Beyond Silicon Valley: Tech Jobs Spreading Out of Tech Hubs
A decade ago, most tech jobs were concentrated in the “tech” industry. Today, every company is trying to transform itself into a tech company, and roles related to software engineering are spreading into retail, finance and other industries as employers rely on big data, mobile apps, and automation to deliver value to consumers.
How much has the distribution of software jobs shifted among industries and cities? To investigate this, we examined Glassdoor’s large database of historical online job postings for trends in software jobs over the past five years.
Here’s what we found. There have been two big shifts in hiring for software jobs since 2012:
- Software jobs are spreading to non-tech sectors: The share of software jobs has risen sharply in three industries since 2012: Retail, Banking & Financial Services, and Manufacturing. Meanwhile, the share has fallen in the Computer Software & Hardware industry and in Aerospace & Defense.
- Software jobs are spreading out from Silicon Valley: The share of software jobs has risen rapidly in Seattle, Washington D.C., Detroit, Denver and Austin since 2012. Meanwhile, the share has fallen sharply in San Jose, in the heart of tech-centric Silicon Valley.
What We Did
For this analysis, we used Glassdoor’s large database of historical job listings for U.S. employers. As the second most visited job site in the U.S., we’re in a unique position to study jobs data. We looked at all active, unique job postings on Glassdoor with “software” in the job title on June 1, 2017 and five years earlier on June 1, 2012. These include roles like software engineer, software developer, software engineering manager and many others.
We then looked at a sample of industries and metros for which we had the highest quality job postings data. Within that sample, the industries and metros had to have at least 100 open software-related jobs in each year, respectively. This allowed us to look at the percentage of software job postings that fell into each industry and metro category, both today and five years ago. From there, we show how the distribution of job postings has shifted among sectors and by geography today versus 2012.
Industries Gaining and Losing
First, let’s look at changes in software job openings among industries. Here is a table showing the industries in our sample with the largest gain in the share of software job listings between 2012 and today.
The industry with the biggest gain in software hiring was Retail, mostly driven by online retail giants such as Amazon and Walmart as retail purchasing has moved from brick and mortar stores to online. Over the past five years, that industry has risen from 6.4 percent of software job postings in 2012 to 13.9 percent in 2017, a whopping gain of 7.5 percent of total U.S. openings.
The second largest gain was in the Banking & Financial Services industry, as that sector has ramped up hiring of software roles related to online security and payments, electronic trading, and mobile banking apps. That sector’s share of software jobs rose from 2.4 percent to 4.4 percent during the past five years, an increase of 2 percentage points.
Finally, the Manufacturing sector is absorbing more tech talent since 2012, increasing its share of software job postings by 1.7 percentage points. As the beleaguered U.S. manufacturing sector has struggled, employers have made a push to become leaner and more technologically savvy, requiring a ramp-up of tech hiring.
As some industries have raised their share of software hiring in recent years, others have seen their share eroded. Below is a table showing the industries in our sample with the biggest decline in the share of software jobs since 2012.
Two sectors experienced the largest declines: Computer Software & Hardware, and Aerospace & Defense. Both are major employers of software talent, but as other sectors have stepped up their hiring for tech roles, these industries’ share of software job postings has eroded since 2012.
Over the past five years, the Computer Hardware & Software industry has seen its share of software job postings shrink from 35.5 percent to 25 percent today, a decline of 10.5 percentage points. This includes many traditional software and hardware companies like Microsoft and Apple. Similarly, the Aerospace & Defense industry has seen its share of software jobs shrink from 8.6 percent in 2012 to 6.5 percent today, a drop of 2.1 percentage points.
Interestingly, one sector that has seen a declining share of software job postings is the Recruiting & Staffing industry. This sector includes many IT outsourcing and staffing firms. Although they’re still a major employer of software talent, their share has shrunk from 8.7 percent in 2012 to 7.4 percent today, a decline of 1.3 percentage points.
Are Tech Jobs Getting Less Concentrated?
