Key Highlights from Softletter’s Software Company Staffing Report, Part I of II

(The following information is excerpted from Softletter’s forthcoming Software Company Staffing Report. Very little information or data is available on this topic in the industry and given the recent controversy over such topics as outsourcing, H-1B, the relocation of jobs from the U.S. to international venues, the possible misuse of H-1B by companies such as Disney and Southern California Edison and the ongoing questions about how software companies staff up, we think this information very timely. This article will be open through the end of the year and then only be available to Softletter subscribers.)

The Softletter 2016 Software Company Staffing Survey was launched in autumn of 2016 and will still be open for a few more days in order to enable  industry executives to participate and receive the complete summary results.The MatrixCX (www.allegiance.com) online system is used to generate and manage the survey. The survey has currently recorded over 300 valid responses from senior software executives, enough to ensure the summary results are stable and will not change significantly. The purpose of this survey is to develop a comprehensive snapshot of the current state of how software companies staff, what jobs are most typically outsourced, and how staffing resources are typically allocated.

Throughout this article, numbers of particular interest have been bolded. Decimals have been rounded off to one degree of precision for summary results and percentages may not equal 100%.

Respondent Profiles and Company Demographics

Development stage of your company?

These numbers are in line with our current industry standard benchmarks.

What is your company’s current gross revenue?

 For how many years has your company been selling software products/systems?

The number of companies reporting 10+ years for the SaaS cross tab is the highest we’ve ever recorded, a testament to the growth and dominance of the model.

What is your primary geographic market?

The majority stating their primary geographic market is the U.S. is not surprising, nor is the fact that the EU is the second choice. We found the 0% number for Mexico interesting. Our southern neighbor, despite its highly publicized problems with immigration and drug-trade driven lawlessness, is nonetheless steadily growing an increasingly affluent middle-class under the radar. There are opportunities in Mexico. Also, note that the question asks “primary” market, not every market. Major software firms such as Microsoft, Oracle, SAP and others all have major offices in Mexico.

The primary answer in Other is that the company sold to “everyone” and “everywhere” and equal mixes of different regions.

What is your company’s primary business model? (We define a SaaS company as a firm that provides remote access to its software typically via a web browser and derives revenue via some form of recurring revenue model. We define a mobile applications company as a firm that provides access to its software typically via a smartphone, tablet, or similar device. We understand the two models can intersect at different points, and leave it to your judgment.)

How many companies subscribe to your SaaS system? (We understand that within a company, you may have multiple subscribers who use and access the software. Please tell us only the number of companies who have subscribed to your system.)

How many active users of your mobile application do you have?

 How many regular employees do you have? (Please include only personnel who are on your payroll)

Do you employ H-1B personnel? (In the US, the H-1B program allows a company to employ non-US citizens if there is a shortage of US workers to fill skilled technical jobs. If your country has a similar program and you do employ this class of worker at your firm, please answer “Yes.” If it does not, please answer “No” and proceed with the survey.

There’s been a great deal of speculation about the usage and and extend of H-1B employee usage in the software industry. We had originally thought the number of companies reporting Yes would be lower than 28%, something in the range of 15% to 20%. On the other hand, the % of H-1B employee filling jobs in software companies is limited.

On a yearly basis, what % of your entire employee base consists of H-1B employees?

The low percentages seen here are surprising. H-1B visas are limited in number, though that number is slated to rise in 2017. We suspect under the Trump administration, their availability and the process of obtaining visas may change dramatically.

Analysis

H-1B was originally designed to allow U.S. companies to hire employees who possessed skills not easily found in the pool of available U.S. applicants. The program was initially not very controversial, but that has changed. The actions of companies such as Disney and SoCal Edison, wherein entire IT departments were gutted of U.S. workers and replaced by foreign workers, has radically altered perceptions of the program in the public’s mind and attracted intense interest by some in the media (Patrick Thibodeau, senior editor at Computerworld, provides some of the best ongoing coverage on this issue).

At Disney and SoCal, the laid off workers trained their foreign replacements under threat of losing their severance pay, making a mockery of the claim that the H-1B program was filling technology holes at either company. Rather, the clear goal in both cases was to replace highly skilled American workers with more cheaply paid foreigners. From a PR standpoint, both initiatives were disasters, with the Trump campaign focusing attention on the plight of the laid-off workers in certain venues, while the Clinton and Sanders forces were largely silent on the issue. Sources we have within the RNC have told us H-1B was a significant contributor to Trump’s narrow victory in Florida.

Another problem with H-1B is it raises the issue of the ultimate value of free trade. High-tech is dominated by liberals and progressives, who were overwhelming supporters of Clinton and are the loudest voices calling for expanding H-1B. Trump effectively used this issue to help him win an improbable presidential election victory and protectionism, tariffs, and similar measures against foreign involvement in U.S. hiring and free trade have reentered the national debate.

The traditional argument in favor of H-1B and free trade is that the efficient market eventually re-balances industries by opening up new job opportunities in spots up the employment food chain. But, in the eyes of most people, the Disney workers were already close to the top of the skills ladder. It’s one thing to tell burger flippers they need to obtain more skills, but what are highly knowledgeable IT specialists supposed to do? Obtain jobs at Nerds to Go? All become Ruby on Rails or Javascript coding cowboys? (Not that Mark Zuckerberg, Sergey Brin, or Tim Cook will hire them, as age discrimination is rife in high tech.)

And can the U.S. support the process of stripping away the employment layers of workers who listened to their parents, focused on the industries and skills of the future, and are now expected to hold down jobs at food courts in local malls? (Said opportunities shrinking fast, as Amazon and online shopping continue killing malls.)  It’s one thing to turn critical rare earths production over to the Chinese, but quite another to turn over maintenance of the country’s technology infrastructure to outsources.

In Silicon Valley H-1B is quite popular, but when you raise the issue of the Disney and SoCal firing, lips purse and eyes begin to focus on distant objects before program advocates wander away from the discussion. Regardless of Valley opinions, the opposition arising to oppose H-1B is potent and a growing political force. Some of the most significant reforms proposed for the system is requiring that visa applicants be paid top tier wages, thus removing the incentive to use the program as cost savings opportunity. Other reforms recommend an auction approach to granting the visas. Regardless, the Trump election ensures the program will stay in the public eye.

One startup we’re aware of is attempting to deal with the issue of the U.S. workforce lacking key technology skills by creating a new vocational partnership of local industries, educational institutes, and government. The concept revolves around creating new two-year colleges, with the the first schools located in the country’s principal technology centers: Silicon Valley, Austin, the 128 corridor, and possibly centers such Research Triangle Park in North Carolina, Silicon Alley in New York, and others.

The curriculum would focus heavily on teaching students the latest and most-in-demand programming, design, and engineering skills. During their matriculation, local technology companies would offer extensive internships to students and actively recruit graduating students for their companies. The educational infrastructure would be created by partnering with local schools augmented by distance learning systems. The price for attending these new colleges would be a fraction of what it costs to obtain a liberal arts BA at a typical four year college and the degrees would receive official state-recognized accreditation.

We’re not in a position to forecast the future of H-1B, but we think it prudent for software companies to plan around the possibility that the availability and costs of the program may change sharply.

In Part II of this article, we’ll complete our look at H-1B usage by software firms and look at information on temporary employment usage and how firms distribute their staffing allocations.

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