Austin battles shortage in high-end software engineering talent
AUSTIN AMERICAN-STATESMAN | By Lori Hawkins, Kirk Ladendorf
Austin's supply crunch for software developers was bad enough by September to prompt 25 Central Texas tech executives to fly to California in search of new talent.
They offered free beer and pulled pork tacos at the Mighty, a warehouse bar in San Francisco, to attract a couple of dozen job candidates. The next night, they headed to Sunnyvale , in the heart of Silicon Valley, for a Tex-Mex happy hour that drew another 45 potential recruits.
After resumes were shared, business cards exchanged and several follow-up phone interviews completed, not a single one of those California candidates has made the move to Texas, according to the Austin Technology Council, which organized the trip.
"It's even tighter there than it is here," said participant Rod Favaron , CEO of Austin startup Spredfast . "The challenge is there just aren't enough good software developers to go around."
In an otherwise sluggish U.S. economy, an intense national talent war is being waged for engineers with critical skills in hot areas. Austin is one of a number of fronts — which include California, the Northeast and other tech centers such as Seattle and Boulder, Colo. — where recruiters and executives say the supply of talent can't keep up with demand.
In Austin, software engineers with the latest skills are in high demand, and some startups, confronted with attracting talent or seeing their business progress slow down, are poaching people from other companies in town.
Silicon Valley companies are just as eager to raid Austin for the right skills. Last week, social media giant Facebook snapped up top technical talent at Austin-based Gowalla, which ran a location-based social networking service. Gowalla will shut down its operations here and move some key staffers, including co-founder Josh Williams, to Facebook's Palo Alto headquarters.
Recruiters say the fiercest demand is for top-level, experienced workers with a few critical skills. Those skills include user interface, which involves designing the look and feel of a software application; mobile apps development, which entails programming for smartphones and tablets; and cloud computing software, which requires new kinds of code.
Keeping skills in line with demand so startups can grow will determine what Austin's technology ecosystem looks like over the next decade.
"These are the companies that are bringing in the outside dollars that fuel our local economy," said Mike Rollins , president of the Greater Austin Chamber of Commerce , which is pursuing solutions to the labor crunch. "If these companies are unable to grow their businesses in Austin, they will be forced to relocate elsewhere. Every economy needs to keep reinventing itself, and software is an area where we in Austin have the ability to prosper."
The software industry accounts for about 20 percent of Austin's tech industry and is its fastest-growing sector, according to Austin economist Angelos Angelou . Central Texas has about 1,860 software companies employing roughly 20,000 people, he said.
Those numbers don't tell the whole story. Austin's software community — both homegrown startups and high-profile newcomers such as Facebook — add to Austin's cool factor and bring cultural benefits, prestige and growth potential.
But in terms of size, Austin's software industry is dwarfed by Silicon Valley. The Northeast, anchored by Boston, is the second-largest U.S. software center, followed by a group of emerging regions, including Austin.
The current shortage can be traced to the Internet bust a decade ago, when tech companies stopped recruiting and computer science enrollment dropped at the University of Texas and other schools across the country. That decline in the technical talent base, coupled with the rise of new companies in need of software developers in a few select niches, paved the way for today's tech talent crunch.
For Austin, which has used its skilled technical workforce as a strategic weapon to lure operations from fast-growing, high-paying companies such as Facebook and PayPal, the pressure is on to find ways to grow its talent base. That's especially important as the region's high-tech economy shifts from being dominated by big semiconductor and hardware manufacturing companies with large workforces to a new generation of small, entrepreneurial upstarts.
Homegrown Austin companies such as online vacation rental company HomeAway and software developer BazaarVoice have grown enough to establish college recruiting efforts. But many startups can't afford to bring in talented programmers from outside.
"We've fallen into a trap of fighting over existing talent," Favaron said, "and that's a zero-sum game that hurts everyone."
The hunt for help
The companies that do have the resources to recruit outside of Austin are finding it's not always the answer.
Fast-growing Spiceworks, which develops software that helps companies manage their networks, took part in the technology council's Silicon Valley trip and pursued its own recruiting efforts there.
"Unless they've raised their hand and said, 'I'm coming to Texas,' you go to a lot of trouble, and then they bail," said CEO Scott Abel . "I'm not going to pay the California wages, which can be 30 percent higher. But the bigger problem is the density of startups there is so high, people realize, 'Why would I leave?' "
Of the 50 employees Spiceworks added last year, all but eight were already in Austin. The company, which now has 120 employees, plans to hire 60 more in sales, marketing and development next year — more of whom will probably come from outside of Texas.
"We're going to do more college recruiting and also focus on the Northeast," Abel said. "It's much easier to get people there who want to get out of the cold and come to Austin."
As Spiceworks grows, it's able to add less experienced employees and supplement their skills with training. But most new companies aren't in that position, said Marc Davis , CEO of Austin recruiting firm HireStarter.com.
"With a young startup company, training is not an option. Skill sets are so in demand, and funding for startups has gone down. Nobody has time to hire people who don't have the skill sets," Davis said. "I don't have a warehouse of these people, so I have to yank them out of somewhere."
That's led to a jump in counteroffers by companies trying to keep their people, he said.
"We've had candidates get an extra $30,000 just to stay," he said. "Their managers say it is worth it because otherwise they have to pay a headhunter, and they'll lose time and money getting a new candidate up to speed."
Austin salaries vary greatly, depending on the size of the company and its ability to raise venture capital. For top-level, experienced software programmers with key skills, pay can range from $130,000 to $150,000 a year, up from $100,000 to $120,000 over the past couple of years, according to HireStarter.com.
