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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek technology

FEBRUARY 25, 2000 VOL. 26 NO. 7



Show Me the Stock Options!
Intoxicated by dot-com fever, sane folk are taking pay cuts and defecting to start-ups with trendy names. How long will the gold rush continue?
By YASMIN GHAHREMANI and MAUREEN TKACIK

The Hyatt Regency hotel in Hong Kong is having one heck of a time finding staff these days. Management couldn't even locate a suitable bartender, and not because the hotel is losing its five-star cachet. The trouble, says the inn's communications manager Therese Necio-Ortega, is that "all the young people we wanted to hire said they would rather design web pages."


Photograph by David G. McIntyre; photo illustrations by Simon Wan

Hey, who wouldn't these days? While the Hong Kong economy remains hostile for many job seekers, at least one sector is expanding like, well, something that looks remarkably similar to a bubble. The giant sucking sound you hear is the noise of Internet start-ups, flush with venture capital and starved for qualified workers, siphoning employees from the boardrooms and cubicles of less trendy establishments. Intoxicated by the opportunity to work in a sexy, new industry - not to mention the chance to strike stock-option gold - adventurous (some say foolhardy) employees are fleeing chosen vocations and leaping, nearly blind, into the terra incognita of cyberspace.

Dotcom Inc. is hiring.

Colin Bates recently left his job as director of strategic planning at Grey Advertising in Hong Kong to become vice president of marketing communications at HungryForWords.com, which offers Net-based foreign-language training. Bates took a 50% salary reduction to join the six-person management team, and now regularly works 14- to 15-hour days, compared to the 8- to 10-hour days he once toiled. "My kids are beginning to forget what I look like. And my wife is not very impressed at all," sighs Bates, who turned down a job offer from a traditional ad agency that would have doubled his salary at Grey. But the work is exciting, and the 36-year-old feels he's learning skills that will provide him "lifetime employability."

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Pulse: Battling Robots, Multimedia Wristwatches, Chinese Auctions and Websites That Have Something To Say

Toolbox: How To Install Linux On Your Pc

Politics.com: A Malaysian Website Makes An End Run Around Media Restrictions

Net Index: Asia's Tech Stock Bubble Has More Room To Rise

E-vesting: Online Pundit David Webb Uncovers Hong Kong Corporate Horror Stories

Assif Online: Singapore's Financial Portals Gear-Up For Online Trading

B2B: Global Traders Try To Beat The Boat

Wired Exec: Acer Whiz Goes Unplugged By Night

REGULAR ISSUE
Business Buzz: Japan -- Land of the rising Internet ad spend

Cutting Edge: If you like Apple's iBook laptop, but think its candy-colored case clashes with your macho image, then how about one in gun-metal gray?
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A year ago not many people cared to work for Asian Internet start-ups. Terry Filbert, executive director of Hong Kong-based recruiting firm Executive Asia, has one word to explain the sudden attraction: romance. Defectors are essentially taking pay cuts to join companies offering a piece of the action, Silicon Valley-style. With tech stock prices skyrocketing, options look like winning lottery tickets.

"Everyone wants to get rich quick" by switching careers, says Filbert. The lofty expectations are not entirely unfounded. Filbert headhunted a North Asia managing director for a fledgling software encryption outfit from an established Hong Kong telecommunications company. After a lot of coaxing, the candidate took the job for a package that included 20,000 options. The company listed on Nasdaq four months ago at $4.50 a share - now it trades at $38 to $40. "So this gentleman, who was not even really sure if this company was for him, has probably made a million U.S. dollars," says Filbert. Recruiters at the Morgan & Banks job placement firm tell about a director they introduced to a Hong Kong e-commerce company. The executive took a 30% pay cut, but when the firm went public he made HK$3.6 million on paper.

Managers with the right skills can command options, plus big-buck salaries. One multimedia professional recruited by Executive Asia for a dot-com job haggled with a prospective employer until he pushed up the offer three times - to 160% of his current salary. He still hasn't signed. "Before, if you did that once, you were lucky, twice - impossible," says Filbert. "They haven't walked away from the table yet. So it just shows you the desperation of clients."

That sweaty despair is a manifestation of the law of supply and demand. Even before Asia became Internet-besotted, the region had a severe shortage of Information Technology workers - computer programmers and technicians, webmasters, network engineers and technologically savvy managers. "It's the biggest challenge we face in Asia," says Gary Jackson, a Singapore-based vice president for Cisco Systems. Nor is it an uncommon one. The shortfall of tech workers in the U.S., a mecca for many of Asia's best and brightest, is estimated at 350,000.

In Singapore, where over the next several years one out of every four jobs created will be in IT, the shortage is estimated at 12,000 research scientists and engineers over a 10-year period ending 2005. Hong Kong universities turn out about 4,000 IT graduates every year, compared with a government-estimated annual demand for 5,000. "As I have mentioned repeatedly, our human-resources department is on full-year recruitment exercise," says Thomas Wan, CEO of Hong Kong-based semiconductor-design house Valence Technology Ltd. Wan's company is so short of staff it has resorted to buying integrated-circuit design centers overseas to alleviate the problem.

