America is facing an unprecedented mismatch in the supply of and demand for talent. In a robust economy, over 40% of college graduates are still underemployed in their first job. And we know that if they’re underemployed in their first job, 2/3 of the time they’ll be underemployed five years later, and half the time they’ll be underemployed ten years later. Even worse, tens of millions of older workers are out-of-position relative to the skills required by employers. And on the demand side of the equation, there are over 7 million unfilled jobs, most of which are high skill or middle skill positions. The labor market isn’t working very well.
The skills gap is exacting a heavy toll on American families and institutions. It is impeding economic growth, promoting generational inequity, jeopardizing the American Dream, and creating real anxiety about the future of work.
Why is the skills gap worse than ever? Largely due to technology. Through my investments in technology staffing companies, I have seen the data firsthand: thousands of job requisitions sent to staffing firms where average fill rates may be no higher than 20%. The vast majority of these positions are jobs that–if not formally “IT jobs,” require discrete digital skills–which is consistent with reports that we’re seeing near-zero job growth in what’s supposed to be our most dynamic industry. According to the TechServe Alliance, the national trade association of technology staffing and services companies, IT employment is basically flat. TechServe lays the blame entirely on the supply of technical talent: “the rate of growth remains anemic due to an acute talent shortage.”
America’s skills gap remains primarily a technical or digital skills gap–not general, but rather specialized across thousands of specific technologies, some of which haven’t even been around for a year. For example, we don’t have a shortage of C++ or Fortran coders, although there’s huge unmet demand for J2EE, Microservices, and .NET developers.
The skills gap is clearest is in technology sectors that are evolving and changing most rapidly. Cybersecurity is Exhibit A. Whereas a decade ago, cybersecurity at most firms consisted of virus protection software, today it’s a mission critical function that senior management and the board of directors spend an awful lot of time and money on, because the cost of getting it wrong can be devastating. Unfortunately, trained talent is not readily available. According to international cybersecurity organization (ICS)2, the current cybersecurity workforce gap in the U.S. is nearly 500,000 and the global gap is over 4M.
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Waiting for colleges and universities to catch up is not a viable strategy. In an article a few years ago on Texas A&M’s effort to launch courses in cybersecurity, the Chronicle of Higher Education – American higher education’s paper of record – reached the following conclusion: “Work-force demand can lead some institutions to teach students the skills needed for today’s entry-level jobs. But those tools may well be obsolete five or ten years from now.” The implication–one that is absolutely in the mainstream of college and university thinking–is that updating curriculum to reflect cybersecurity needs may not be a worthwhile pursuit because such needs will change in five to ten years.
Employers are also unlikely to solve this problem by themselves. In a reaction to the higher cost of bad hires, and increased employee churn, U.S. employers increasingly insist on the perfectly qualified candidate. If job applicants don’t check all the boxes, they won’t be considered. Peter Cappelli of Wharton has observed this phenomenon: “Employers are demanding more of job candidates than ever before. They want prospective workers to be able to fill a role right away, without any training or ramp-up time. To get a job, you have to have that job already.”
Closing America’s skills gap requires solving a “many-to-many” problem. There are thousands of postsecondary institutions, bootcamps, and training programs and there are millions of employers. No single school has the capability to interface in depth and at length with hundreds (let alone thousands) of employers, and no employer is willing to allocate the time and resources required to engage with hundreds of educational institutions. As a result, there can be no question that the solution requires intermediaries to stand between education and employment and aggregate talent supply and demand. The only question is what form these intermediaries will take.
In my experience, the answer is most likely to be companies that have a commercial incentive to scale the provision of talent to their clients. One example in software development was our portfolio company Revature, a software developer staffing company that entered the business of sourcing and training new talent, and that grew at an astronomical rate before we sold the Company earlier this year. What Revature and other employment intermediary companies in our portfolio have in common is that they’re not schools. They’re established business services or staffing companies and already have relationships with clients–the hardest part of the skills gap to bridge. By adding talent sourcing and training, they can accelerate their growth and expand their margins by adding a new dimension to their business: the provision of purpose-trained talent at scale, typically on a try-before-you-buy basis.
In recent months, I have been exploring the cybersecurity market, attempting to ascertain which existing business models have the greatest potential to serve as employment intermediaries. Staffing firms? Pen testing? MSSPs? Of all the models I’ve looked at, one has piqued my interest more than others: building and transitioning security operations centers (SOCs) for clients. Building SOCs requires a broad funnel of talent for which the employment intermediary model is well suited. And since the whole point is to add value by transitioning talent to clients at scale, transferring an entire SOC of dozens or even hundreds of proven cybersecurity professionals could prove to be a scalable solution to closing the cybersecurity skills gap.
Over the next few years, I expect to see a range of cybersecurity businesses get into the business of providing trained, proven talent to their clients. It will be interesting to see whether existing cybersecurity staffing firms, solutions or consulting companies, or specialized build-and-transition SOC businesses scale fastest. But with a talent gap of 500,000 in the U.S. alone, the commercial opportunity is far too vast to remain unfilled for very long.
