A new generation of IT pros is taking over as Baby Boomers continue to retire from the industry in droves.
Today, Gen Y "Millennial" employees (born in the 1980s through the mid-90s) make up more than 49% of the total labor force; Gen Xers (born between 1965 and 1981) represent 37%; and Baby Boomers (born before 1964) have shrunk to only 14% of the total labor force, according to recent US Bureau of Labor Statistics (BLS) data.
“Retirements of IT professionals has increased as more Baby Boomers opt-out of returning,” according to a salary survey by IT employment consultancy Janco Associates and eJobDescription.com. “Consultants who augment IT staff and skills are beginning to re-appear in many enterprises.”
The hiring of IT professionals is running at record pace, with 197,000 more IT jobs in the past year compared to the previous 12 months, according to the BLS. There has been growth in the IT job market during each of the past eight months.
As of December, there were about 3.8 million IT jobs in the US, with hiring during the past year responsible for one of the largest year-over-year leaps in IT job positions in 20 years.
“Hiring prospects are looking good for IT professionals,” Janco said in its report. “Many enterprises are looking to expand the size of the IT function as the economy continues to recover and application development increases along with the use of contractors and consultants.”
Raises were skimpy in early 2021; that’s changing fast
Pay is one thing that didn’t increase markedly early in 2021, according to Janco. Mean compensation for all IT professionals rose by only 2.05% to $96,667 by the end of the year, up from $94,729 in 2020. And salaries for IT staff and middle managers have not come close to keeping up with inflation, which was up 7% year-over-year in December 2021, according to the Consumer Price Index.
Janco based its salary data on surveys of 55,715 employees at 70 large enterprises (with gross revenues of more than $500 million or with more than 1,000 employees) and 11,450 workers from 195 mid-sized enterprises (with gross revenues below $500 million or fewer than 1,000 employees).
In the first two quarters of 2021, salaries were flat as more than 100,000 IT professionals were laid off or terminated because of COVID-19-related shutdowns. As companies reopened, demand for IT pros grew — as did salaries.
For example, IT executives in large enterprises had a median salary of $170,316 based on data in January 2021; that figure a year later stood at $177,846 – a 4.42% increase, according to Janco’s figures.
Middle managers in big enterprises were being paid $96,033 at the beginning of 2021 and saw only a slight increase to $96,292 at the end of the year. That represents a meager 0.27% uptick in pay.
IT staffers at large enterprises also saw meager wage hikes over the past year; their pay went from a mean of $78,384 a year to $79,417 – up just 1.32% increase.
For mid-sized companies, salary increases didn’t fare much better. Executives saw their salaries rise from $145,422 to $149,626 year-over-year (up 2.89%); middle managers saw pay grow from $91,581 to $95,040 during the same period (up 3.78%); and IT staff saw wages increase from $76,375 to $77,050 (a 0.88% increase).
Lily Mok, a Gartner Research vice president analyst, said that while raises were lackluster in the first part of 2021, demand for IT pros has changed dramatically over the past six months. With that demand, salaries and raises intended to lure or retain workers have gone up.
In March 2021, Gartner predicted IT-related pay increases would remain around 3% in 2022, the same as it had for the past three years. Since March, however, the research firm has revised those figures, doubling the median pay increase to an expected 6% in 2022. IT personnel in higher demand jobs should expect pay median increases as much as 8%, Mok said.
Along with its annual IT survey, Gartner also surveys human resources departments; that more recent data shows organizations have already been increasing salaries for current and prospective IT professionals.
“If it was 3% before, we’re seeing 5% to 6% for merit increases,” Mok said. “Individual feedback from a lot of clients I’ve spoken to over last six months [has] indicated they’ve seen outside organizations poaching their IT talent by offering 30% to 40% pay increases. That’s the anecdotal information we have as well as ongoing tracking we’ve done.”
The most in-demand IT-related jobs are in data science, cloud computing architecture design, enterprise IT architects, information security, and artificial intelligence-related jobs, Mok said.
Another trend Gartner has tracked involves CIOs and other high-level IT leaders moving out of data center-specific roles and into larger business-centric job titles as the result of digital transformation (DX) initiatives.
“The opportunities from that [DX] have increased; it allows IT technology leaders to really play a more significant role, so that’s encouraged a lot of movement not just within the IT industry but across industries,” Mok said. “So, exiting IT may not be exiting the company but maybe moving to more business-focused positions.”
Former IT leaders are now involved in business product management and development compared to their former internal IT focus, and that’s a highly visible, revenue-generating role, Mok explained.
IT professionals are also leaving jobs for reasons beyond just pay. Work-life balance, or the ability to take advantage of flexible work hours and to work from home, has become the top incentive most organizations are offering to retain talent.
People don’t leave companies, they leave managers,” said Lily Mok, a vice president, analyst with Gartner Research.
“Also, manager quality has become essential,” Mok said. “You may pay people well, but if people are dissatisfied with the way people manage and lead in this constantly-evolving, hybrid environment…, they’ll walk away. It’s quite significant. Don’t just get the pay right and competitive.”
Not caring about employees as people is no longer acceptable, Mok said. And employee exit interviews have been telling. "People don’t leave companies, they leave managers,” Mok said.
Other initiatives to retain talent include increased insurance benefits (including health and disability), according to Janco’s salary survey.
What’s hot and what’s not
In highest demand are IT professionals who support security, work-from-home initiatives and technology, and e-commerce, according to Gartner.
The IT marketplace has evolved considerably over the past two years with computer systems design and related services, by far, owning the lion’s share of positions (representing about 2.32 million jobs). Telecommunications positions, which have been steadily declining over the past 21 years, now amount to about 666,000 positions. Data processing, hosting, and related services represent about 382,000 positions, according to Janco Associates.
In-demand positions, such as those in data analytics and artificial intelligence, are seeing bonuses paid on top of higher salaries, Mok said. On average, those bonuses have been 10% to 12.5% on top of base salary.
Along with salaries, another thing that hasn’t changed much is how long top IT executives remain with an organization. Over the past year, the average tenure for a CIO has risen from four years, seven months to four years, eight months, according to Janco; that average tenure is expected to drop over the next year as retirements increase and a younger generation of IT professionals take over the roles.
To retain high-level IT managers and executives, organizations need to get back to what Mok called “basics.” For example, companies should benchmark their salary rates more often than the common practice of every two to three years. In some cases, especially in highly in-demand IT roles, they should reevaluate salaries quarterly.
There will always be outside organizations that can pay more than yours, but what’s harder to change is company culture. Managers, Mok said, need to fulfill their roles as an employee’s company engagement point and help workers with career development.
“Rather than asking questions of an employee about what’s not working at an exit interview,” Mok said, “they need to do on-going ‘stay’ interviews and conversations to identify those things that are beginning to fall apart and address them there.”