A war for talent is raging in Silicon Valley where internet companies, from big groups such as Google down to the smallest start-up, are scrambling to find the best technology specialists, sending ripples to labour markets from London to Bangalore.
Large California-based companies are raising salaries and bonuses to prevent seasoned employees from defecting to a competitor, while compensation for junior engineers just leaving university has gone up 30-50 per cent in the last year, according to several industry insiders.
Microsoft in April announced a pay rise for its 90,000 employees. That followed Google raising salaries by 10 per cent at the end of last year to prevent a loss of talent to other Silicon Valley companies such as Facebook.
“The competitive intensity is extremely high, and the best people, in many cases, are getting multiple offers, multiple counteroffers,” says Jim Breyer, an investor at Accel Partners, who leads recruiting efforts for companies the firm invests in. “Each week, by phone, e-mail, or in person, I interview 10 young technologists, executives, or potential leaders for our portfolio companies.”
Product designers, even more than back-end computer programmers, are in highest demand, Mr Breyer says. Because so many new companies are building software for consumers – such as social networks and mobile applications – the skills to design easy-to-use, appealing interfaces are at a premium. “Designers and people who have experience at companies like Apple are in extraordinarily short supply,” he says.
Data scientists – the number crunchers who test consumers’ receptiveness to a green button over a red button, or a 20 over a 10 pixel image, and feed this information to product designers – are also in high demand. The information they provide is critical to companies that are focused on attracting user clicks and demonstrating growth to their investors.
The trend has been slower to spread to Europe, with the result that for the first time in decades, London is considered by some as the “cheap” place for hiring developers. This comes at the same time as venture capitalists are finding the investment climate in Silicon Valley inflated, with increasing talk of a second bubble forming, with the result that investments in Europe are seeing a lift.
“Hiring is so expensive in San Francisco. It is one of the reasons we have kept our development team in London,” says Alicia Navarro, chief executive of Skimlinks, an online marketing technology provider which is based in London and Silicon Valley.
“It is still hard even in London, where you are competing with banks that can pay double the salaries. But it is better than San Francisco.”
Qliktech, a Swedish business intelligence company, moved its headquarters to the US in 2002 and listed on Nasdaq last year. However, it has kept its development team in Lund, a university town in the south of Sweden, where the company can have more stability in its workforce.
Anthony Deighton, head of sales at Qliktech, said: “Being in Sweden and being successful has benefited us. Many employees have worked there for 10 years. You can’t find engineers who have worked at one company like that in Silicon Valley. It is impossible. The cost of a developer is not their salary, it is having to rehire them and retrain them.”
Recruiters note that demand for IT staff is increasing rapidly in Europe. Logica, the IT services company with offices across Europe, is increasing its graduate hiring this year from 2,500 to 4,000. About 1,000 of those graduates are to be hired in France.
Alex Farrell, managing director at The IT Jobs Board, a technology recruitment website, says she recently took a call from an employer in Germany who was looking for 1,000 consultants. “I have never come across that in the 15 years I have been in IT recruitment,” she says.
In the UK, Ms Farrell says there had been a 16 per cent increase in job advertisements on the IT Jobs Board over the past year. For certain skills – such as programming for mobile devices, cloud computing, creating e-commerce applications and banking technology – demand has nearly doubled.
Competition for the best employees is also heating up in Asia, particularly India, where churn – the number of people who leave each year – is now about 17 per cent, up from the more common 10-12 per cent, according to Nasscom, the IT industry lobby.
Indian IT companies are looking to combat this by recruiting students earlier, with help from big IT services companies such as TCS, Infosys and Wipro.
In Silicon Valley too, some start-ups are plucking students from university before they graduate, a tactic used in the 1990s internet boom, says Harj Taggar, a partner at Y Combinator, an incubator for technology start-ups.
He cites how PayPal employees at that time hung around the computer labs at the University of Illinois talking to students to build interest in the company. That’s happening again, Mr Taggar says, and the scale of it is increasing as more start-ups launched by younger founders receive funding.