Bidding War Erupts for Young Programmers

By JULIE PITTA

July 30, 1996 12 AM PT

TIMES STAFF WRITER

PALO ALTO —

For many newly minted college graduates, job hunting is a lesson in humility. For 21-year-old Vik Gupta, it was just the reverse.

With a double major in economics and computer science, the Stanford University senior not only had four solid job offers long before graduation day, he was even the object of a bidding war among software companies that were desperate for his services.

Gupta opted for a $47,000-a-year post at database powerhouse Oracle Corp., where the perks include a swank fitness center with an Olympic-size indoor swimming pool and company-subsidized cafeterias featuring the trendiest in trattoria and Japanese noodle-bar fare.

“I probably low-balled myself a little bit, but I didn’t want to go over $50,000 because then I would start the job with a lot of weird pressure,” he said. “I had friends who got more than $50,000. You can pretty much make whatever you want to these days.”

Through a combination of good planning and good fortune, Gupta and his Stanford computer science classmates this year were perfectly positioned to capitalize on the opportunities being created by the information economy.

Good jobs are being created in many high-tech fields, and nowhere is the demand for skilled workers so great and the supply so small as in software engineering.

“Software programmers are the rock stars of the ‘90s,” says Pavam Nigam, vice president of engineering at a hot new Internet company called Healtheon.

Indeed, top-shelf computer science majors across the country are the clearest beneficiaries of a new economy that is increasingly based on brainpower, technical knowledge and innovation.

Among the most sought-after graduates in the Class of 1996, they wear their grade-point averages on their sleeves and are the targets of intense corporate recruiting battles. Often denigrated as nerds just 10 years ago, this emerging elite now commands as much money in their first jobs as do 25-year veterans on Detroit’s assembly lines.

This doesn’t apply to anyone who writes software, of course. The incredible pace of change in the computer industry means that the programming skills that were invaluable yesterday can be all but useless today. But those who are expert in the state-of-the-art database programming, computer networking and multimedia product development can often write their own tickets.

The bidding war is at its most intense in the Silicon Valley. Unemployment in Santa Clara County, the heart of the valley, was 3.7% in June, compared with 5.5% nationally and 7.2% statewide. Software-related jobs accounted for 90% of the 8,900 jobs added in Santa Clara County last year, an increase of about 25% from 1994.

“I’ve been working in the valley for more than 20 years and I’ve never seen it so hot,” says Jerry Held, a product development chief at Oracle. The number of programmers on his staff has more than doubled in 2 1/2 years, and this year he hopes to add an additional 800 to 900 to a software development team that’s already about 3,200 strong.

And Stanford, which boasts one of the top computer science schools in the country and has incubated some of the computer industry’s leading companies, is perhaps the most popular of all high-tech hunting grounds.

Many industry executives who are Stanford alums take great pains to maintain strong ties with the university, using donations of money and equipment to curry favor with the faculty members who can steer the best students in their direction.

Companies without special ties to the university can still pay $5,000 to $15,000 to be a part of the online job listing service run by Stanford’s Computer Forum. Qualified students find a smorgasbord of possibilities there, with scores of job offerings from big, established firms like Oracle, Hewlett-Packard and Sun Microsystems, as well as a host of small companies and start-ups.

A recent posting from Sun, a vendor of powerful computer “servers,” reads like a real estate brochure: “Sun’s new campus . . . includes a fitness center, a cafeteria, a Starbucks coffeehouse, and a deli/bistro.”

And a posting from Starfish Software trumpeted: “Reap the rewards as Starfish grows and prospers (we’re still private!).”

Carolyn Tajnai, assistant chairwoman of Stanford’s computer science department, says she can forecast the computer industry’s economic growth by the number and quality of job listings on the forum. Although it’s difficult to pinpoint, Tajnai figures that several hundred job openings have been posted during the last academic year.

“Salaries are going up again,” Tajnai says. “The jobs for students with bachelor’s degrees usually list in the high 40s; for master’s it’s in the high 50s and for PhDs it’s anywhere from $60,000 to $90,000.”

For risk-takers, start-ups typically offer salaries several thousand dollars below those of more established companies, but they offer the possibility of making a quick fortune via stock options.

An early stage start-up offers the option to buy stock at prices as low as pennies per share. The number of options can vary widely: Some are offering options on 5,000 to 20,000 shares of stock to lure new employees.

