Caught Between Record Layoffs And Hiring Freezes, IT Execs Face A Buyer’s Market
Unemployment hit a 15-year high in October, reaching 6.5 percent, with 4 million people unemployed, the U.S. Labor Department reported in November. While the figures are discouraging for the economy as a whole (which now officially is in recession), they do beg the question of whether the notoriously difficult hiring market for financial technologists is now a thing of the past. New York alone, where Wall Street traditionally has formed a sizeable share of the economy, may lose as many as 165,000 jobs over the next two years, the city's mayor, Michael Bloomberg, recently noted.
The consensus among bank IT market observers seems to be that U.S. employers, particularly, now decidedly have the upper hand on employees -- added to which, offshoring to less expensive labor markets is expected to continue to grow unless the new administration checks the practice. Meanwhile, observers acknowledge that certain niche positions, such as Web security experts, require such specialized knowledge that they remain hard to fill.
Seven of BS&T's Elite 8 2008 technologists honored at the magazine's annual summit in late October said the current financial crisis will be good for recruitment (for more on the Executive Summit, see the photo gallery). Given a choice of three responses to the IT implications of significant banking layoffs in an informal survey, they answered, "There will be more available IT talent out there, meaning opportunities to upgrade IT organizations" over the options of "negative" or no effects on IT staffing.
The sole voice of dissent in our awards-night poll was Steve Kietz, EVP, growth ventures and innovation, with New York-based Citi ($2.1 trillion in assets). In a one-on-one interview following the Summit, Kietz explains his position from a banker's perspective: While the hiring manager may have new opportunities, he says, within the bank as a whole, "Layoffs kill morale." In those circumstances, retaining the best IT talent can become a challenge. [Ed. note: At press time, it was reported that Citi would cut 52,000 jobs in addition to 23,000 previously announced job cuts. According to Citi, most of the job losses will occur in New York and London.]
Speaking in his other capacity, as head of a new Citi mobile payments unit to be spun off next year, for which he is hiring 25 people, Kietz says, "It's amazing, the quality of people that are available, and not just from banks but in Silicon Valley." The CEO of Citi's Mobile Money Ventures elaborates: "I just hired a former director of PayPal, and I expect a lot of talent from the venture capital fallout. I've hired 15 extremely talented banking and Web 2.0 people, and I expect the opportunities to increase during this crisis."
Other industry participants agree to varying degrees. "It is a buyer's market," says Tom Kraack, a senior executive with Accenture who is based in Minneapolis. According to Kraack, Accenture works with its clients to help them recruit thousands of financial services employees annually, particularly technologists. Likening the job market to the stock markets, he says there are "strategic buying opportunities" for financial firms that survive the crisis.
Asked to rate the difficulty of hiring financial technologists now versus a year ago, on a 10-point scale with 10 representing the maximum difficulty, Ron Hoffer, a VP and senior audit manager with Union Bank of California ($60 billion in assets), says, "A year ago it was a nine; now it's maybe a seven." He adds, "It's going to be easier for us to find the talent we need."
Hoffer notes that Union Bank of California is "reaching out to folks from WaMu," even though Seattle-based Washington Mutual ($327 billion in assets), which was acquired by J.P. Morgan Chase (now $2 trillion in assets) in late September, is hundreds of miles from the San Francisco-based bank. Union Bank, he explains, has linked to "key individuals" at WaMu through industry peers.
Location Counts in IT, Too
Certain regions are likely to be more directly hit by the financial crisis than others, with cities such as Seattle and New York likely to see a disproportionately high number of bank technologists laid off. It has been reported that thousands of financial jobs will be lost in Charlotte, N.C., where Wachovia ($764.4 billion in assets) -- which is to be acquired by Wells Fargo -- is based. Meanwhile, Boston-based Aite Group predicts that hundreds of jobs will be eliminated in that city as Bank of America (Charlotte; $2.7 trillion) shifts its brokerage business to New York, where its latest acquisition, Merrill Lynch, is based.
On the other hand, there are indications that the demand for financial technologists in more-rural areas remains stable (see related article on community bank technology priorities, page 10).
Generally the crisis has increased the supply of financial IT job seekers while reducing demand for them. "Hiring freezes are the norm," relates Chris Twyman, CEO of Zapoint, a Brookline, Mass.-based firm that uses software algorithms to find the best applicant for a vacancy.
Some banks, however, looking to build retail deposits to counter the credit crunch, are moving to take advantage of the current environment. Frankfurt-based Deutsche Bank ($3.1 trillion in assets), for example, recently said it would concentrate on its core market and add 400 retail branches in Europe. Spokesman Klaus Thoma told BS&T that the bank would hire 2,500 new employees, but they would be financial advisers, not technologists, so he declined to be interviewed for this article.
London-based global bank Barclays Bank ($2.27 trillion in assets) has taken advantage of its relatively strong position to expand internationally. "Now it is a good time to expand, ... and we can pounce very quickly," Frits Seegers, CEO of Barclays' retail and commercial banking worldwide, told local Singapore media shortly after Barclays announced in late September its plan to add 1,500 new bank technology jobs there over the next five years. About 500 of those positions will be filled by the end of next year, the Singapore Straits Times reported. The "high-value jobs" for software engineers and others will support Barclays' retail and commercial banking worldwide, Barclays told the daily newspaper.
Barclays declined an interview request, but spokeswoman Phillippa-Jane Vermoter directed BS&T to coverage by the Singapore Straits Times. According to the paper, Seegers added that "It is still quite costly" to acquire banking franchises in emerging markets, but some buying opportunities had emerged in the U.S.
