Why

As we are working on Sybil (our new talent management tool for development teams), we obviously spend a good amount of time discussing or thinking about skills management. While this give us a better view of the sector issues on this subject, it also makes its importance a “no-brainer” for us, while it may not be for everyone. I tried to summarize in this post why we think that skills and their management do matter in the software industry today.

It is the economy, stupid (reference)

Today’s economy in most parts of the so-called developed world is more and more a service economy, as services represent more than three quarters of USA GDP (number are similar for large parts of Europe). While not all services are human capital related, a good (and growing) part is, that has lead to the emergence (and recognition) of a “brain economy”: an economic system where the most important resource is no more earth or iron or even machines but human capital.

Resources

In economical terms, a resource is something you need to produce your services or products and that has some intrinsic rarity, which is clearly the case for human capital. In quantitative terms, the workforce is not something that is extensible in the short term: while it does evolve, it does so in demographic timeframes, which are mostly measured in years or even decades. In qualitative terms, persons qualified for a specific task are in limited numbers and again, while the situation may evolve, human capital evolution is something that takes time: if some sector is missing young graduates, even if decisive action is taken immediately, it will only show its impact in three to five years. An eternity, in economy.

Innovation and software

In parallel, to succeed in this new economy, one needs to bring innovation: new products, new ways of thinking, new ways of doing. Those new processes increasingly reach the world via a category of tools that are called “software”. Software allows to implement and execute thought processes, new or updated software being the evolutions of those processes.

What the “Software factory” metaphor has missed is that producing software is not similar to producing cars, because a software is already more the equivalent of an assembly line (it is an automated way to execute tasks on a standard and reliable way). This makes the production of software some kind of production of an assembly line. When the process becomes the product, the key aspect moves from having a large number of identical and interchangeable workers to having the right people to create the new process.

Human capital

It is the reason why today software tycoons such as Microsoft or Google are not flattering themselves with the number or size of the factories they own (while they may do it about their servers numbers), nor with the large size of land they possess, but mostly with the number and quality of their employees, especially engineers. As their future success is mostly build on products that does not exist yet, their long term investment is in new software and the people able to produce it, a strategy which has some similarity to investments in better and larger factory plants in the industrial sector: you need the innovation, and those things take time, so you need to prepare accordingly.

Shortage

What makes the current situation more difficult yet for software companies is that the human capital resources is not only intrinsically rare, but further limited as the demand for it is growing much quicker than the offer (partly due to the timeframe problem explained above). When your most critical resource is in short supply and that your needs (and those of the whole economy around you) are growing, you have to be especially efficient. When in addition your actions have a minimal one-year delay (new hires take time to be fully efficient, internal training programs effects are measured in years, not days or weeks), you have to be extra-careful.

Conclusion

Those points are not theoretical: they are things we hear or read about every day, whether from the press reports of from the people we meet in the various software companies we are in contact with. But they tell only one half of the story, the other will be the subject of the next post.