If anything, projections grossly underestimated demand because they did not anticipate the region's explosion in IT and Net start-ups. In Hong Kong alone, some 300 technology and Internet companies have been formed in the past 18 months. Many are hiring in bunches as they move quickly from concept to mid-sized company. Pacific Century CyberWorks staff exploded from about 100 to more than 500 in less than six months. Alex Arena, PCCW group managing director, says the company may double in size over the next 12 months.

Netalone.com, which creates Internet portals, has gone from zero to nearly 100 employees since December. "Even the tea lady and the driver have stock options," says Netalone.com founder William Lo.

Options, also known as platinum handcuffs, are the employers' incentive of choice because they encourage key staff to stay put. The right to exercise options is time-delayed, phasing in over several years. Sometimes the magnet is neither money nor options but celebrity appeal. One of the founders of ChinaNow.com, a Shanghai-based portal and online entertainment guide for mainland cities, was friendly with Kaiser Kuo, a former member of the immensely popular mainland rock band, Tang Dynasty.

When Kuo quit the group last summer, he went to work as the company's Beijing editor - and has become a selling point in its recruiting efforts, especially among engineering students. Eric Rosenblum, ChinaNow's chief operating officer, says when he told candidates about Kuo they got so excited they didn't even bother to bargain over salary. Rosenblum chuckles at the memory. "They'd say, 'Oh that's not important. I think this is the right place.'"

It isn't just skilled technicians that Internet companies are desperate to hire. They also need writers, marketers, advertising personnel, lawyers, in-house financiers - and hundreds of 20-somethings to answer phones, push HTML-coded copy and maintain websites. In Hong Kong, having no Internet experience is not an impediment to finding work in WebLand.




Chantal Teodorovich sold natural health and beauty products as managing director for 8Enterprises, a global "cosme-ceutical" company. Now she is marketing and communications manager at iAsiaWorks, a local start-up that just raised $85 million in venture funding. "My university was really advanced in terms of the Internet, and if I'd known then what I know now I would have gotten an IT degree," says Teodorovich, 25. "And maybe I would be retired by now."

Antony Yip, founder of MyRice.com, says only about one in five people he has hired for his China portal company knew anything about the Net. "The supply-demand curve is so misaligned right now, most people are basically looking for any warm body with a remote chance of succeeding," says David Kim, who oversees investments in the region for Softbank, Japan's giant Internet company.

"It would be so good to find someone with just that raw, geeky passion," agrees Mark Brown, chief operating officer of CareerNext.com, an Internet job recruitment site. "But there aren't any of those people here." So dot-coms are availing themselves of the next best thing: raiding experienced workers with transferable skills from other industries.

"There's been a huge surge from publishing and media fields into the e-com world, as well as the classic sort of programmers and web designers," says Russell Yeomans, regional director of Morgan & Banks. Public relations and advertising agencies are losing marketing talent, because "it's important for [Internet] companies to build strong name awareness and brand identity from day one," says Stephen Yap, associate director of Ogilvy Public Relations in Hong Kong.

There's hardly a field that hasn't experienced defections, and many feel powerless to stop the brain drain. An executive at Cable & Wireless HKT says that late last year his office endured a steady stream of Internet-related resignations. "In many cases, they were getting a 20% raise, plus stock options," the executive says, a package the telecommunications company could not match. Paul Chu, a former technology manager at Andersen Consulting, estimates that as many as 15 middle and senior ranking managers out of a total of 60 staff members left the Hong Kong office in the past year to go to e-commerce ventures. "The consulting industry is extremely worried," says ChinaNow's Rosenblum. "They're getting decimated by e-commerce."

Hardest to keep are experienced managers who can supervise all the eager children relegated to the Web's engine rooms. Those with an Internet pedigree are prime targets for poachers and headhunters, who dangle lucrative offers and in some cases are even willing to buy out contracts of desirable candidates.

Kenyon Lee, a venture capitalist with Techpacific in Hong Kong, says he receives on average four phone calls a week from start-ups or headhunters. Lee, 26, formerly worked at Spyglass, one of the original Internet browser companies. His services are in demand. When the phone started ringing, banks were on the line. In September, the calls came from new Internet companies. Lately, he says, it's the large Hong Kong conglomerates that are building tech businesses. "They hire very good headhunters; they're probably the most aggressive," says Lee. "They're willing to pay a lot of money."

Sharp elbows are flying in the jostling for bodies. A "key attribute" in new hires is their ability to bring good talent with them, says Yeomans. Lo of Netalone.com says half of his staff came from Cable & Wireless HKT, where he used to run the interactive cable-TV network. Roselyn Cheung, the managing director of Hong Kong multimedia company Lemon, claims two former directors of the company tried to take designers with them when they left to go to Chinadotcom's Web Connection last year. She believes they broke the conflict-of-interest clause in their shareholder agreement. "It was just a real bad way to handle it," she says.

