2015 IT Salary & Jobs Regional Report: The Southwest
The coasts might have the high-profile IT employers -- big banks and insurance companies, Google, Apple and Microsoft. But the Southwest is the region that leads the nation in technology job growth; and, as many IT professionals have found, that part of the country has plenty of natural charms.
"I think we're a hidden gem," says Lorenzo Gomez, director of the co-working space Geekdom in San Antonio, referring to the 80-mile Texas corridor from Austin (metro population 1.9 million) south to San Antonio (metro population 2.3 million) that comprises one of the economic centers of the Southwest.
Yet that gem may not be so hidden. By 2017 at least 9,000 new technology jobs are expected to be available in the Austin area (otherwise known as "Silicon Hills"), says Julie Huls, head of the Austin Technology Council. Already one in eight jobs in Austin is in the technology sector, and since those jobs pay well, they account for a quarter of the local payroll, says Drew Scheberle, vice president of the Greater Austin Chamber of Commerce. The chamber estimates that there are about 4,700 technology companies in the Austin area and that 110 people are moving to the area every day.
Why? "There are no quakes, floods, hurricanes or fires here," says James Bindseil, president and CEO of Globalscape, a San Antonio-based provider of file transfer software. "We occasionally get weather from the Gulf of Mexico, but it's short-lived. We are in about as good a place as you can get." With a subtropical climate, the average daily day-night temperature is 68.6 F, ranging from 84.8 in August to 48.8 in January.
"The general personality is that it is a place where a growing family can afford a home, education is available and abundant, and traffic is not bad," says Sheridan Chambers, principal at Denim Group, a cybersecurity and custom software company with offices in both Austin and San Antonio. New recruits get to choose which office they want to work in. "Austin has a reputation of being a place for college-age or slightly older people, with an incredible music scene," he notes, but family-oriented new hires typically choose San Antonio.
Do the math
IT jobs in the Southwest may not pay as well as jobs on either coast, but calculating the value of compensation is a two-part process.
Here's the first half of the equation: According to the 2014 Computerworld Salary Survey, base pay plus bonuses for IT workers averaged $97,188 in the Southwest region, which was only slightly above the national average of $96,943. The average for New England was $111,265. For the Pacific region, it was $105,783.
The differences were starker for individual cities with strong IT markets. The average total compensation in San Jose was $125,829, and in Boston it was $131,624. In the Southwest, Austin led at $105,799, but that put it 20% below Boston and 16% below San Jose. Other examples were $98,365 in Dallas, $95,205 in Las Vegas and $101,240 in Phoenix.
Incidentally, IT pay in the Southwest may be catching up to the rest of the country, as compensation increases were higher here than elsewhere, according to Computerworld's survey. Compared to 2013, average compensation was up 2.6% in the Southwest, while the average rose 1.8% in New England and 2% in the Pacific region.
But the second part of the equation, the cost of living, is what really closes the gap. While salaries in the East Coast or West Coast technology centers might be 20% or more higher than in specific cities in the Southwest, the cost-of-living differential (especially including housing) on the coasts is much more significant, according to figures from the U.S. Census Bureau's Cost of Living Index.
The index uses a weighted composite of the local cost of groceries, housing, utilities, transportation, healthcare, and miscellaneous goods and services to gauge the price of day-to-day life in different parts of the country, with the national average set at 100.
According to Census Bureau figures from 2010, the most recent year for which data is available, Boston's overall composite index rating was 132.5, San Jose's was 156.1, San Francisco's was 164 and Manhattan's was a giddy 216.7.
Meanwhile, San Antonio came in at 95.7, Austin's index figure was 95.5, Houston's was 92.2 and Dallas' was 91.9. Outside of Texas, index figures were a little higher, with Phoenix at 100.7 and Las Vegas at 101.9, highest in the Southwest.
The comparison gets even starker when considering only the cost of housing, which the Census Bureau used as 29% of the cost-of-living composite in its 2010 calculations. Seattle's housing index figure was 140.3 and Boston's was 152.7. And in San Jose, San Francisco and Manhattan the figures were off the charts, at 260.3, 281 and 386.7, respectively.
But in the Southwest all the figures were under 100: Dallas was lowest, at 70.7, followed by Houston at 82, Austin at 85.1, Phoenix at 90.4, Las Vegas at 94.1 and San Antonio at 95.3.
So even disregarding Manhattan, the cost of housing in the Southwest can be as little as one-third of that in some major technology centers.
"We are not able to compete with either coast, not if you compare salary to salary," says Robert Lagoudis, director of IT business management at San Antonio-based USAA, an insurance carrier for members of the armed forces and their families and a company that is regularly ranked in the top five on Computerworld's annual Best Places to Work in IT list.
