2006 InfoWorld Compensation Survey: IT salaries are back on track and headed north

A near-forgotten term is back in the lexicon of IT compensation: opportunity. And tech workers are making the most of it. Salaries are on the rise. Promotions are not just title changes in lieu of a raise. Surfing the want ads is more than an exercise in disgust. Plus, the good news extends beyond the job market. Tech pros are pushing out more products and surpassing milestones to make good on an economy on the mend. Getting by with less is steadily giving way to creating competitive advantage with whatever you’ve got.

According to the 2006 InfoWorld Compensation Survey, which polled 789 IT professionals, salaries are up 4.8 percent, the best showing in five years. Bonuses remain healthy. Austere for years, the scene is finally looking up.

Yet budgets are often reined. And though improved, the job market is flooded with more contract positions than ever before. Lessons learned in the downturn have more employers rolling with the multisourcing model. As with any upward transition, however, those who adapt decisively are best positioned to cash in on new opportunities.

Top dog, top dollar

Unlike last year, when raises gravitated toward midlevel managers, this year the money flowed up the chain of command. Nearly three out of four senior managers reported a pay increase in 2006, best among the three employment categories (senior, midlevel, and staff). Raises for most senior managers were modest, with 61 percent receiving an increase of less than 5 percent. But when considered together, tech executives — less than a quarter of all respondents — earned 50 percent of this year’s total raises. With C-level salaries growing on average by 8.8 percent — better than the past two years combined — it’s good to be driving the train.

Still, there’s a sore point: Senior managers are feeling pressed into even greater levels of service at every turn. But many say they look for more than just bounty in those extra obligations. Jim Poehlman, chief information technologist at Ubicom, says the opportunity to deliver vanguard technology underlies the satisfaction he derives from work. “I drive the entire IT infrastructure for Ubicom and have full flexibility in designing and testing new technology,” says Poehlman, whose company develops high-performance wireless network processors and platforms. “That’s key to my job satisfaction.”

Poehlman isn’t the only one who gets a thrill out of keeping the company alive and kicking. More than half of the senior IT professionals surveyed said helping their organization run efficiently is critical to their on-the-job motivation.

Of course, adding bonus-type incentives to salaries is a sure-fire way to keep tech execs invested in company performance. And 2006 proved, now more than ever, that being close to the corner office pays off. From salary boosts to profit sharing, senior IT managers took home considerably more than their reports. But with 14.1 percent of total compensation coming from bonuses, as compared with 6.7 percent for middle managers and 3.8 percent for staff, it’s little wonder why tech execs are going to great lengths to compete successfully.

After riding out the storm, many are shifting into accomplishment mode. Thirty-eight percent more likely to have received a bonus for steering a major project past a milestone or getting a product out the door this year, more than a few are delivering results. Whether these projects or products are the business or fuel the business, companies are certainly the better for it. Sixty-six times as many companies issued standard salary increases this year than cut wages — up from 25 times as many last year and 10 times as many in 2004.

Despite such trends to suggest company prospects are improving, many tech execs are finding the added revenue heading elsewhere. Only 40 percent expect their companies to invest more in IT. In all, IT budgets are slated to grow by 5.1 percent, on par with last year and slightly less than in 2004.

In light of this, Ubicom has migrated to open source tools in an effort to keep costs down. Still, as many are finding, such cost-cutting measures aren’t saving enough to add to head count. For now at least, workload relief may be limited to personal rather than personnel gains. And with one in six senior IT managers expecting staff reductions in the next 12 months, tough times aren’t universally over.

Motion in the middle

For middle managers, taking on more responsibility proved less rewarding this year. Taxed with even more work, they were 28 percent less likely to cite added responsibilities as the impetus behind higher wages than the year before. More troubling perhaps is that the personal performance bonuses — the bellwether for take-home growth in 2005 — appear to be in decline, as the number of middle managers who cashed in on individual incentives dropped to 24 percent from 29 percent.

That’s not to say managers aren’t hard at work driving performance.

“I can’t lose sleep over what I can’t control,” says Steve Bergeron, senior project manager at a 450-employee company. “So I focus on our execution.” In charge of more projects and people this year, and more accountable for customer satisfaction, Bergeron provides insight as to why so many managers remain fixed to the grindstone: “I fear how quickly a small company can be set back.”

And many middle managers’ commitment to company performance has not gone unrewarded. Profit sharing, project completion, milestone incentives, and professional certifications are up. In fact, more middle managers got in on the action, as 64 percent reported receiving an award — the best mark in five years. Yet the decline in personal performance awards left overall bonuses for middle managers level with 2005.

The drop off in bonus pay may be attributed to a new trend in compensating employees for adding new skills, according to David Foote, president and chief research officer of Foote Partners, a consultancy and IT compensation research company.

“Premiums can be either added as bonus or as adjustment to base pay,” Foote offered in a recent podcast. “It’s very popular these days that those adjustments are made to base pay.”

Help wanted

Employers are three times more likely to be hiring at higher salaries than having to lowball new hires. More importantly, hiring freezes are less frequent, down to 29 percent from 42 percent in 2004, and layoffs have also been cut, from 37 percent to 29 percent during that same two-year period. With such drastic measures on a downturn, a new staffing conundrum has taken the top slot of this year’s chart: the inability to fill all open spots.