The above tables show there’s been a big shift in tech hiring among industries during the past five years. But have software jobs gotten less concentrated among industries overall during that period? That is, are tech jobs really diffusing out more broadly to all industries, or are they still staying clustered, but just clustered into a new set of industries?
One way to quantify how concentrated or spread out software jobs are among industries is by calculating what’s known as a Herfindahl-Hirschman Index (HHI). It ranges from zero to one, with zero meaning tech jobs are highly dispersed across any industries, while an index equal to one means they’re clustered entirely in one industry. The figure below shows the HHI index for software job postings across industries we calculated for 2012 and 2017.
Source: Glassdoor Economic Research (glassdoor.com/research).
In 2012, the index of software job concentration among industries was 0.16. By 2017 it had fallen to 0.11 — a decline of roughly 30 percent in terms of the HHI index value. This provides clear evidence that tech jobs are in fact becoming more dispersed among industries in Glassdoor job postings data, as software roles spread outward from the tech sector into more traditional industries like retail, finance and manufacturing.
Cities Gaining and Losing
Next let’s look at the geography of who is hiring for software jobs. How has it changed over the past five years? Below is a table of the metro areas in our sample that have seen the biggest gains in the share of software job postings since 2012.
Leading the pack for gains in software hiring is Seattle. As the home of tech icons like Microsoft and Zillow, as well as online retail giant Amazon, the Seattle area has long been a major employer of software talent. That trend has intensified during the past five years, with Seattle’s share of software job postings rising from 10.2 percent in 2012 to 16.9 percent today, a large increase of 6.7 percentage points.
Other metro areas that have witnessed a rising share of software job postings include Washington, D.C. (up 1.3 percentage points), Detroit (up 0.8 percentage points, partly a reflection of the gains in the Manufacturing sector noted above), Denver (up 0.7 percentage points), and Austin (up 0.7 percentage points).
These data reveal a consistent theme: The distribution of software hiring is slowly expanding outward from Silicon Valley, and toward smaller, more affordable metro areas with fast-growing clusters of tech employers.
As some metros have seen their share of software job postings increase, others have seen their share eroded. The table below shows the metro areas in our sample that witnessed the largest drop in their share of U.S. software job postings between 2012 and today.
The biggest decline was in San Jose, located in the heart of Silicon Valley. In 2012, that metro boasted a whopping 15.8 percent of U.S. software job postings according to Glassdoor data. By 2017, that share was down to 8.1 percent, a drop of 7.7 percentage points. This largely mirrors the gain in software jobs in Seattle, as many San Jose-based tech employers have expanded hiring in their Pacific Northwest offices.
Other metros that experienced declining shares of software job openings include San Diego (home to hardware and microprocessor chip giant Qualcomm, down 1.4 percentage points), Baltimore (down 1.3 percentage points), Houston (down 0.6 percentage points), and Portland (down 0.5 percentage points).
Today, every industry is in some measure trying to transform into a “tech” industry, using software, automation and big data to streamline operations and boost value to consumers. This economic trend is in turn transforming the tech labor market, in two important ways.
First, our analysis of Glassdoor job postings reveals that software jobs are diffusing among industries. Working as a software engineer no longer requires working in a software company. Instead, it can mean building tools for online stock trading platforms, or writing code that automates logistics at an online retailer.
Sectors like retail, finance and manufacturing are hiring a larger share of software talent since 2012, while more traditional tech employers in computer software and aerospace are hiring a smaller share.
Second, the geography of tech jobs is shifting in America. Cities like Seattle, Washington D.C., Denver and Austin have all witnessed their share of software hiring rise since 2012, while the iconic Silicon Valley tech hub of San Jose’s share has eroded dramatically.
Although Silicon Valley will almost certainly remain among the nation’s top tech hubs for decades to come, the world of software jobs is flattening — both by industry and geography — and the big winners in coming years are likely to be the lower-cost U.S. metros with fast-growing tech clusters that have attracted a rising share of software job postings in recent years.
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