Tech job cuts reach Triangle

'The technology industry isn't immune to the overall economy'

******

CORRECTION

An article in Wednesday's paper about job cuts in the technology sector incorrectly said 45 employees would be cut from ChannelAdvisor in Research Triangle Park. The company eliminated those jobs Sept. 4.

******

THE BAD NEWS: Job cuts are sweeping through the Triangle's technology companies.

THE EVEN WORSE NEWS: The looming global recession is only beginning to have an impact.

Although prosperity reigned at many tech companies earlier this year, consumers and businesses alike have since reined in their spending. Since late September more than 900 job cuts have been unveiled by a variety of technology companies in the Triangle -- including, most recently, IBM and Lenovo, two of the region's major employers.

"The technology industry isn't immune to the overall economy," said Brooks Raiford, president of the N.C. Technology Association, an industry trade group.

The Triangle is home to software firms, telecommunications-gear makers and other tech companies, making the tech sector one of the crown jewels of the local economy. So its prosperity -- or lack of same -- reverberates throughout the region.

Moreover, technology jobs tend to pay well, so job cuts have an outsized impact.

Or as Raiford says of tech workers: "They make more than average and spend more than average." The average tech industry job paid $79,484 in 2006, 87 percent more than than the average job in the private sector, according to AeA, an industry trade group.

In addition to IBM and Lenovo, some half dozen Triangle tech companies have announced layoffs since late September. If the economy continues to sink, there could be more cuts.

"Most economists are thinking the worst of the recession is yet to come," said N.C. State University economist Michael Walden.

The rapid growth of economies in emerging countries has been a boon to many tech companies in recent years, but the luster of those markets is dimming given the worldwide slowdown, said Ronald Williams, an adjunct professor at UNC-Chapel Hill's Kenan-Flagler School of Business and a former IBM executive.

"I can't believe we aren't going to see a turndown in China and India and Russia [that will affect] people that were spending a lot of money on very high-cost goods," he said.

The dot.com bust

Although it remains a pillar of the Triangle economy, the local tech industry has never completely recovered from the dot.com bust at the turn of the century, said Walden. For example, he said, 25,145 people were employed in computer and electronics product manufacturing in the first quarter of this year, down nearly a third from the first quarter of 1999.

Nationwide, tech industry job growth this year through July totaled 1.3 percent -- lagging behind the pace of a year ago and the 2 percent growth in the private sector overall, according to AeA.

Given the economy's travails since then, a decline in tech jobs across the country "is a very real possibility" in coming months, said Jenna Leary, manager of research and industry analysis at AeA.

Even before the economy hit the skids, tech companies were outsourcing jobs to lower-cost countries and facing intense competition that offers enormous rewards to the winners but pummels the losers mercilessly.

Consequently, some of the latest job cutbacks announced by Triangle companies might have happened even if the economy were in better shape, said Williams.

"We have a set of global market forces that are reshaping things," he said.

Exceptions

Still, not every tech company is in cutback mode. Cary-based SAS, the world's largest privately-held software company, posted double-digit revenue growth in the third quarter. The company's U.S. employment has increased 3.9 percent so far this year, said Jim Davis, the company's marketing chief.

"We also have 183 open positions at SAS" worldwide, said Davis, who doesn't foresee any job cuts at the company. In May, SAS did eliminate14 jobs from its education division as part of a reorganization of that unit. The company has 10,834 employees worldwide, including 4,170 in Cary.

Likewise, Raleigh software firm Red Hat, which enjoyed 29 percent sales growth in the latest quarter, is hiring as its sales expand, said DeLisa Alexander, senior vice president.

"We literally have hundreds of jobs posted," she said. The company has 2,635 workers worldwide, including about 500 in Raleigh.

One silver lining in the latest restructuring is that tech companies that are expanding have a wealth of talent to choose from, said venture capitalist Jason Caplain of Raleigh's Southern Capitol Ventures.

"The competition isn't as much now as it was 18 months ago," he said.

Even in the current economy, Williams said, tech companies can prosper if they develop innovative products or adopt an innovative business model -- as Apple did when it created a new way for consumers to buy music with its iTunes.

"But if they aren't [innovative], if they just decide to pull in their horns and cut costs, then jobs go away," Williams said.