One in three tech execs reported unstaffed positions this year. But with two-thirds of all IT professionals lending at least a casual eye to the classifieds, this carryover is not due to a lack of candidates.

“We have had major turnover at the senior level,” says Ken Teel, director of technology solutions at Liberty Community Services, noting a problem common to many as the job market heats up. “Changing landscapes at the senior level always mean changes further down the food chain.”

Whatever the particular impact this churn has on a given organization, morale seems to hang in the balance. Some, finally near full strength, are only just beginning to recover from years of being understaffed.

Room for improvement

Putting aside the good news, there’s plenty of room for improvement. For the second year in a row, less than half of all IT workers feel they are getting their due. Surely some smiles were bought in 2006, as this year’s gain of a full percentage point in compensation growth was accompanied by a full percentage point in satisfaction with pay. Enthusiasm, however, for how the workload and attitude toward IT have changed in the past few years is tepid. Only 45 percent of IT staff believe their compensation measures up — the lowest pay satisfaction mark in the history of the survey.

Fewer IT staff reported a raise than did in 2005. What’s more, fewer cashed in on a new position. Low unemployment, at 3.4 percent, may in fact be sapping the strength of staff wages. Not to mention the fact that still-lean budgets have many employers tapping the talent pool tentatively with contract appointments.

“All the opportunities seem to be four- to eight-month contracts in distant locations,” says a document repository manager who works for a civic organization in Southern California.

For many, giving up full-time security is not worth the temporary boost in pay. And when the only options for improving your station are short-lived or far away, job satisfaction wanes. Worse, this tendency toward contract positions rather than full-time gigs is only part of a larger, evolving strategy companies are employing to establish competitive advantage. And whenever the staffing paradigm shifts, those with the most commodifiable skills sleep less.

Offshore dilemma

Certainly the most contentious development in staffing practices in the past five years is offshoring. Perceived or not, the panic is fast becoming pandemic, as IT professionals now rank offshoring as the No. 2 job threat, behind budget constraints. And with good reason. Among those who expressed knowledge of company staffing plans, 25 percent said their employers currently contract overseas, a third more than last year and two-thirds more than in 2004.

But what about offshoring’s promise of around-the-clock production and the potential to facilitate the development of feature-rich, low-cost products? Isn’t it supposed to eventually lead to increased hiring stateside? Those questions remain unanswered.

Here’s how the offshoring situation appears to be unfolding of late. Competition among providers has many offshore operations looking to diversify their offerings. Offshore contractors’ skill sets are heading up the IT ladder — toward middle management. So too is the fear of offshoring, as middle managers are three times as likely to feel themselves exposed to the offshoring ax. Now, one in 10 midlevel IT professionals fear their job may move overseas — the same rate of anxiety expressed among the IT staff.

What is certain is that “offshoring has really put a premium on project management,” consultant Foote says. “Companies are just dealing with complexity. Oodles and oodles of complexity. People are feeling that you can’t ever have enough good project managers, so maybe it’s time to start paying for them again.”

The shift toward SOA is also having an impact on what stays onshore. The most desirable job candidates are tech pros with Web services expertise and experience with middleware apps, according to the survey.

“We’re going to have applications skills certifications in demand for professionals until we’re dead,” Foote says.

Business acumen also figures to bring home more in the future employment landscape. In the latest CIO IT Staffing Research Report, tech execs list business analysts, project managers, and strategic planners as the most sought-after employees five years out. Not surprising, given the continual convergence of business and technology.

Call for collaboration

When it comes to aligning business with IT, theory and practice can often collide.

More than a mere season of discontent, last year’s staggering rise in contentiousness along the business/technology divide is demonstrating lingering effects. Nine out of 10 senior IT managers report essential involvement in planning their company’s tech strategy and implementing it. Yet only seven in 10 influence goals and allotments. More startling, senior managers are 20 percent less likely to have final say on tech strategy as well as purchasing decisions than a year before. With two out of three tech execs ultimately responsible for aligning technology with business objectives but only one in three given the power to decide how best to do so, it’s no surprise that more senior IT professionals feel executive management is missing the mark on the value of IT.

And the decline has been precipitous. A mere 49 percent of senior IT managers believe executive management’s estimation of IT is on target, down from 53 percent last year and 62 percent in 2004. Many find it tough to get executive management to understand and buy into their mission, as 69 percent said a lack of technical acumen was key to management’s inability to recognize the value of IT. Remarkable, however, is that this percentage is actually in decline. Business is listening but still can’t seem to see beyond the expense column to true ROI.

And perhaps that is why, despite improving market conditions, the necessity of making do with less endures at some organizations. Just more than half of senior IT managers consider current levels of investment in IT adequate to support business goals. And there is the rub. Tech execs are more likely to feel IT is undervalued than to believe IT can’t deliver on what it has to accomplish to meet corporate goals.

Perhaps this discrepancy suggests some senior technologists believe the business side isn’t yet cooperative or collaborative enough. Opportunities are out there. With greater investment in IT, many tech execs believe their companies can attain the agility necessary to seize them. And with nearly four times as many senior IT pros actively pursuing a new position at their current employer, taking matters into their own hands may just be their answer.