Why Software Developer Pay is Skyrocketing

The questions I am asked most often today are: why is it so hard to hire software developers and why are they so expensive? These questions are worth expanding on as the IT recruitment market is reshaping fast.

It’s a strange dichotomy. The world is in the grips of Covid, yet in March/April this year more IT jobs were advertised on Seek.com.au than ever in history. Why is this happening, and what does it mean?

In short, it’s a simple supply and demand issue, driven by a global shortage of software developers.

With once inconceivable computer power and data now instantly and flexibly available through the cloud and fast networks, the war for IT value and profit realisation has moved squarely to the software development race. As Microsoft CEO Satya Nadella said, “every company is now a software company”.

There is an abundance of juicy low-hanging fruit in product innovation, data analytics, AI, machine learning and computer vision, plus product improvement. Just about everything can now be improved, streamlined and cost-reduced through software-driven automation. All this requires Software Developers. And good ones - unless you want to build a Frankenstein product/system. But those days are gone. Users are savvy. If it’s not useful, accessible, fast, seamless, with sophisticated UX/UI prompting a response before you even really realise you need it, then no one will buy it.

Not only do you need good developers who really understand computer fundamentals, but you need a variety of them - and the right blend and team structures - to fully tap into the software goldmine: back-end, front-end, full-stack, database, mobile, automation testers, and SDET’S (Software Development Engineer in Test), or the software developers who build the automated software tests that are replacing what used to be known as ‘testers’.

Then there are the DevOps and DevSecOps engineers. These software/systems engineers have largely taken the place of infrastructure or network engineers to get software innovation perfectly and automatically deployed to your hungry, waiting customers and users. On top of this, you need this variety of talented developers to continually learn the ever-improving, powerful and easier-to-use software tools which maximise competitive advantage.

This surge in demand for developers has one major issue: there are just not enough out there.

In a talk a few years ago by the Global Human Resources Director for a top 10 technology company, she named the global shortage of software development talent as one of the top three strategic impediments to the company’s innovation and growth. Today these shortages are compounded further by Covid.

A 95+% reduction in skilled migration visas to Australia during Covid has firmly turned off our global talent tap. However, the global shortage in software development talent meant it was already comparatively slow running. Of far greater impact is that we haven’t produced enough software talent and we’re seeing developers stick to their secure current jobs. They are not seeking change because they fear market instability as a result of Covid.

Software developers overall are an analytical and somewhat cautious bunch. Many of the good and experienced ones have graduated from the energy drink-quaffing nocturnal keyboard warriors into parents, mortgagees, and school-fee payers.

Software developers, on the whole, are showing a decidedly ‘safer’ predisposition to stay put. This is the case even among those whose current role is sub-optimal. Seek.com.au figures in 2021 showed an increase from 20% to 40% in IT workers not prepared to consider a new job this year. These are unprecedented figures.

So here you have an insatiable global hunger for software talent on one side, and a record-breaking talent drought on the other. This has had many effects, not the least being an increase in software developer remuneration packages of somewhere between 10 and 30 percent.

Opportunism has played out among developers prepared to move. They have cashed in on the musical chairs opportunity, switching companies, joining competitors who have been willing to offer huge pay increases and promotions driven by their own struggles to hire real talent. Employers, realising the cost of losing good developers - and worse still not being able to replace them - match or better these inflated offers to entice the candidate to stay. Many of my clients have recently shared the pain of releasing an employment contract to a software candidate, only to have them snatched away through a counteroffer shortly after.

The situation is not all fraught. Highly skilled developers are being realised for their worth. High price tags for real talent is an equitable system. However, post-Covid, I predict a blood-letting, a bursting of the bubble for mediocre developers on these newly increased pay levels who do not live up to the expected value they deliver and will be let go.    

Looking at the current market, I see four positive plays by organisations:

  • Investing in retaining their great developers. They know good software comes from stable, cohesive teams. This investment comes through proactive pay increases; share and equity offers; work from home flexibility as standard, to effectively improve work/life balance; and a new sensitivity by employers to understand specific needs of their people to increase job satisfaction and retention. To get this right, companies need to have heightened EQ and have great relationships and communication in place with their techo’s - a fair definition of good tech company culture. This is being executed best by hyper-growth Australian start-ups and scale-ups who hire software developers constantly: think Canva, SafetyCulture and Atlassian.
  • Using skilled recruiters. Whether you use internal recruitment teams which have become more skilled and better paid, or specialist recruitment agencies, this is critical in identifying the right talent. But this isn’t the full solution to the problem of a skills shortage. However, investing in, and partnering with, capable internal and external recruiters gives companies the upper hand in hiring great talent.
  • Improved hiring processes. Companies are competing better in the interviewing and hiring process, through fewer steps, less time between steps and faster decision-making. The hard truth is, if employers can’t recognise what they’re looking for when they see it, then they need to better understand what it is they are looking for. To be competitive in securing talent, current best practice is interview-to-offer in under a week.
  • Growing their own talent. In recent years, slow-changing universities haven’t been able to adapt to the needs of the fast-growing IT industry. Making this situation even worse, a lack of international student enrolment since Covid means there is even less talent out there. The industry has realised it must take ownership by developing its own talent. We are therefore seeing an increase in cadet programs, both internally-run and, increasingly, outsourced through IT recruitment companies, who attract bright young talent to be trained in business and IT, and as the next wave of home-grown software developers.

The software race is speeding up with no let-up in sight. With no single way to provide talent fast enough to meet demand, the price of software development talent will continue to rise. There are those who are adapting to meet these hiring challenges, and there are those increasingly being left behind. Good companies are – and need to continue – to recognise this change and respond to it.