Sunday, December 18, 2005

Google blamed for jump in high tech pay

"It's driven up software engineering wages by 50 percent in the past couple years," Reed Hastings, chief executive of Netflix, the online DVD rental firm in Los Gatos, said recently at a conference for the technology industry's lobbying group.

The irony, of course is that Reed Hastings himself was a top notch software engineer when he started his first company, Pure Software. He took the proverbial second mortgage, and contracted as a consultant while writing Purify in his basement. When Pure went public, Reed deserved every bit of the success he got, including wealth and the other opportunities which he took advantage of. However, not that many of his employees became fabulously wealthy (especially given Pure's later history).

I started working for Pure Software as my first job out of college (and later returned to Pure after a short and none-to-memorable stay in graduate school). Reed managed to get me to stay at Pure for a year (when I had pending admittance to several graduate schools) by giving me (what seemed to me) a huge sign-up bonus, so he knows exactly what it's like to dangle money in front of someone who would be a starving graduate student.

In any case, I returned to Pure after graduate school, and at one point shifted desks. I accidentally left my paystub in my desk, and a senior engineer (hint to fresh grads: make friends with senior engineers who are honest and will give you some mentoring) inherited the desk. He took a look at my paystub, and then came to me privately and said, "You're not getting paid enough." I then went and explored how much the market was willing to pay for an engineer of my caliber in 1995, and discovered to my surprise that I could get a raise of over 45%, along with more stock options from an internet startup (the startup went on to a lucrative IPO before the 2001 bust). I took the job and never looked back. Software companies that under-value their engineers don't last long, and sure enough, Pure Software started bleeding talent soon after, and was eventually acquired by Rational and then IBM.

So as far as I'm concerned, the problem with the software industry isn't that of overpaying engineers as much as corporations systematically under-valuing engineering talent. Less than 1% of the population is capable of becoming good software engineers, and most of those people don't become software engineers for various reasons.

If you're a software engineer, it is to your advantage to network with good friends and occasionally compare salaries and total compensation. As my experience above illustrates, once in awhile you need a reality check or you might find that you've been systematically under-valuing yourself, an easily corrected situation in today's market. The secrecy around salaries only works to hurt talented employees who might not know what they are really worth. If you find yourself underpaid by more than 10 or 15 percent, it might be time to see what kind of a raise the market will give you.
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