MATRIX Monitor Q3

MATRIX is pleased to share with you this quarter's edition of The MATRIX Monitor, offering brief summaries of the latest research on market conditions for IT staffing, the technology industry, and the economy.

Research shows that the technology industry continues to be healthy despite continued weakness in the economy as a whole. As well, unemployment within IT remains very low–-less than one-half that of the labor market as a whole. We provide you with current national averages of annual compensation for the most common IT positions, as surveyed by PayScale.We also analyze PayScale data to provide localized data through the bi-annual MATRIX IT Compensation Survey. You can obtain the version for your market from your MATRIX Account Manager or at www.MatrixResources.com . As always, your feedback is welcome–-please let us know how The MATRIX Monitor can better serve you.

IT Employment & Skills Demand Forecast Unemployment Low within IT
Unlike the economic downturn of 2001-02, information technology today is among the most enviable occupations as evidenced by low unemployment rates. Whereas national unemployment reached 6.1% in August, it is less than one-half that rate for most IT positions. According to a report from the National Association of Computer Consultant Businesses, unemployment is just 1.0% for computer scientists and systems analysts, 1.6% for database administrators, 1.7% for computer hardware engineers, and 1.9% for computer software engineers. Among other IT positions, the national unemployment rate is 2.1% for computer and information systems engineers, 2.8% for network systems and data communications analysts, and 2.8% for network and computer systems administrators. The only IT positions exceeding 3% unemployment are computer programmers at 3.3% and computer support specialists at 3.7%.

Gartner Projects Slowing of Growth in IT Hiring
A new Gartner survey revealed a notable drop among U.S-based IT organizations that plan to increase their IT staff levels as compared to a year ago. Gartner found that 57.9% of survey participants now project an increase in IT staff levels (including full-time employees and contractors as supplementary staff), down from 66.3% in 2007. The survey also showed the percentage of organizations projecting a greater than 10% increase in head count also dropped from 15.7% in 2007 to 12.1% in 2008.

"Even though the number of vacancies and turnover rates remain at similar levels as 2007, organizations are being cautious in their hiring practices," said Lily Mok, research vice president for Gartner's CIO workforce management group. "We have not seen extreme measures being taken by IT organizations, such as hiring freezes, but we do expect to see enterprises take a more conservative and 'wait-and-see' approach to staffing for the rest of 2008."

Increased Demand for Java Jobs versus C, C++, and C# Positions
Job postings on Dice.com for J2EE/Java programmer positions have caught up with the number of open C, C++, and C# positions. In September, Dice listed 16,673 open C, C++, and C# language positions versus 16,063 open Java language positions. A year ago, Java trailed by a larger margin with 13,981 open positions versus 18,448 C, C++, and C# programming languages.

IT Worker Compensation Compensation Data from MATRIX
The accompanying chart summarizes national averages for total cash compensation levels for 20 of the most common IT positions. The data is a reflection of the typical percentile range, based on the statistical median of total compensation packages. The data was generated in August by PayScale, a leading online compensation and benefits data firm. Compensation reflects the typical total cash compensation for an individual's job based on location, education, certifications, shift, employer type, and other factors. The data reflects only senior level positions (at least 5 years experience). Localized market compensation data for all 20 positions listed is available from MATRIX Account Managers and Recruiters, or at www.MatrixResources.com.

Noncertified IT Skills Gain Value Versus Certifications
The latest Foote Partners' IT Skills and Certifications Pay Index found continued divergence in premium pay for certified versus non-certified IT skills with many certifications losing value.

"For the most part, employers are still fiercely competing for IT talent and they're continuing to balance requirements for non-technical experience and expertise against pure technical abilities in filling jobs, which has had the combined effect of depressing demand for IT certifications somewhat," notes David Foote, the firm's co-founder, CEO, and Chief Research Officer.

"But more to the point, employers have become comfortable using skills pay as a work-around solution for differentiating pay in IT workers who, though they may share job titles, do not necessarily share job content," Foote added. "That's become a big problem for employers because salary surveys are traditionally benchmarked to job titles and re-titling IT workers is harder than it sounds. Anything that can be used to bring IT professionals to true market pay levels for their specialized skills will help recruitment efforts and, at least for a little while, keep the predators at bay."

IT Salaries to Rise 3.6% in 2008 and 3.5% in 2009
A 2008 Gartner survey reveals that current economic conditions have yet to have a material impact on compensation budgets. Enterprises are continuing to budget for pay increases in 2008 at a level similar to previous years, with the reported median salary increase budget at 3.6%, according to Gartner.

"We do see a relatively more conservative projection for 2009 across all sectors, with a budgeted median increase of 3.5%", said Lily Mok, research vice president at Gartner. "Cost-cutting measures, such as reduction in pay increases or pay increase freezes, affect the retention of high performers."