"But our recruiting teams do a very good job of reviewing a cost-benefit analysis with prospects. And we sell them on what we are and what we do." Additionally, USAA brings prospects to town and houses them in a hotel on the famous San Antonio River Walk, where they can dine outdoors and enjoy a nonstop fiesta atmosphere.
"If they are coming from California or New York or some other place where it's much more expensive to live, they can take a salary not paying exactly what they were paid in that region -- but that won't take much of an adjustment," says Cody Horton, director of recruiting at Rackspace, a provider of managed services headquartered in San Antonio, and another regular on Computerworld's Best Places to Work in IT list.
As for people recruited from outside the area, "about 60% will relocate," while some of the others may work remotely, says Andrea Farmer, head of human resources at Globalscape, a past Computerworld Best Places to Work in IT honoree. "Some don't like the heat and the climate, or have kids in school. But it is always cheaper here."
Companies in Austin's tech sector specialize in areas such as semiconductor design, mobile apps and devices and biotech equipment, says Scheberle.
Gomez notes that San Antonio's main IT niches are security (thanks to local military operations and institutions of higher education) and cloud technology (thanks to the presence of Rackspace).
"The competition has heated up for key resources and skills," says Jake Dominguez, CIO at Austin-based chipmaker Advanced Micro Devices. "There is a lot of demand for developers [and people with expertise in] semiconductors, SAP or ERP solutions, and the competition is heating up around security." There are a lot of people with security expertise in San Antonio "due to the Air Force and the University of Texas at San Antonio," he adds.
"Local recruiters are looking more and more for people in the world of mobile applications, and people with good skills in data integration, big data, Drupal and . . . visualization and data analytics," Dominguez adds. "There is fierce competition for design engineers, for manufacturing and new technology, and we are seeing a lot of design centers being built."
For general business development, AMD has been able to find the people it needs in the Dallas/San Antonio-Austin/Houston triangle. But it has had to go outside the state for people with specialized skills, such as Sarbanes-Oxley app development, Dominguez says.
He says he has also seen a rethinking of outsourcing and offshoring, as managers decide it's better to keep key skills at home. "Changes are happening so quickly they can't afford losses of time in handoffs with [people in other] time zones," he says.
USAA has had a big appetite for developers, especially those with expertise in Java and mobile platforms, big data, business intelligence, and people who can use ETL (extract, transform and load) tools for data warehousing, says Jackie Head, the insurer's assistant vice president of application development.
More numbers to crunch
Of course, there would be no technology jobs without companies to create those jobs. And in Texas, one of the things that brings companies to town may be the low tax rate.
"As for what brings corporations here, the No. 1 reason is taxes," says Michele Skelding, a senior vice president at the Greater Austin Chamber of Commerce. She calculates that the per-capita tax burden is 16% lower than the national average.
There is no personal or corporate income tax in Texas. For non-utilities, a so-called franchise tax amounts to 1% of revenue for larger businesses, 0.575% for businesses with revenue of less than $10 million, and 0.5% for retailers and wholesalers. Franchise tax bills are waived if they're less than $1,000.
"It's a relatively minimal, insignificant factor," says the Denim Group's Chambers.
Texas raises the bulk of its state revenue through sales tax. And at 6.25%, "it's a relatively small tax," Chambers says, noting that local jurisdictions can levy their own sales taxes on top of that. "Products that are sold are taxed, including custom software and software delivered on a disk, while consulting and advice is not taxed," he explains.
In addition to the incremental sales tax, local governments raise revenue through property taxes.
"Rackspace has dealings with governments all over the U.S. and on three other continents, and I would say that the governments we deal with here in Texas are among the most collaborative that we've seen anywhere," says Rackspace CEO Graham Weston. "They're not giving away the store, but they understand how to encourage the creation of new jobs and new enterprises."
A storied tech legacy
The tech industry has played a role in the Southwest for quite some time.
Technology came to Austin in the 1960s in the form of an IBM facility, according to Scheberle. It got another boost in the 1980s when two research consortia, the Microelectronics and Computer Technology Corp. (MCC) and Sematech (Semiconductor Manufacturing Technology), set up shop in Austin to counter Japanese efforts to dominate the software and semiconductor equipment industries. Then in 1984, University of Texas freshman Michael Dell founded a PC company in his dorm room, part of a wave of startup activity that continues today, Scheberle says.
Another catalyst of the Austin-area tech sector was an effort to attract clean industries, part of a pro-environment stance adopted by Austin politicians, says Joshua Long, an assistant professor of environmental studies at Southwestern University in Georgetown, Texas, and author of Weird City: Sense of Place and Creative Resistance in Austin, Texas.
Technology arrived in San Antonio just as early -- in fact, the PC industry was born there. Founded in 1968 with local investments, Computer Terminal Corp. (later renamed Datapoint) began shipping the Datapoint 2200 desktop computer in 1971. The company could have used a chip from fellow startup Intel, but chose not to wait for Intel to reduce its processor to a single chip. Intel eventually put that chip on the market as the 8008, which was later enhanced to the 8080 and then the 8086 and so on, sparking the x86 microprocessor dynasty.
