What is the tech talent shortage?

The tech talent shortage refers to a lack of qualified workers available when needed by a tech company. This can be for several reasons, but it is affecting the recruitment and growth plans of organizations throughout the Bay Area, Seattle, New York, London, and other key global tech hubs.

How does the tech talent shortage affect businesses?

The San Francisco Bay Area, including Silicon Valley, is one of the most desirable places in the world to work, as a consequence of so many tech companies having their main offices there. The likelihood is that whether you’re an entry-level software engineer or an experienced application software developer, you’ve thought about what it’s like to work in the Bay Area for a tech giant like Google or Facebook, or a smaller startup or scale up company.

Similarly, tech companies base themselves in the Bay Area because of a belief that that’s where the best people are working, and that it is the place where a company can flourish. The reasons for this are many - a major infrastructure geared round the tech industry, and a sizeable chunk of media and public relations professionals, are based in San Francisco and the surrounding area.

That the Bay Area has a gravitational pull for many companies with a neat idea and a wish to become the next Uber is clear, but it brings with it problems, one of which is a tech talent shortage, which is also affecting other major metropolitan areas with established tech hubs. Meanwhile, in other long-established western tech hubs, the inflation in the cost of living caused by the injection of venture capital investment and the increase in highly skilled workers means it’s tough to move there unless an individual is already wealthy.

“Our concentration in San Francisco is not serving us any longer,” said Twitter CEO (at the time of writing) Jack Dorsey in February 2020. Companies, of all sizes, from giants such as Twitter to small startups, are deciding to look outside of the major, established tech hubs, in the direction of such solutions as remote engineering teams. There are a number of reasons why the tech talent shortage is getting worse.

Read more: how to scale up smartly

It’s too expensive to live there

The number-one reason why it can be difficult to bring, for example, a recent university graduate in is because it can enormously expensive to live in a place like the Bay Area. The median home cost in San Francisco, according to Bestplaces, is $1,378,300. Even if we assume most new software development graduates aren’t going to be looking to buy a house right away when they move there, the cost of housing is almost six times the US national average, while overall the cost of living is reckoned to be more than two and a half times the average.

There is also a chronic lack of accommodation across the Bay Area, and that’s not all. When people get there, they often find that even small luxuries, like going out to eat, can cost far more than would be the case elsewhere. Many of the retail prices are aimed at the tech workers and other people already living there, meaning that anyone new to the area is effectively priced out of having a good work-life balance.

All this means that the best and brightest people to graduate from universities around the world are looking at other career options than working in the best-known tech hubs, wanting to be somewhere where they can earn well, but also live well. There is also a wider skilled trade shortage in many major cities, and a lot of it’s down to steep price rises in the past two decades, and wage rises which have, in many cases, not been able to keep up with inflation.

Read more: why remote teams can solve recruitment issues

Immigration laws do not favor tech companies

In order to find the best software development talent, tech companies have of course looked locally - but the fact is, technology is a global business that requires global hiring, and that means, for many HR departments, looking to top graduates all over the world. The problem comes after those people are identified.

Getting a worker who is not a US Citizen to a job in the tech industry in America has never been more difficult. This is a result of changes to immigration criteria brought in by the Trump Administration, which make it harder for highly skilled workers to obtain the H-1B visa.

The aim of this change was to incentivize the hiring of Americans instead of international workers, but the result has been that the growth of tech companies, particularly in the Bay Area, has been stunted by an inability to get the best people through the door at the time when they are most needed.

This is not only an American problem, either. Across Europe, governments are tightening immigration laws, in an attempt to prioritize the hiring of nationals, and in the UK, Brexit means that many EU and non-EU workers are reconsidering whether or not to stay in the country, fearing a lack of employment prospects when the UK leaves the EU. Similarly, UK immigration policy seems likely to allow even fewer highly skilled tech workers into the country than is currently the case.

Read more: handling time zone differences at work

The education system isn’t working for tech companies

US tech companies have said for many years that the domestic public education system isn’t producing enough of the kind of people they need - highly skilled graduates with the kind of ability in software engineering, for example, that makes them an asset.

When a company looks for the best of the best, of course, they will always have to pay well for that skillset, but the tech talent shortage is being caused by a difficulty in taking on the numbers of people required in order to scale up.

Big Tech is trying to solve this problem in a number of different ways, but the skills gap in schools, in the US, UK and elsewhere, is leading to a technical skills gap in university, and when companies are being asked to hire more workers of the same nationality as their office, but they cannot find them, that’s exacerbating the skilled trade shortage we see.

Read more: keeping morale high in a growing company

How can the tech talent shortage be solved?

Companies have tried a number of different ways of solving their own tech talent shortage. These have varied in effectiveness; here are two possible solutions.

(Photo: Base B)

Outsourcing

One of the mooted solutions to the lack of skilled workers in the numbers needed was to outsource. This is still a popular solution for mature companies, for whom the bottom line is the most important thing, as is a ready-made workforce that can carry out a small number of set tasks with ease.

Outsourcing, then, works reasonably well with disciplines such as customer support, in cases where many of the issues reported by customers can be resolved in similar ways, and with similar, often predefined, responses. It’s one of the reasons companies such as Microsoft use callcenters in countries like the Philippines.

In most cases, though, outsourcing cannot be used to resolve more sophisticated issues. Most callcenters have several tiers of operative - tier one is the outsourced tier, then the subsequent tiers are for more demanding problems, which are escalated to skilled operatives who know the technology of their systems inside-out, and can deal with each query on a case-by-case basis. This more nuanced intervention just isn’t possible with an outsourced team, where a lot of people are trained at the most basic level in a way that is cost-effective.

There is another problem with outsourcing. A software outsourcing company, by definition, does not possess any of the company culture or values that its clients have tried to engender in their own business. Yes, you’ll get people who are hard-working, polite, and good at what they do, but they’re not recruited, onboarded, or trained by a tech company’s own HR department, and fundamentally, they’re not your own staff.

Remote engineering teams

Another avenue tech companies have gone down to try and solve the tech talent shortage is to bring on board remote engineering teams. These differ from software outsourcing companies, because the people on the teams are working directly for the tech company in question, and are full-time employees, but working in another location, often on another time zone.

Remote engineering teams take advantage of huge talent pools that are often unexplored by Big Tech. In Ukraine and Poland combined, there are more than 500,000 qualified software engineers. If we look more closely at a single city, for example Lviv, the largest in western Ukraine, then we can see there are seven universities, producing 4,000 or more IT graduates each year. This shows that while some education systems are failing to produce enough skilled people, others are thriving.

Read more: what is a remote engineering team?

A remote engineering team takes advantage of the wealth of talent in a specific region, but it also allows a tech company’s training and development team to be in control of the onboarding process, ensuring that everyone who joins the team is on the same page, and working for the same goals. What’s more, the hiring process is far faster in a region such as eastern Europe, which, for a growing tech company, means remote engineering teams can be the ideal solution.

To see how a remote engineering team can help your business, talk to Base B.