If the stock performs well, particularly if it is sold in an initial public offering, bidding can send a stock soaring to levels tens of times higher than its pre-IPO prices.

The flip side, of course, is that if the stock goes down--as many a technology share has in recent months--the options can end up being worth nothing, and the job can even disappear.

For the companies, the hiring derby can be as nerve-racking as it is for job-seekers in less-favored fields. Joe Kraus, Class of ‘93, was fretting rather publicly at a popular computer industry hangout near Stanford one recent afternoon, furrowing his brow and restlessly tapping his fingers as he complained about the difficulty of finding good programmers.

He wouldn’t seem to have much to gripe about: At the tender age of 25, he helps run Excite Inc., a company that makes search software for the Internet. Its April initial public offering made overnight multimillionaires of Kraus and his dormitory mates, who started the company only two years ago.

But right now, Kraus worries that his ambitious plans for the fledgling company will be ruined unless he can hire 50 more programmers before year’s end. “It’s gotten so bad that not only can’t I get the programmers, I can’t even get a headhunter,” Kraus said.

Recently, he found himself on the losing end of a competition for a 33-year-old programmer with several years’ experience in database management.

“His boss countered with a three-year, $250,000 contract plus a bonus just for sticking around,” he says. “He was good, but we didn’t think he was $250,000 over three years worth of special.”

There is a touch of irony in Kraus’ situation, since he declined the chance to be somebody’s well-paid employee and instead chose the other tantalizing career path available to Stanford computer science whizzes: starting a company. Netscape Communications’ Marc Andreessen, a University of Illinois graduate, and Yahoo!’s David Filo and Jerry Yang, both Stanford alums--who reaped major fortunes before turning 25--are the poster boys for this crowd, and there are, not surprisingly, many would-be imitators.

“I can’t think of anyone I know who hasn’t thought about starting their own company,” said Cyprien Godard, 26, who recently completed his master’s degree in computer science at Stanford. “I could have started at least two companies from my master’s project. I may do it at some point.”

For now, though, after sifting through four e-mails a day from prospective employers, Godard has settled on a $55,000-a-year job with General Electric Medical Systems. The reason? GE will relocate Godard, his wife and infant daughter to his native France and will enroll him in its two-year management training program.

“You look at a start-up first and eventually you end up at a big company,” he says.

But his friend Malcolm CasSelle, who received a master’s degree in computer science from Stanford last year, opted for the other route. He and a partner launched NetNoir, an online service for African Americans, with America Online as a major investor.

While still a student, CasSelle had worked at Apple Computer, drawn to the company by its reputation for a loose work environment.

“I really thought I would wind up working for Apple permanently,” CasSelle says. “It was very comfortable. I could have bought a nice car, but the exciting, raw, wild frontier feeling wasn’t there. After that, I decided that I really didn’t want to work for anyone else.”

Gupta’s experience, however, is more common. Before signing on with Oracle, he considered jobs at start-ups and established companies. He interviewed with Microsoft Corp., flattered that the software giant would consider him for membership in its vaunted corps of elite programmers.

But he found Microsoft’s intensity a bit much. “Microsoft shreds you,” Gupta says. “Microsoft’s idea of a job interview is, ‘Hello, now go to the white board and write some code.’ During lunch, they wanted me to code on a napkin. I nearly choked on my ravioli.”

Eventually, Gupta ruled out the start-ups, deciding that a more financially stable company would offer a greater variety of product development projects. He narrowed his choices down to two: Oracle and Intuit Corp., the leading maker of personal finance software. They offered identical salaries, though Intuit sweetened the deal with options on several hundred shares of stock.

The clincher? “My older sister used to work at Oracle and I first heard about it when I was 13 and a good friend of mine works there now and likes it a lot.” The other key factor was the company’s gym: “Working out is really important to me.”

“Any good company like Oracle is a good springboard to a start-up,” he continued. “I can go to one after I get some experience here.”

Oracle relaxed its grade-point average requirement to hire Gupta. “Oracle is very GPA sensitive,” he concedes. “I didn’t have the Oracle-esque GPA, which is at least a 3.6, while I’m in the low 3s. But they took me anyway.”

