Growth In Number Of Start-Up Companies Drives Computer Scientists' Pay Increases

Salaries for computer scientists specializing in software design rose last year over 1990 levels, according to a recently released survey by the Massachusetts Computer Software Council. Pay increases were attributable to a growth in the number of start-up companies, which offered new job opportunities for software professionals, council officials say. While the recession eliminated jobs at larger companies, particularly among defense contractors and computer manufacturers, computer scientists found work and, often, better pay at small software firms developing and marketing their first products, according to the council. "This continues to be a very successful and growing industry," says Robert Keefe, a partner in the Boston office of Coopers & Lybrand, an accounting and consulting firm that helped compile the survey. Responses to the survey were received from 361 companies. Respondents were based in cities across the United States. The survey divided those polled into four regions--East Coast, Midwest, Southwest, and Northwest--plus two states with their own separate categories--Massachusetts and California. While the firms polled included software giant Lotus Development Corp. of Cambridge, Mass., most of the companies polled were small--84 percent reported that they employ fewer than 100 people, and 83 percent said they generated less than $10 million in revenue in 1991. Industry `Stars' Shine Among the findings was that chief technology officers--usually the head of research and development--received an average salary gain of 6 percent, to $95,000, in Massachusetts. In California, the pay hike for this position averaged 7 percent, to $87,000. Meanwhile, those referred to in the survey as "technical gurus"-- those considered to be software stars who work on special projects--received an average 11 percent pay increase in Massachusetts, where salaries averaged $88,000, and an average 12 percent gain at companies in the Northwest, where salaries averaged $64,000. But computer scientists didn't have to be stars to earn more money, the survey found. Applications programmers, who develop custom software, picked up an average 7 percent increase in the Bay State, to $37,000, and a 16 percent average hike, to $39,000, in California. "Opportunities for software people are tremendous," says Joyce Plotkin, the council's executive director. Plotkin stresses that the software industry should be viewed differently from computer makers, such as Maynard, Mass.-based Digital Equipment Corp., which are paring employees to cut costs. Recession Takes Its Toll The recession has had some effect on software professionals, however. The survey found that 22 percent of the respondents slashed jobs companywide and 21 percent froze salaries last year. When asked to project salaries for 1992, 17 percent said they will freeze salaries this year. As a result, some employers can be choosier about what they pay new employees. At Parametric Technology Corp. in Waltham, Mass., for example, pay scales for most new hires have remained fairly flat. Pay increases have been reserved for promotions. Industrywide, salary increases "will probably remain flat for the next six to nine months," says Lou Volpe, vice president of marketing and operations for Parametric, which creates mechanical design software. "It should pick up as the economy starts to bounce back." But as an example of the industry's potential, Plotkin notes that the overall revenue growth last year for software companies based in Massachusetts was 19 percent. And while just 800 software companies were located there in 1989, more than 1,400 companies were identified there in 1991. Startups Aplenty "Even in hard economic times, people laid off with severance packages go off and start a company," stimulating demand for software professionals, Plotkin says. "There's no drop-off in the number of startups," although specific data on the number of newly created companies aren't available, she says. Newly formed companies have provided a cushion for computer scientists who find the traditional big names in computer manufacturing unwilling to hire, Plotkin says. Moreover, the flexible nature of software design has spurred job demand around the U.S., not just in traditional computer hubs like California's Silicon Valley and New England, she says. Though some firms were reducing personnel, the survey found that 60 percent of the software companies nationwide were increasing the size of their work forces. The gains ranged from 48 percent in the Northwest region of the U.S. to 68 percent in Massachusetts. Moreover, jobs were added in leaps and bounds. Overall, companies were expanding by 48 percent. In the Southwest, companies were adding 97 percent more jobs, while on the East Coast, the number of positions was rising by 34 percent. However, Coopers & Lybrand officials note that these increases included hiring plans for marketing and support personnel, not just software engineers and applications programmers. And most of the fast-growing companies were small to begin with. "If you've got a 10-person company and it's about to go to market with a product, they might add five salespeople," says Ann Murphy, a Coopers & Lybrand senior consultant. "Well, that's a 50 percent increase." "It's definitely a small-company industry," says Ken Maddox, executive director of the Software Association of Oregon, which represents 300 companies. "You know about Microsoft [Corp. of Redmond, Wash.] and Borland [International Inc. of Scotts Valley, Calif.], but the bulk are small companies. Half of our companies here have one to five employees." Career Potential Among the software-design areas that the council believes are driving job opportunities are networking, telecommunications, and Unix and C language programming. In addition, software development for overseas markets, particularly Japan and Western Europe, is said to be growing. Computer scientists are still very much needed domestically. At Parametric, which expects to increase its overall head count by 77 percent this year, to 540 workers, as many as 50 of the new hires will be software professionals, Volpe says. "In any industry, you have winners and losers. Some companies are shrinking because they're unsuccessful or because of the difficult economy, or both," says Coopers & Lybrand's Keefe. "But I think there'll continue to be increasing competition for hiring. Layoffs at large companies will stimulate activity at smaller companies, so there'll be good people to hire," he says. "It'll also encourage people to take risks.... There's demand for talent." Edward R. Silverman is a freelance science writer based in Hoboken, N.J.

Growth In Number Of Start-Up Companies Drives Computer Scientists' Pay Increases

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