**IT Spending **Worldwide IT Spending On Pace to Increase 8% in 2008
Despite current economic concerns, worldwide IT spending will exceed $3.4 trillion in 2008, an increase of 8% from 2007, according to Gartner. In October 2007, Gartner predicted 2008 growth just 5.5%. Analysts said much of the larger than expected growth is due to the decline in the U.S. dollar.

"The U.S.-led economic downturn shows no sign of causing a recession in IT spending," said Jim Tully, vice president and distinguished analyst at Gartner. "In subsequent years we will see reduced growth, but the fundamentals remain strong. Emerging regions, replacement of obsolete systems and some technology shifts are driving growth."

"Spending in IT services is being supported by two main factors," said Kathryn Hale, research vice president at Gartner. "Businesses are investing in improvements to internal processes aimed at reducing costs, while often maintaining some of the prior interest in innovation. The second factor is that globalization allows IT services providers to mitigate the risk of weakening demand by operating in more markets."

IT Spending Growing Faster in Smaller Companies
IT and telecom spending by small and mid-sized U.S. companies (SMBs) is expected to continue outpacing the U.S. Gross Domestic Product, according to research by AMI Partners. In 2007, smaller companies increased their IT and telecom spending 6.5%, three times GDP growth of 2.2%, a sign that companies with less than 1,000 employees are weathering the economic downturn better than their larger counterparts.

"We're beginning to observe IT vendors–-especially larger, established vendors–- transforming themselves to be increasingly SMB-focused," said Melissa Chong, an AMI Partners analyst.

In the past, for instance, considering product lines–-vendors have missed the mark in providing SMBs with fast, affordable, and easy to use IT solutions that solve SMBs' business problems.

Application Development Leads Outsourcing Initiatives
U.S. and Canadian-based IT organizations are more likely to outsource part or all of their application development needs than any other IT function, according to a new study by Computer Economics. Fifty-three percent of organizations surveyed use an outside service provider for application development whereas 44% outsource application maintenance. Ranking third at 40% is outsourcing of a corporate Web site or e-Commerce system. In this study, outsource is defined as being performed through an onshore third-party rather than offshore.

Varied Impact of Economy on IT Budgets
A Forrester Research survey of senior IT managers found that 49% of North American companies have cut their IT budgets as a result of the economic downturn. However, the demand for IT services is holding steady with 45% of firms planning to increase their use of applications outsourcing, 43% expanding their use of infrastructure outsourcing, and 43% moving more work offshore. The survey also found a growing trend with 20% of firms planning to outsource convergent telecommunications and network management.

"This in not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography," said John C. McCarthy, vice president and principal analyst at Forrester Research. "The demand for enterprise IT services has not dropped significantly."

Forrester also found that spending on IT security will continue to grow in 2009, according to a poll of North American enterprise and SMB (small and medium businesses) security decision-makers. Security makes up 10% of overall IT operating budgets in 2008, up from 8% last year.

Economic Conditions Inflation Jumps 1.2% in July
Inflation should ease during the fall after a sharp rise in wholesale prices during the summer, according to research from BMO Capital Markets. Wholesale inflation surged 1.2% in July, the fastest pace in 27 years, largely as a result of rising costs for energy, motor vehicles, and other products. Core prices, which exclude food and energy, rose 0.7%, the biggest increase since November 2006.

"A firmer dollar, retreating commodity prices, and continued economic weakness would dampen inflation by the fall," said Sal Guatieri, a research economist at BMO. Decreases are already seen in oil and other commodities, Guatieri added.

GDP Revised Upward for Q2; Expected to Slow to 1.5% for Q3
The U.S. Gross Domestic Product (GDP) for Q2 '08 was revised upward to 2.8% from 1.9% by the Commerce Department. The key changes were a much bigger contribution from foreign trade–-reflecting surging exports and falling imports–-and less inventory liquidation than first estimated, according to analysts at Global Insight. In addition, consumer spending increased 1.7%, better than the Q1 increase of 0.9%, largely due to economic stimulus payments. Global Insight predicts that GDP growth will slow to 1.5% for Q3 and then dip to 0% or below in Q4.

U.S. Worker Productivity Soars
American workforce productivity soared during Q2 2008 while labor costs declined during that same period, according to the U.S. Commerce Department. Productivity–-defined as the amount of output of every hour of work–-jumped at an annual rate of 4.3% from April-June, a full percentage point higher than economists predicted. During the same period, labor costs fell at an annual rate of 0.5%.While rising wages is good news for workers, if those gains outstrip the increase in productivity, it raises the risk of rising inflation.

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