take advantage of the opportunity to strengthen their recruiting efforts. Now is the time for CIOs to take action to strategically acquire top IT talent, rather than stalling in response to market noise.
CIOs can effectively attract and retain top IT talent
CIOs must be more intentional in applying proven practices that help them effectively attract top talent and quickly fill open positions. For example, CIOs should cast their nets wide to tap into a large pool of passive IT candidates. Many IT hiring plans are designed to target active job seekers rather than passive ones, leaving an untapped opportunity to increase the quality and quantity of IT candidates. CIOs should consider ramping up employee referral programs, or use talent intelligence capabilities that leverage artificial intelligence (AI) to source passive candidates from social search.
CIOs can also acquire skills not available in the IT labour market by targeting laid-off workers in adjacent tech categories and training them to build needed IT skills. For instance, it’s hard to find data scientists, but there is a significant pool of data and business analysts available in the talent market, who could be trained on more technical skills. CIOs should work with recruiting functions to adjust job posting requirements to include adjacent skills that are desirable for open roles.
Finally, organisations that can revamp their employee value propositions (EVP) for tech talent will be better positioned to capitalise on market opportunities for focused and efficient growth. With opportunities in IT vastly exceeding what is available, companies that do not live up to employees’ expectations may find that even if they are able to get candidates in the door, those candidates leave as soon as a better offer comes along. Focusing on factors other than compensation that employees care about, such as flexibility and growth opportunity, can improve the IT organisation’s EVP to win current and future competition for talent.