Silicon Valley poaching Kiwi talent with $150,000 salaries for grads

Friday, 20 August 2021

Pavan Vyas has a major problem: Growth.

He is chief executive of Rush Digital, the company that developed the Covid-19 tracer app. But rather than sit back and appreciate its success, he has other issues on his mind.

He needs to hire another 15-20 staff if Rush is to continue its growth trajectory, but hardly anyone is applying.

Across the country a lack of local talent in software development and design was holding back growth potential in New Zealand’s tech sector, Vyas said.

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Pavan Vyas, chief executive of Rush Digital, says the lack of supply of talented, experienced, software developers is the number one problem in the New Zealand tech industry.

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“Talent has become the number one problem in the tech industry.”

Sajeewa Dayaratne, vice president of engineering at Coretex says the salary amounts offered by Silicon Valley tech companies for New Zealand-based remote workers are impossible for local companies to compete with.

Things had recently grown much worse due to Silicon Valley poaching local talent with pay packages that blew New Zealand offerings out of the water.

“A graduate engineer in a tech company in the US gets paid $150,000 a year, plus stock options. The big US tech companies look at New Zealand and say ‘for that money I can hire a very senior engineer’,” Vyas said.

A recent case of big tech setting up shop in New Zealand was seen when Google announced a local software engineering team in Auckland. It has 50 staff in New Zealand.

Sajeewa Dayaratne, vice-president of engineering at Coretex also said members of his team had been approached by overseas companies looking for remote workers.

Dayaratne is looking to hire 14 extra staff, but said many candidates had priced themselves out of the domestic market by comparing New Zealand salaries to offers from overseas.

Brad Olsen says the economic situation has been shifting rapidly because central bank strategy has too.

“A graduate software engineer in New Zealand is looking at a salary of $50,000 or 60,000. In the US the starting salary is $150,000 not including signing bonuses and stock. This is impossible to compete with,” Dayaratne said.

And it was not only the big players who are poaching local talent Dayaratne said.

Graeme Muller says ‘digital pathway blockages’ are seeing people realise a tech in career is viable for them later in life.

“The companies that are going after New Zealand talent are not even well known. They are smaller tech companies in Silicon Valley who feel it is easier to work with remote workers for a fraction of the price,” Dayaratne said.

But according to Vyas, talent poaching will have a damaging impact on the entire tech sector.

“The risk is that New Zealand becomes a place that just builds intellectual property for other countries, and we don’t own any of it. If that happens we will fail to transition to a knowledge economy,” Vyas said.

Brad Olsen, chief economist at Infometrics said this was a key issue for the local tech industry.

“If we see New Zealand talent producing for overseas companies, then we are not extracting the full economic potential out of this resource,” Olsen said.

Double Yolk chief executive Jack Coleman says more foreign companies are recruiting Kiwis to work remotely out of New Zealand.

Olsen said the potential for an industry of “weightless exports” such as software, operating at full steam was vast.

“With knowledge intensive production we are not utilising a physically scarce resource, we are thinking about technological gains and human capital. This has a much larger potential for growth over the long term,” Olsen said.

Graeme Muller, chief executive of NZ Tech Alliance said as international companies brought their salary offers to New Zealand it was driving salaries in tech up.

NZ Tech research shows that on average a salary in the tech sector has increased by 30 per cent in the last 12 months. Before the increase it was already the highest paid sector.

Because local talent is moving overseas, New Zealand software companies are having to look offshore to find the talent that they need to keep their businesses growing.

“The big local software companies are having to employ people remotely because we can’t get them inside New Zealand. So we are seeing hundreds of software roles exiting the country as they are setting up in other countries,” Muller said.

Jack Coleman, founder of Double Yolk is one of the people facilitating the New Zealand tech industry’s access to offshore talent.

Coleman recruits software developers in India and sets them up to work remotely for New Zealand companies.

In recent months, demand for his remote workforce had gone through the roof, Coleman said.

“It is mind-boggling the scale of this shortage. We used to have on average 12 to 15 full-time software developers placed at a time. In the last month it has gone bonkers. We are up to 60 developers, and forecast to be well over a 100 placed by the end of the year,” Coleman said.

Coleman said the demand for tech talent is a global phenomenon.

“The Americans have a shortage as well. Even in India it is becoming increasingly hard for us to hire developers, we are competing with Microsoft and Paypal. From a global point of view there is just such a demand for software developers,” Coleman said.

Coleman believes a bigger problem than Silicon Valley poaching talent will be if a lack of local talent stunts the growth of local companies.

“You may not be able to get developers here now, but let’s not hamper development, lets not hamper innovation. Let’s connect with India and keep NZ businesses growing and humming. But we do need developers, there's no way around it, we need more people,” Coleman said.

Muller believes that until a solution is found, whether than be in a tweaking of immigration policies to allow more tech talent into the country, or forming a talent pipeline into the sector, the industry will not be able to operate at its full potential.

“This is delaying the next wave of game development studios, the next wave of SaaS,” Muller said.

Muller also believes that the current remedy of sourcing talent offshore will have negative impacts in the long run.

“The success of having a digital sector is that we have highly paid people sitting in New Zealand, creating intellectual property, and being taxed and developed in New Zealand,” Muller said.

“If you have a New Zealand company whose staff are being pushed more and more offshore, then effectively it becomes an American company, the tax and the intellectual property is sitting over there,” Muller said.

“In the long run unless this is addressed we will see the companies that do good things for our economy and can lift an entire sector, those companies will have more and more of their emphasis offshore,” Muller said.

An earlier version of this story said that Google had 262 staff in New Zealand (updated August 30, 2.45pm)