Competition has forced Oracle and its rivals into much more extreme recruiting measures than relaxing a grade requirement. Oracle recently held a recruiting fare fair at a storefront just blocks away from Ingres Corp.--a software firm that had recently been acquired by giant Computer Associates. More then 200 Ingres employees eventually left.

Oracle has also targeted two ailing competitors, Borland International and Sybase Inc., in the hopes of filling 150 spots in one of its product development divisions. “We’re looking for you and we’re not laying people off,” said a recent Oracle message on the Internet.

For companies that have neither the glamour of an Oracle or a Microsoft nor the get-rich-quick allure of a start-up, hiring can truly be a nightmare.

George Sollman, president of Centigram, a 19-year-old San Jose maker of computer networking gear with $100 million in sales last year, said the company was forced to delay a project by six months because it couldn’t hire enough programmers to do the work. “It beat the company up financially,” Sollman said.

“We’re sitting next door to [fast-growing rivals] Cisco and 3Com and they’re . . . always hiring people away from each other and when they’re not doing that they’re raiding from Bay Networks down the road,” he says. “We have to compete with that and it makes it very tough.”

Even a storied company like Netscape is having a difficult time attracting programmers. Kandis Malefyt, a Netscape vice president, said the 2-year-old company is losing prospects to younger start-ups where the possibility of making money from stock options is greater.

Some worry that too much money chasing too little talent will eventually have a negative impact on the computer industry.

“Because of this conduit that’s open to them, it’s becoming harder and harder to convince some of our best students to continue in the program,” says Eric Roberts, associate chairman of Stanford’s computer science department.

“Stanford is not producing its share of the next generation of research scientists, and it’s not because we don’t have the talent. Some of these people would make fantastic researchers and faculty members,” he said.

“Students just can’t imagine spending five or six more years in the program when they’re getting the kind of offers out there now. It’s a brain drain. Many fields are producing too many PhDs. That’s not the case with computer science.”

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About This Series

The Times today continues with the third part of a four-part series examining the dramatic changes sweeping the nation’s economy. Included in the series:

* Sunday: A look at central Indiana, an area best known for cornfields and high school basketball that used to be part of the Rust Belt. Now one of the nation’s most vibrant manufacturing areas, its dramatic metamorphosis from pauper to prince provides valuable lessons for the rest of the country.

* Monday: They are known as the Band of Angels and they’re a major reason why the river of green flowing through the Silicon Valley is overflowing its banks. As the financiers of the new economy, these so-called venture capitalists are tough, experienced and constantly on the prowl for the next Netscape.

* Today: Vik Gupta is among the clearest beneficiaries of the nation’s new economy. After studying computer science at Stanford University, he was among the most sought-after graduates of the Class of 1996. It’s an elite group that wears its grade-point average on its sleeve and has been at the center of intense recruiting wars. Ten years ago, these people were known as nerds.

* Wednesday: Where are all these changes taking us? To an economy that is based on knowledge, knowledge, knowledge. So what does the future look like? Try San Diego, which now bills itself as the City of the Future because of its toehold in areas such as telecommunications, biotechnology, medical instruments, computer electronics and software.

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Wanted: New Skills

The rising value of skills in today’s marketplace is reflected in a push by businesses to train their employees both to take on the duties of those whose jobs have disappeared in massive corporate downsizings and to use the latest technology. A look at the state of employee retraining in the nation:

* Amount businesses budgeted for all types of formal training in 1995: $52.2 billion (a 3% increase over 1994)

* Number of individuals who received formal training from their employers last year: 49.6 million (a 5% increase from a year earlier)

* Amount firms budgeted for outside educational expenditures such as seminars in 1995: $10.3 billion

* Companies with the lowest average expenditures for employee training last year: educational services

Source: 1995 report by Training magazine. All figures refer to U.S. organizations with 100 or more employees.

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FASTEST-GROWING OCCUPATIONS

Workers who are savvy about new technologies and the changing skills required by knowledge-oriented enterprises should be able to find jobs in many of the fastest-growing occupations into the next millennium:

Occupation: Projected employment growth from 1994-2005

Personal and home care aides: 119%

Home health aides: 102%

Systems analysts: 92%

Computer engineers: 90%

Physical and corrective therapy assistants and aides: 83%

Occupational therapy assistants and aides: 82%

Physical therapists: 80%

Residential counselors: 76%

Occupational therapists: 72%

Manicurists: 69%

Medical assistants: 59%