Senior software engineers with experience in traditional programming languages like C++ can earn between $100,000 and $120,000, and workers with mobile programming skills can make $120,000 to $150,000. Some established software startups are paying "north of $150,000 for programmers. That was almost unheard of before," Davis said.
'Import that talent'
Austin's first software talent crunch came in the mid-1990s, when a promising group of new companies, including Trilogy Software, Tivoli Systems and Vignette Corp., received venture financing and began expanding. They quickly found there weren't enough Internet-savvy programmers to go around, so they began recruiting from outside Austin.
Trilogy was the most aggressive and creative. It launched Trilogy University, which incorporated both a national recruiting effort and a boot camp to bring in talented young workers and quickly acclimate them.
"We said the only thing to do is to import that talent ," said John Price, a former Trilogy executive who now heads another startup, Vast.Com. " We spent millions of dollars bringing talent to town. We were one of the only companies in the country beating Microsoft to the top talent."
Price estimates Trilogy brought 1,000 or more workers to Austin over the years. Many of them stayed in Austin even after the Internet boom went bust in 2001. And many of those have become key executives in today's new group of local tech startups.
These days, there are no comparable large-scale recruiting efforts in place restocking the area's talent base. That means local companies often find themselves fighting over the same workers.
At Whaleshark Media, which runs online deals and coupon websites, nearly every engineer the company makes an offer to also receives offers from other companies.
"Rather than competing against one other firm, you're competing against four or five other firms," said Matt Howitt, who weighed a number of offers before joining Whaleshark as vice president of engineering two months ago.
Even though it's more established than a fledgling startup, Whaleshark competes with much bigger players, including Facebook and Google, which are expanding here.
Whaleshark grew from 30 employees to 100 over the past year and plans to add up to 50 next year. Even with deep pockets — Whaleshark has raised $300 million in venture capital — finding the right people is the company's biggest challenge, said CEO Cotter Cunningham .
The company has started offering up to $2,000 for any employee who makes a successful referral. And it is sweetening its perks: Breakfast and lunch are catered several times a week; there's no vacation policy — employees can take what they want ; and new employees can choose their own computer system and get a cellphone allowance.
"Those things are what it takes to stand out," Cunningham said.
'A beacon on Austin'
There is no overnight fix for the software talent crunch, but several potential solutions have been suggested by local tech entrepreneurs and the Chamber of Commerce.
Rollins, the chamber president, said his organization is "neck deep" in discussions with several area schools, including Austin Community College and UT, to push for programs that would offer training in cutting-edge software skills to workers who already have technical degrees.
Rollins said he expects one or more schools in the region to offer a program to address that in the next six to 12 months.
Part of the answer could come from UT, where the computer science department is seeing student enrollment expand and is working with local companies to create more specialized programs, including game development and mobile applications development.
Department chairman Bruce Porter said computer science enrollment has grown to about 1,340 students this year compared with a low of about 800 in the years after the first Internet bust.
"We are expanding, but the demand from industry is growing faster than our uptick in enrollment. I am guessing we are going to see an increasingly severe talent crunch over the next five years," he said.
UT is talking with local startups, but Porter noted that larger, better-known companies, including Hewlett-Packard Co., Google and Facebook, also compete for UT students. Despite interest from national tech employers, Porter said two-thirds of his department's graduates remain in Texas.
Tech companies need more incentive programs to lure students into studying software development and engineering, said Larry Warnock , CEO of cloud computing startup Gazzang and a member of the Austin Technology Council.
Another part of the solution, said Price, the former Trilogy executive, is to create a collaborative recruiting effort that would be backed by local software companies and other business organizations.
He said Austin needs to target the young tech developers who come to town each spring for the South by Southwest Interactive Conference.
"The idea is to put a beacon on Austin and the Austin tech scene to bring in large numbers of people. Without a program like this, we have no chance of growing," Price said. "We are going to solve this problem. And it will take time. We ought to have a five-year time horizon. We will get the influx of talent. It is going to be hard work. And companies will have to step up with their pocketbooks and their time."
Although it doesn't look as if the Technology Council's Silicon Valley visit will bring many new brains here, participants say it paid off by raising awareness of Austin as a technology hub.
More trips are being planned, possibly to Raleigh-Durham, N.C., and the Northeast, Warnock said.
"We want to get the word out that Austin is a great place to live," he said. "It's not just about Silicon Valley. It's Chicago; it's New York; it's about importing talent from wherever we can find it."
WHAT AUSTIN SEEKS
Here are some of the skills software companies are searching for:
This refers to the look and feel of a software application and how users interact with it. It has become a high- demand skill as companies seek applications that look cool and are fun to work with.
Mobile devices, including smartphones and tablets, impose different constraints and require different kinds of programming skills from standard personal computer programs. These applications are usually on Apple iOS or Android, which are relatively new environments.
The world is moving toward cloud computing to gain efficiency and flexibility. The new software developed for clouds demands different kinds of code to take advantage of the flexibility of computing clusters. The real mind shift in cloud development is the notion of ‘infinite resources' where capabilities can expand immediately. Most cloud environments are built on open source infrastructure and require that expertise.
About this story
Lori Hawkins and Kirk Ladendorf are veteran technology reporters at the American- Statesman. In their conversations with startups and CEOs, they have heard frequently about a shortage of software engineers and other highly skilled technology workers. Realizing that the labor crunch has become one of the most pressing issues for the Austin software industry, they went to work exploring the issue — both what is causing it and what can be done to address it.
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