Victor Mehra, one of the ex-Lemon directors and director of regional creative services at Web Connection, denies that he asked anyone to go with him. But several designers echo Cheung's story, saying Mehra and Sean Clarke - now Web Connection's regional business development director - tried to coax them to leave by offering a chance to help build a new, very creative design studio chock full of such amenities as in-office pool tables.

Anna Jean, who works in television programming and production for Pacific Convergence Group, says the poaching can lead to bad blood. "The heads of the companies are friends with each other. So it gets really tricky when someone gets offered a job because their boss knows the guy making the offer and he's thinking: 'You ass, I can't believe you're trying to steal my media department.'"

Poaching is fiercest within the Internet business itself. One dot-com manager said bidding wars had reached "unbelievable, irrational levels. People are hiring anything that moves for double the market rate. It's a very negative scenario." His firm, one of the more established, was suffering a "full-on assault" from a competitor. "They're sending e-mails with 15 job openings directly to our best people. They're spamming us!"

Little surprise that Silicon Valley job-hopping is becoming a normal practice, as accomplished e-commerce types play musical chairs, with option packages calling the tune. Last fall Edward Hsu left Sina.com, the mainland's No. 1 portal, to become chief technology officer at Chinadotcom, the mainland's sixth most-frequented website. He was followed by Andrew Miller, now Chinadotcom's head of North American sales and marketing.

David Kim was poached from a job with Lycos to become CFO of Chinadotcom, only to leave after taking the company public last summer to join Softbank. Lo of Netalone.com worked at Cable & Wireless HKT and headed Citibank's interactive banking initiative before starting his own company. And so it goes.

Some worry that escalating salaries and benefits spell trouble for Asia's fledgling Internet industry. Bad enough that top officials are spending large amounts of time and energy on recruitment, distracting them from the job of developing and running their companies. James Fong, who launched music site AsiaMix.com last October, says during the first four months of operation, he spent 80% of his time recruiting, going through more than 1,500 résumés to get his current 15-member staff. Alex Arena of Pacific Century CyberWorks estimates up to 40% of his time is taken up wooing job candidates.

But a larger problem is that salaries are being bid up to levels completely unjustified by business fundamentals. This is, after all, an industry in which revenues are scarce and profits even scarcer. With high salaries built into the cost structure, companies with dubious business models to begin with may be forced to close before they can adapt.

Fong notes that the heavy reliance on stock options to attract candidates distorts the importance of share price and puts a heavy burden on a company's fund-raising ability. "Sometimes you may raise money not necessarily because you need it but just to get the valuation so you can attract more talent," he says. Adds Steve McKay, chief operating officer of Web Connection: "We are looking at an incredibly high cost of labor that could damage the natural growth rate of this part of the economy."

There's no question that salary expectations have become unrealistic. K.F. Lai, chief of Singapore start-up BuzzCity.com, says he gave two 12-year-olds internships at BuzzCity for two weeks during spring break last year, but when he tried to get them back during the summer they were terribly sorry, but they'd already been offered several internships and were looking for the highest stipend.

With the local talent in seriously short supply, some companies have taken their recruitment campaigns global. Brett Rierson, a partner in Hong Kong start-up Incubasia, recently hired a web developer from Israel, through the recruitment service Headhunter.net. He hired another from Denmark. "All things being equal, of course, we'd like to hire in Hong Kong because it's cheaper," says Rierson. "But there are so few people here who understand the Internet."

Some are turning to the mainland, where universities churn out more than 100,000 science and engineering graduates a year. Singapore and Hong Kong have relaxed immigration policies to allow in more mainland talent (see story page 26). ChinaNow.com hired two channel editors from Zhaodaola and eLong, two Beijing-based Internet companies. Bagging them was a breeze; their previous bosses paid them poorly and were miserly with options - nowadays disaffected people like them are defecting from many established Chinese Internet companies, even the biggies like Sohu.com and Sina.com. Firms that expect staff to work long and hard can no longer compete without offering incentives.

Outsourcing work to the mainland is also an option for Hong Kong Net companies. But hiring mainlanders is not without drawbacks. Yip of MyRice.com, which owns numerous China websites, says workers need to be cajoled and "told things like: 'You're the king, you're the master webmaster.' I'm serious."

Moreover, China's media are state-controlled so the people in that industry tend more toward bureaucracy than creativity. The same goes for other types of managers at state-owned enterprises. "If you try to bring them into an Internet environment it just doesn't work at all - the hours, the pace, it's just completely different," says Rosenblum. ChinaNow.com prefers to hire non-managers with a couple of years of Internet experience and try to turn them into managers.

The reality: There is no instant cure for the tech talent shortage. It's a global phenomenon that, because of the booming information economy, is here to stay. "What we can see in the next 20 years is that there will be permanent shortages of people [in the tech industry], which will have lots of consequences, in immigration for one," says Kevin Kelly, Wired magazine editor-at-large. Forget all the searching for winning Internet business strategies. "People," Kelly says, "are the killer app." Find some today.

With reporting by Jim Erickson, Allen T. Cheng, Yulanda Chung/Hong Kong and Alejandro Reyes/Singapore

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