For its part, Datapoint was unable to compete with the subsequent flood of x86-based PCs, but the company's dissolution didn't have too much of an effect on San Antonio's tech sector, thanks in part to the area's large military economy.
Founded originally as a frontier garrison, San Antonio still hosts several large U.S. Army and Air Force installations, recently including the headquarters of the 24th Air Force, which handles cybersecurity and cyber combat for the U.S. Air Force.
Beyond the numbers
But jobs, salaries, the cost of living, weather and taxes turn out to be increasingly superficial considerations. "Today the trend, very specific to the millennial generation, is to first decide where to live and then find a job there," says Gomez. And what young people look for are cities where they can walk to work and walk to stores, restaurants and recreational sites. "They do not want to be beholden to a car," he notes, and therefore they prefer high-density urban areas.
Weston agrees, saying, "They want to live in a vibrant urban core, with high-quality and affordable housing, plenty of restaurants and bars and music clubs and other entertainment venues, good parks and bike paths and other outdoor recreation, and good public transit options."
Many locales in the Southwest may not fit the bill. The region has what Gomez calls "sprawl cities," spreading over cheap land to the horizon, making a car indispensable. However, both Austin and San Antonio are trying to do something about that.
In Austin, city leaders have been promoting high-density development since the late 1990s, leading to projects in the downtown area and east of Interstate 35 (which runs north to south just east of downtown) and south of the Colorado River (which runs east to west just south of downtown), says Long.
In San Antonio high-density development has been underway along recent extensions of the River Walk, both north and south of the downtown tourist district, says Gomez. Weston, who is a real estate developer as well as head of Rackspace, says he is personally involved in such development.
Then there is the question of charm. Austin has been careful to promote a reputation for eccentricity, embodied in the phrase "Keep Austin Weird" (which was coined by a DJ and later trademarked by a T-shirt company).
Long cautions that the idea that Austin is "weird" is more easily understood in context: Being accepting of those who dress differently, embrace alternative lifestyles and pursue a Dada-esque arts scene doesn't make the city any weirder than a lot of others, and it probably pales in comparison with, say, New Orleans, he says. But when you consider the fact that Texas conservatism prevails beyond Austin's borders, the embrace of eccentricity -- not to mention environmentalism -- is an example of what Long calls "Austin exceptionalism."
"You can find beautiful landscapes in other cities, but there are people in Austin who believe they live in a perfect, exceptional oasis compared to the rest of Texas, and even the U.S.," Long says.
Another major contributor to Austin's identity is the music industry. Music journalist, author and filmmaker Joe Nick Patoski says the music scene probably rivals the technology industry when it comes to attracting newcomers to Austin, which bills itself as the "live music capital of the world."
"There is a disproportionate number of live music venues -- you can hit 10 clubs easily in a night. Austin musicians are considered artists and given respect, even if they're starving," he notes. "Austin is cool, and that's not a marketing tool, but a grass-roots spirit you cannot create -- but from it have arisen profitable companies."
The PBS TV show Austin City Limits, which features music recorded live in Austin, has been on the air since 1976. The annual South By Southwest (SXSW) arts conference began as a music festival in 1987 and has since expanded to include film and interactive technology, according to Patoski.
Now that the tourists have discovered Austin's music venues, the hipsters are gravitating to the burgeoning local food scene; they'd rather stand in line outside a celebrity chef's hole-in-the-wall restaurant than wait to get into a dive club to see a band, Patoski says.
San Antonio, meanwhile, has shown less urgency about trying to establish a defining atmosphere. Or perhaps that lack of urgency is the defining atmosphere. "San Antonio is a third-gear city," says Gomez. "No one is in a hurry, whereas New York and London are in fifth gear. And the city is about relationships -- people ask about your wife and kids. If you want transactional interactions, there are other cities for that."
Gomez adds that San Antonio's proximity to Mexico and its heavily Hispanic culture -- Spanish is the predominant language in many parts of the city-- makes it easy to attract Mexican startups.
"We look for geeks with a great bedside manner, and there are a disproportionate number in San Antonio," Weston says. "One reason, I think, is that we've long had a thriving hospitality industry and a big military sector. People here, through their family upbringing and experience, tend to be polite and helpful."
Meanwhile, Long notes that it remains to be seen how the area's quality of life, if not its "weirdness," can be maintained in the face of continued growth. Traffic congestion is an issue, compounded by heavy trucks carrying Mexican imports down Interstate 35. And affordable housing is becoming scarce in Austin because of gentrification and the construction of luxury homes, he notes.
Regardless, "Austin is the creative center between the coasts," says Patoski. "Young people continue to flock here."