New Economy Means New Rules

ompensation levels for solution provider personnel continued their relentless surge in 1999, thanks mostly to e-business.

Managers, salespeople and technical personnel all shared in the gains, and in most cases these increases far exceeded the rate of inflation, according to data from the exclusive 2000 CRN Salary Survey.

For complete coverage of the Salary Survey, click here.

In addition, compensation increased substantially with the percentage of a solution provider's total revenue that comes from e-business.

And in the continued shift toward a service-based solution model, certifications can make a big difference in the level of compensation for technical staff.

The data also demonstrated that "old" skill sets, such as education and experience, still play a major role in compensation, as do age and gender.

CRN interviewed a total of 1,014 solution provider personnel in three categories: managers, salespeople and technical staff. These were further divided into four separate job classifications for managers, two for salespeople and seven (based on the level of certification) for technical staff. The solution providers employing these personnel have average annual revenue in the $10-million to $15 million range, though for individual companies the figure varies widely around this average.

For all respondents as a group, the median value of total compensation,defined as the sum of salary, bonus and commission,reached $60,000 in 1999, up 9.1 percent from the 1998 figure of $55,000. This increase was more than three times the inflation rate of about 2.4 percent last year.

More important to solution providers, however, is the fact that the rate of increase in compensation is accelerating. The 9.1 percent increase last year is more than a percentage point higher than the 8 percent jump in median compensation in 1998, according to the survey data.

"Salaries are really reflecting the growth of the [e-business] industry," said Brian Bernon, chief information officer of SeraNova Inc., a solution provider based in Edison, N.J. "The explosion of the dot-coms has driven the expectation that people can obtain higher compensation packages," Bernon said.

The rapid growth of compensation has put considerable pressure on solution providers' bottom line. Data from the CRN Reseller Financial Operating Performance Survey show that only the move by solution providers toward profit-rich services and away from low-margin products has allowed net income (measured as a percentage of total sales) to continue increasing.

Nor are these trends likely to change anytime soon. Solution providers are being forced to pay sizable increases in total compensation as the demand for skilled, experienced personnel continues outstripping supply. This is especially true as solution providers shift their business models to take advantage of the burgeoning opportunities in e-business.

"It makes sense because [e-business] is where all the new technologies are being used," said Ed Crosslin, recruiting manager at Nuforia Inc. (now doing business as Red Sky Interactive), an Internet and e-commerce solution provider in Houston. "For the next year or so, I see this trend [in compensation] growing even stronger," Crosslin said.

Managers, salespeople and technical personnel all realized solid gains in total compensation last year.

For example, median compensation for managers as a group reached $70,500 in 1999, an increase of 8.5 percent from the previous year. Of the four specific job classifications CRN surveyed within this category, three received double-digit percentage gains. High-level managers, such as chief executives and chief financial officers, saw their median level of compensation surge 15.7 percent last year, one indication of what top-flight managerial talent is worth to solution providers these days.

Salespeople realized the largest increase in median compensation among the three categories of personnel surveyed. Compensation reached $54,000 in 1999, up 13.6 percent from $47,500 in 1998. Both senior salespeople,those with five or more years of experience,and junior salespeople,those with less than five years of experience,saw significant increases in compensation. Experience does make a difference, however, as both the dollar size of compensation, and the percentage increase last year, were higher for senior sales staff compared with their junior counterparts.

Technical staff as a group saw their median level of compensation increase 7.4 percent last year to $58,000. While this was the smallest increase among the three categories of personnel surveyed, it was still three times the rate of inflation.

And among the seven certification levels CRN surveyed within this group, the gains were sometimes larger. Individuals with both the Microsoft Certified Systems Engineer (MCSE) and Cisco Certified Network Associate (CCNA) certifications, for example, enjoyed an increase of 12.1 percent in median compensation last year. For technicians with the Microsoft Certified Professional (MCP) and CompTIA PC Technician (A ) certifications, the increase was nearly 8 percent.

Other survey results show a strong, positive correlation between the percentage of total sales revenue coming from e-business solutions and the level of total compensation. CRN compared each respondent's total compensation with the percentage of his or her employer's (i.e., the solution provider's) total revenue that comes from providing e-business solutions. Comparisons were made for all respondents taken as a group, for the three major job classifications and for the 13 separate job classifications or certification levels.

The data show that for all respondents taken together, those who worked for solution providers whose e-business revenue makes up less than 10 percent of total revenue had a median compensation level of $58,000 last year. But for respondents working for solution providers whose e-business revenue accounts for more than 30 percent of their revenue, the figure jumps to $75,000, an increase of nearly 30 percent.

The trend is also clear among the managerial, salespeople and technical staff categories. For example, technicians working at solution providers where e-business makes up more than 30 percent of total revenue realized a median level of compensation of $75,000 last year. Compare this with the figure for technicians at solution providers with less than 10 percent e-business revenue, where the figure is only $57,500.

And even among those individual job classifications where sufficient data exists to make comparisons, the same general upward trend is evident.

One possible reason behind the correlation between e-business revenue and compensation is that as the percentage of e-business rises, solution providers are taking on more and bigger projects and moving into more specialized areas, requiring not only more personnel, but more highly skilled and specialized personnel as well. With the competition for talent so intense, solution providers (particularly smaller providers) have to pay, and pay well, to attract new people and keep the ones they have on board.

The survey also found that in a world of service-based solutions, certifications make a big difference when it comes to how much technical staff members are paid. To study this question, CRN surveyed technical personnel on the basis of their certifications, rather than by job title. Seven different combinations of certifications were chosen to be surveyed, based on which are most likely to be encountered in the field and which the vendors are marketing most strongly.

