Firms Hit Wall on Tech Worker Hiring in New York City

High-tech employees are so hard to find in New York City that some firms are giving up and expanding elsewhere, threatening one of the city’s fastest-growing industries.

Bart Feder, chief executive of the FeedRoom, a Manhattan-based firm that delivers online video for Web sites, searched for six high-end software developers for months. After it became clear that he wasn’t going to find them in New York, he opened a satellite office in Toronto, which has a wealth of untapped tech talent. It is also just a 90-minute plane ride away, he says.

“In New York, you’re competing against banks, media companies and Google for good software developers,” Feder says. “Right now, the demand is exceeding the supply.”

Brooklyn-based Etsy, an e-commerce site for homemade arts and crafts, is in dire need of software engineers as it continues to grow. With more than 250,000 registered users, 500,000 items listed on its Web site and more than $1 million in annual sales, it relies on engineers to maintain and increase its volume of business. So a few months ago, the two-year-old firm opened a San Francisco office, where it now has four engineers.

“There are more applicants out there,” says Etsy founder Rob Kalin, who expects to hire five more engineers by the end of the year. “More people come out with computer science degrees and want to work for startups.”

New York has enjoyed steady growth in tech jobs since mid-2003, and the sector is still healthy. As of June, there were 44,000 computer system design jobs in the city, 3,600 of which were added in just the first half of this year. Employment is up 12 percent compared with last year and is approaching 47,000, the peak number of tech jobs before the dot-com bubble burst in 2000.

But some observers question how long the growth will last, as companies continue to expand and wrestle for a limited supply of talent.

“Computer jobs are commodities. Employers can move jobs out,” says John Tepper Marlin, former chief economist with the city comptroller’s office and now a principal at consulting firm CityEconomist.

Looking overseas
More firms are considering doing just that. Online ad firm 24/7 Real Media started a foreign-exchange internship program in Paris and hired four interns in June. Full-time offers may be extended at the end of the program, but the company hasn’t determined where the jobs will be based—New York or Europe.

Companies are also becoming more accommodating just to retain the talent they already have.

When one of M5 Networks’ top employees had to move to Rochester, New York, for personal reasons, the Internet phone services provider opened an office there just to keep him on board. When the company hired someone in Chicago, it did the same thing—and now has a team of seven in the Windy City.

“You have to be flexible in this economy,” says chief executive Dan Hoffman, who originally had no intention of opening offices in those cities.

Almost a quarter of M5’s 110 employees work from their homes in other cities, such as Washington.

Not all tech employers are ready to give up on the Big Apple. Some companies are pouring more money into recruiting efforts. It used to be common to offer employees $250 to $500 per referral, but now companies are paying thousands, says Rick Dionisio, a director at executive search firm Staffmark.

Referral bonuses
The New York office of interactive ad agency Avenue A|Razorfish, with about 400 employees, recently boosted its bonus to $4,500 for referrals received between July 23 and August 3. Manhattan-based online job site TheLadders.com offers employees bonuses of up to $5,000.

The talent shortage is also forcing companies to be more creative. TheLadders.com plans to rent out a billiard parlor in the city in October and host a one-day event of fun and games where local techies can win cash prizes. It will be a first for the four-year-old company, which has grown to 146 employees.

David Carvajal, a vice president at TheLadders.com, doesn’t know how much the event is going to cost yet, but if the company spends $20,000 and can find two or three good people, he says, the event will be worth it.

“We are not ready to abandon New York,” Carvajal says. “Talent is here; you just need to know how to compete.”

Filed by Amanda Fung of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.