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Wage Wars: San Diego Software Firms Battle for Talent

Inside San Diego’s high-stakes tech talent war

By Brittany Meiling, The San Diego Union Tribune

Talent wars are waging in San Diego’s tech scene as companies grapple to hire — and keep — skilled software workers amid rising competition, thanks in part to the entrance of tech giants to the region.

Now that companies like Apple, Amazon and Walmart Labs are expanding or opening new offices in San Diego, the demand for senior software talent is higher than ever. These corporate titans have deep pockets and distinguished brands that act as siren calls to experienced engineers.

Cash-poor tech startups — and mid-size companies with less panache than their big-tech brethren — are now facing pressure to up their game when it comes to salaries and other job perks, otherwise workers might leave them behind.

The boost to the local job market comes at a high point for San Diego’s software scene, which is already experiencing growth thanks to the booming economy and global expansion of the software industry. But with growth comes growing pains, like finding workers who are vital to the local industry’s survival — and having enough money to pay them what they want.

Engineers constantly poached and recruited

As of April, San Diego-based software publishers have increased their labor force by nearly 7 percent since last year, seeing more growth than nearly every industry tracked by California’s Employment Development Department. The activity is evident online, where an average of 2,320 job postings are going live per month for computer programmers, software developers and web developers in the greater San Diego region. That’s 29 percent higher than the national average for an area this size, according to data provided by the San Diego Regional Economic Development Department.

And lots of companies are competing for the same workers, the data shows. As a result, local software engineers — particularly the experienced ones — are being aggressively pursued by head hunters.

“There is a steady stream of recruiters reaching out to me on LinkedIn, calling and texting,” said Josh Nock, a senior software engineer with more than 15 years of experience. In a busy week he gets contacted three to five times , he said, and has noticed an uptick in the frequency lately.

Jared Sanderson, a tech recruiter and director at Savya Solutions, said the competition has been steadily on the rise for years. While overall unemployment rates just dropped to 3 percent in San Diego County, Sanderson said tech unemployment is “virtually zero.” This is true in tech hubs around the country, but the local market is undergoing a bit of a transformation that’s likely spurring more competition.

“The landscape is changing quite a bit in San Diego,” said J. Michael Smallwood, CEO of digital giftcard startup Bitmo. “If you’ve been at Qualcomm or Intuit for a long time and think you want to do something new, there are a lot more options now.”

New options include the expanding satellite locations of big tech companies from other regions, including Google, Amazon, Walmart Labs and Apple. But home-grown firms are also boosting their headcounts. Software startup Seismic just raised $100 million and plans to add 100 new jobs by the end of this year. And ServiceNow’s local office, which serves as the company’s unofficial engineering hub, employs roughly 900 workers and is rapidly expanding their ranks, according to the company’s director of global talent and engineering, Jim Bartolomea.

“There’s been a big shift in San Diego with the emergence of software and SaaS (software-as-a-service) companies,” Bartolomea said. “Everyone is having problems finding talent right now.” ServiceNow has more than 100 job listings live on their website for the San Diego office.

Forget perks. Show them the money.

Engineers with valuable skills certainly have the upper hand when it comes to salary negotiations during a job market like this. But data show wage growth for San Diego developers may not be keeping up with the rapidly rising cost of housing in the region.

Local tech workers saw stagnant wages from 2015 to 2017, according to Hired’s latest State of the Salaries report, which showed average annual salaries stuck at about $108,000 for software engineers, designers, product managers and data analytics workers. That compares to San Francisco’s 2017 average of $143,00 (albeit the housing costs up north are higher).

In Austin, Texas, where housing is significantly more affordable, these same workers earn an average of $118,000 in 2017, up from $108,000 in 2015. The median home price in Austin is $368,600, according to Zillow, while San Diego’s median home price is $633,600.

“I regularly tell other software developers that I meet (that) if you’re not in love with the outdoors in California — surfing, hiking, camping — then your money will go a long way in most other states, especially Texas,” Nock said.

If not paying San Francisco dollars when it comes to salaries, large local tech companies are competing with other compensation perks. Sanderson said it’s common to see big companies offer sizable sign-on bonuses or equity packages for engineers.

“These stock options are already valuable, because they’re trading in a public market,” Sanderson said. Startup equity, on the other hand, is virtually worthless until an exit event occurs, such as an acquisition or an initial public offering.

What engineers want (other than paychecks)

This makes it tough for startups like Bitmo and marketing tech company Zeeto to have an edge.

“As a startup, you’re typically not going to compete on salary,” said Greg Kuchcik, who heads up hiring and human resources at Zeeto.

Instead, startups have to offer something else of value to workers. Flexible work culture and other office perks are only part of the package. Software developers are largely driven by challenges — is the product they’re working on complex? Are they solving compelling problems? These are critical to most engineers.

Equally important is the “tech stack” they’re working with. Engineers often don’t want to be forced to work with outdated coding languages and other technologies past their prime. This can be a problem for older companies who haven’t updated their products. But it can be an edge for startups.

“The tech stack would need to be pretty impressive to persuade a prospective employee to accept average pay,” Nock said. “It would need to be a resume-enhancing, cutting-edge product.”

Kuchcik said startups can also compete for talent by allowing engineers a seat at the decision-making table. At smaller companies, most employees get heard.

“Here, you work with the CEO and other C-level executives every day,” Kuchcik said. “Someone can come in and really have an impact.”

At the end of the day, Nock estimates paychecks mean a lot to workers.

“Eighty percent is salary and the remaining 20 percent is what that individual developer finds important to them,” Nock said. “If companies want top talent, they won’t find it at the median market rate.”

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