As the accompanying chart shows, compensation levels vary considerably depending on certification. Not surprisingly, the highest compensation levels are going to individuals with multiple certifications, and these individuals also realized some of the largest percentage gains in compensation in 1999.

"In-house, certifications are not as important as for those engineers we send to our clients," said Richard Goddard, chief information officer of Comark Inc., a solution integrator in Bloomingdale, Ill. "Technical engineers in the field need a variety of certifications in major applications and solutions to be able to provide total service to customers."

Survey results show just how big the increase in compensation can be when new certifications are added to existing ones. One example is when a technical staff person with an existing A++certification decides to add the MCP certification. As the accompanying chart shows, the median level of compensation for an individual with both certifications is $66,750, while for the A++certification alone median compensation is $50,000. This represents an additional $16,750, or a whopping 33.5 percent, in compensation for adding this MCP certification. The results are similar when the MCP certification is added to an existing A++certification.

Why is the increase in compensation so big? Combining these two certifications, rather than having either the A++or MCP, gives the technician the ability to service both hardware and software, instead of just one or the other. As a result, the technician can meet two interrelated needs rather than one, which, as stated earlier, yields a big advantage for the solution provider while allowing the technician to command a higher level of compensation. If there is a service call where the customer is unsure if the problem is hardware or software related, the solution provider now has an individual on staff who can fix the problem either way.

The survey data also show that factors such as education, experience, age and gender continue to play key roles in determining compensation, despite the ongoing changes in solution provider business models.

Education provides the most striking example. Among all 1,014 survey respondents, those with a college degree had a median compensation level of $65,000 last year, more than 80 percent higher than the median figure of $35,150 for those with a high school education. Those with graduate degrees tacked on an additional $10,000 to their compensation compared with college graduates. And even some college credit is worth money in today's market: Individuals who fall in this category had a median compensation level of $50,000 in 1999, more than 40 percent above the figure for high school graduates.

This trend,recalling the adage of "the more you learn, the more you earn",also holds true for the three broad categories of managers, salespeople and technicians, as well as for nearly all of the 13 individual job classifications or certification levels CRN surveyed.

The gender gap is also alive and well, according to the data. Men made up nearly 90 percent of the 1,104 survey respondents, and their median compensation last year came to $62,000. This stands in contrast to the $48,000 figure for female respondents, a difference of 29.2 percent.

Men also received a larger percentage increase in total compensation last year. Median compensation increased from $57,000 in 1998 to $62,000 in 1999, a gain of 8.8 percent. For women, the increase was 6.7 percent, as compensation rose from $45,000 in 1998 to $48,000 last year.

A more detailed look at the data, however, reveals some positive trends as far as female personnel are concerned. Among both managers and technical staff, the gap in compensation narrowed significantly in 1999. In the latter category, the difference in compensation in 1999 amounted to less than 3 percent.

Women also are moving into the sales ranks in larger numbers. Within the junior salesperson category, for example, 27 percent of the respondents to this year's survey were female, up from 21 percent in last year's survey. As these women move up the ranks, they can expect to see higher levels of compensation.

Experience also makes a big difference when it comes to what people are being paid. Among all 1,014 respondents, the median level of compensation in 1999 was $51,000 for those with less than five years of experience in their current job classification. This increased to $60,000 for those with between five and 10 years of experience, a jump of more than 17 percent, and further increased to $72,500 for people with more than 10 years of experience. The differences in compensation are most evident in the sales area, along with high-ranking managers such as chief executives, sales managers and technicians with MCP and CNE certifications.

"Education is key in its own way, and experience is key in its own way, but we really place a greater value on experience," said SeraNova's Bernon. "We leverage the experience of people who have worked in the IT environment, who have the right 'people skills' and who understand the infrastructure and the environment to get critical projects rolled out."

Age and experience often go together, and the survey shows that compensation increases significantly as workers get older. Those respondents between the ages of 18 and 30, for example, saw their median level of compensation reach $48,500 last year. This figure jumped to $64,000 for those between the ages of 31 and 50 and to $75,000 for those over the age of 50.

And unlike the results in last year's survey, this upward trend held true among the three major job categories CRN surveyed, and in most of the 13 individual job classifications or certification levels.

"We have a lot of younger people on staff because IT is a 'young' industry," said Nuforia's Crosslin. "But older workers bring a lot of skills to the table, particularly past experience. They have seen a lot more of what has gone on in the industry."

There were a few exceptions, however. The data show that junior salespeople over the age of 50 have a lower median level of compensation compared with their counterparts between the ages of 31and 50. The level of success in one's chosen career path, or employer's expectations of future performance, are factors likely playing a role in these results.

Finally, CRN asked respondents about their level of satisfaction with their overall compensation package. The results were quite positive, with more than twice as many people indicating they were either very or somewhat satisfied, compared with the number of respondents who said they were very or somewhat dissatisfied.

Compared with last year's survey, however, the level of satisfaction has actually slipped a bit. Even as the rate of compensation growth accelerates, many personnel, keenly aware of the tight labor market conditions, think they should be doing even better.

This is particularly true in the case of sales managers and technical managers. While the majority are satisfied with their compensation, the percentage that say they are dissatisfied has increased significantly. For example, 17 percent of sales managers surveyed this year said they were either very or somewhat dissatisfied. This is more than double the 8 percent figure from last year's survey. CRN