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2016 Houston IT Hiring Trends and Compensation Report
I began working in the IT recruiting business in 1978. At this time, Houston was experiencing an oil boom. Then, at its peak in 1981, I started JDA Professional Services, Inc. It was a time when if you could spell IBM, you could get a job in IT. Then the bust hit.
Over the next seven years, Houston experienced its biggest job loss ever, with 20 percent of its job base gone. One in five positions in the city was eliminated. Later, in the lead-up to the year 2000, the IT industry experienced another boom with Y2K and the .com bubble. The burst brought with it a 15 percent reduction in IT employment.
After that was another good run up until the financial meltdown of 2008 when, within a few months, employment dropped by upwards of 6 percent. This was a dip from which, to this day, we have not recovered.
At this point, Houston was left in an interesting position. The rapid expansion of hydraulic fracking led to an oil and gas boom that lasted nearly five years. This created the best employment market I have personally seen in over 30 years in the business. However, in mid 2014, we saw commodity prices fall by more than 50 percent with a worldwide production surplus. Within a year, Houston and the oil and gas industry went from boom to bust. During that time, unemployment for IT professionals in Houston rose from 1-2 percent to 3-5 percent. Compared to other times, this is still pretty low, but it also affects some positions more than others.
It is the belief of many that everyone in Houston is tied to the oil and gas industry. And while this might have been true in the 80’s, Houston, now, is much more diverse. Additionally, many companies are taking this opportunity to do some staff realignment, cutting 10-15 percent of their staff so as to eliminate marginal workers, those with specialized skills which are no longer needed, and project staff whose projects have been completed. As such, the impact of a downturn in the oil and gas industry to Houston’s economy as a whole is not as crippling as many might think.
Up to this point, the layoffs follow much the same formula as before: first go the field staff, then plants, then operations. Capex was cut by 20-70 percent in 2015. Energy companies are realigning to current and future revenue projects. Companies across the board are seeing the slowdown and reacting to it as evidenced by only 33 percent of our clients anticipating an increase in department spending, down from 50 percent last year. Many companies are reworking their priorities, searching for ways to get more done with fewer resources and to produce more output per labor hour. This is one area where IT excels, with companies taking advantage of the slowdown and diverting resources to efficiency-based projects. What this means, on a broader scale, is a shift from big Capex projects to reducing Opex, from building to sustaining.
In times like these, given the volatility of the market, it can be a challenge to accurately predict the state of our local economy. Our clients are telling us that this year, and perhaps next year as well, will be mostly flat. But, what they also say is that most of the big cuts have already been made. We expect to see significant consolidation along with mergers and acquisitions as the stronger companies take advantage of the downturn to strengthen their positions. Staffing levels, however, will likely remain flat, with only 29 percent of our clients predicting growth, the lowest rate in our ten years of compiling this survey.
With the diversification of Houston comes growth industries and the companies within them. Healthcare is growing but with frequent consolidations to reduce administrative cost and create a sales funnel from your local practitioner to the major institutions. Several ERP systems are also being implemented to share EMR information and stay compliant with current regulations.
Non-oilfield manufacturing and distributions remains stable, albeit greatly impacted by the world economy. These areas see application in technology, the building industries, and agriculture.
Technology companies are seeking to address specific needs on a global platform. This, in particular, emphasizes software.
Within oil and gas, billions are being spent on new builds along the Gulf Coast, with more plants coming online there now more than ever. The purpose of these new plants is gas liquidification, for the sake of exporting, and other petroleum products. These exports, perhaps , could drive business for pipelines and processing plants.
In housing and construction, the labor pool is coming in line with demand, with workers showing up and finishing jobs. This indicates a reduction in cost for local construction.
Additionally, we predict an increase in both business and personal bankruptcies.
All of this, together, creates an environment with a glut of office space, rent rate concessions, and a skilled labor pool which are favorable conditions for new business or those considering relocation to Houston.
So what does this have to do with compensation? Well, if price is determined by supply and demand and demand goes down, so, too, will compensation. We anticipate base salary increases this year to be in the lower ranges—with 55 percent of respondents to our survey indicating 0-3 percent increases, down from the average 4-7 percent of prior years. More importantly, we are also seeing a big reduction in variable compensation, with bonuses being reduced or eliminated in most companies. The end result is lower total compensation.
With the surge in demand of the last few years, the best people have had multiple offers and big counteroffers. Now, they usually find one offer with few, if any, counteroffers. Despite the downturn, however, key positions and people still see compensation increases, though with a layer of flexibility. If the individual is working, the company has to come to the table and compete. If the individual is not working, there is more flexibility, at least for a few years.
Overall, compensation increases to change jobs are down from the 10-20 percent range to the 5-10 percent range. Bonuses included as part of total compensation packages are also scrutinized more closely than before. It’s a good retention strategy to pay market rates to avoid flight risk.
The overabundance of candidates in the market is causing issues for some of our clients. With scaled back HR departments, the resources to filter through two or three times the typical number of resumes simply aren’t there. There just isn’t time to sift through the slush and find the right person for critical positions. This is where a skilled recruiting firm like JDA can help. We have been here before, and we will be the last company standing.
How JDA Can Help
With over 30 years of experience actively recruiting IT professionals in Houston, JDA is a great resource to identify and recruit the passive job seeker either on a full-time or contract basis. For more information on how we can help you build a great IT department, contact James Del Monte, President, at 713.548.5444 or jdel (at) jdapsi (dot) com.
About the Survey
The information gathered here was compiled from the responses of roughly 100 Houston-area IT managers, 62 percent of whom are the top IT person at their company.
Click here to go directly to the 2016 Salary Survey numbers.