All of this followed Barclays' mid-September acquisition of the American assets of bankrupt Lehman Brothers (New York), once one of the world's biggest investment banks. Barclays announced earlier this year that it would cut almost 2,000 technology jobs in the U.K. and move them offshore to Singapore, India and Hungary.
Some Pre-Crisis Recruiting Challenges Remain
While plenty of IT talent is suddenly flooding the job market, other challenges banks faced in recruiting IT personnel before the crisis still endure. At the top of the list, sources suggest, is the increasing need for people who are both business- and technology-minded.
"It's the combination of business and technical skills that's hard to find versus any specific technology," says Jerry Luftman, lead researcher of the Society for Information Management. SIM's 3,600 CTO/CIO members, one in six of whom are in financial services, rated business-technology integration as their top challenge in the organization's annual survey, which was released in November.
"Years ago you needed a lot of grunts to migrate to Y2K," adds Luftman, who is also a professor at the Stevens Institute of Technology in Hoboken, N.J. "Today you need not only technology skills but to understand management, business and the industry you're in, and to have good communication skills."
The increasing complexity of technology creates another challenge in the recruiting process. The growing importance of the Internet, for example, makes Web developers, those hip to a Web 2.0-transitioning-to-a-3.0 world and Web security experts particularly prized.
"Developers aren't keeping pace" with the rapid advances in technology, said Eric Maass, a director with Lighthouse Security Consulting (Lincoln, R.I.) during a BS&T webcast on Internet security in early November. He noted that the technical specifications for individual security standards run to hundreds of pages and there are dozens of such standards. As a result, the salaries of those truly expert in Internet security are "going through the roof," representing a huge hidden cost of running banks' Web sites, Maass suggested.
Union Bank's Hoffer happens to be seeking a Web application security expert to monitor the bank's site and protect it against attempted attacks. He says he already is preparing to have to lower his standards as he searches for the ideal candidate. "It's still a fairly niche skill set to find," Hoffer says, explaining that he may have to settle for someone who has no banking experience. "But for other positions," he adds, "I need more financial services global knowledge."
Lindsay Soergel, SVP for channel technologies and enterprise information systems with Atlanta-based SunTrust Bank ($180 billion in assets), agrees that Web developers, proficient in Java and HTML, are in high demand. However, she adds, "They have to be able to see the bigger picture -- front end, integration and core systems -- and to know the implications of their work for others."
IT Used to Hire, Inspire IT Execs
In a poetic twist, technology is being used to find ideal candidates for technology positions. According to Accenture's Kraack, "There's an emerging capability for predicting success on the job," which other industries use and banks are starting to adopt. Scoring candidates according to their employability is the most innovative practice he sees in recruitment, Kraack relates. "Scoring candidates increases by 20 percent how good those hired will be in their position and how long they will stay," he contends.
Kraack declines to name particular vendors of such systems. But firms such as Minneapolis-based Previsor, which scores potential recruits, and Philadelphia-based DDI (Developmental Dimensions International), which rates how engaged existing employees are, offer solutions in the space. And the credit bureaus, which have long been used to help employers conduct background checks on job candidates, may provide another source for such scoring. Atlanta-based Equifax, for example, has developed a kind of employability score.
A new entrant in the space is Zapoint, which launched earlier this year. Wyomissing, Pa.-based Sovereign Bank ($85 billion in assets) became Zapoint's first bank customer in June, and the vendor has said it is hopeful that Madrid-based Santander ($1.23 trillion in assets), which is in the process of acquiring Sovereign, will use Zapoint's systems for both hiring and retaining good employees.
During her presentation on Web 2.0 at BS&T's Executive Summit, Anita Sands, managing director and head of transformational management at Citi, suggested that Web 2.0 tools could be used to help banks "tap into employees' knowledge." For questions about who knows whom and what, she said, "Web 2.0 might help us collect answers." Alluding to Citi's recent assessment of Wachovia, Sands noted that such a tool could help identify who within the organization could help quickly gauge the value of an acquisition, for example.
"How do you make knowledge workers more productive? That's the key question now," added Sands.
Retaining the Remaining Talent
With fewer workers now asked to do more, sources say, it's more important than ever for banks to retain their best people.
San Francisco-based Wells Fargo ($1.4 trillion in assets) uses what it understands to be a somewhat unusual approach to retaining IT employees, according to Kathy Shields, the bank's learning and development manager. In conjunction with a provider of on-the-job courses, which Shields declines to name, Wells Fargo provides intensive professional training courses, given by college professors and industry experts. One of its six-week courses packs in as much as many master's degree programs, the bank claims.
Graduates of what Wells Fargo calls its Tech Masters program, offered since 2002, repeatedly express satisfaction with the program, noting that they get to use what they have learned in the course of their jobs and that they benefit from making networking contacts, Shields says. The program, offered to seasoned professionals, may also open access to top executives internally. "Graduates of Tech Masters VII [which covers data, information management and integration] met regularly with a Wells Fargo executive because he valued their expertise on a key corporate initiative," Shields explains. Another popular course, she adds, is advanced Web development, which was the first introduced by the bank.
This service by an employer, a win-win for both sides, speaks to a point made by Accenture consultant Kraack. "Many IT people can move across industries," he says. But those with the best prospects are engaged in highly sought areas, such as Web development, data security and risk management.
As for others who might have been with their companies for a long time, running "the spaghetti nest" of legacy and proprietary applications, Kraack adds, "Their street value may not be as good as they would like." Knowledge of older technologies, such as COBOL and Fortran, used for core processing or loan reconciliation, was sufficient to make such employees highly valuable to the bank they were with, he notes, but they will not be readily transferable to other industries.