A worldwide shortage of information technology talent is hitting all industries hard, just as many of them are shifting into overdrive to prepare their systems for the Year 2000 and the single European currency.

Demand for the world's estimated four million to six million computer programmers, already at capacity, is increasing by 15 per cent a year, according to the Stanford Computer Industry Project, a software industry research unit based at Stanford University in California.

"There is a certain amount of software talent," said Avron Barr, co-director of the Stanford Project. "Whether that talent works for Microsoft or Citibank it's the same talent."

It's not a temporary situation, Mr Barr said. "It won't go away when Year 2000, the euro or when the Java craze subside. There's a worldwide talent shortage which is a long-term situation. It has already taken its toll on information systems departments as the best talent move to more lucrative positions."

US jobs related to information technology will increase at twice the average rate for all industries between 1996 and 2006, says the US Commerce department's Economics and Statistics Administration.

Meanwhile, there is reason to worry about the supply of newly-trained people to fill these jobs. Between 1986 and 1994 the number of US students graduating with computer science degrees fell by 40 per cent, according to the Economics and Statistics Administration. There are 50,000 computer science and engineering graduates this year, the agency said, but more than 250,000 unfilled information technology jobs.

Salaries are escalating to attract and retain these skilled employees. The Sunday Times reported on May 24th that US companies were staffing up for the 2000 problem by offering British programmers more than $7,000 (£4,605) a day and paying for weekend flights home on the Concorde to see their families.

Such measures may be misguided said David Foote, managing partner at Cromwell Foote Partners, a human resources consulting firm in Stamford, Connecticut. "You can't buy your way out of a staffing crisis," he said.

Extreme pay and reward tactics will not still work in 12 months time, Mr Foote said.

"You have to treat everyone the same. If you treat those who are coming in differently than those who are already there, you will foster a `have and have not' feeling among long-term employees." Besides, there are other ways to reduce turnover below the prevailing 20 per cent to 25 per cent a year, Mr Foote said.

Technology workers "gripe about getting no respect, being jerked around, and having no cool stuff to play with", he said. They want challenging work, respect and "psychological ownership" of their jobs. And though money has its uses, Mr Foote conceded, working conditions such as flexible schedules are important - and often overlooked.

"People are seeking more balance," he said. "By nature, IT people are adaptable and fluid."

Customised pay-reward schemes have been successful, Mr Foote said. Employers get around inflexible salary scales with a practice called broadbanding, which lets workers with more skills double or triple their salaries without a change in title. A favourable work environment also helps.

More staid industries are beginning to look like software companies, with casual dress codes, for example, said Laurence Sheehan of the Cambridge Assessment Center in Wellesley, Massachusetts. In order to recruit better, companies need to define their cultures better, he said.

"Know who you are and your style," Mr Sheehan advises. "When you interview, recognise the individual's style - and communicate that that style will be rewarded." To improve the match between staff needs and skills, some companies are hiring temporary workers, in effect trying them out before taking them on full-time.

"Over time, the cost of hire will be less if you spend money on the front end first," Mr Sheehan said. "Those who like the environment will not be pressing the organisation for more pay and benefits."

Mr Foote pointed out that different types of information technology workers seek different rewards. Some are business technologists, business-oriented problem-solvers with technology knowledge. Others are technical specialists with specific programming or systems skills.

Business technologists seek long-term rewards, Mr Foote said, while the specialists respond well to short-term rewards and benefits.

"Companies need to develop different rewards and incentives for the two groups," he said. Business technologists will be most in demand over the next few years, he predicted. They serve as project managers, line-of-business strategists, and analytical advisers, and are good at managing relationships.

"A big part of the job is technology," Mr Foote said, "but it also requires relationships, communication, trust and being a good marketer."

Companies should invest in business technologists but resist the temptation to recruit them from their own technical staffs, he said. The failure rate of such converted workers is 65 per cent to 70 per cent, Mr Foote said, compared with an 87 per cent success rate for recruits from business units or consulting firms.

"The world is moving to information workers rather than IT workers," he said. "Projects are failing not because of the technology, but because of the people."

Jeff Hunter, an account manager at Spectrum Concepts Consulting Corp, a technology recruitment firm in New York, said there is a clear trend toward hiring multi-talented technologists.

"Companies like Merrill Lynch and Bankers Trust are looking for someone with financial knowledge and good communications skills," he said. "They're looking for the whole package, someone who can contribute from day one, with technical and interpersonal skills."

Spectrum's New York office places 130 to 150 consultants a year. "The majority are not born in this country," said Mr Hunter. "The demand for talent has totally exceeded what we have here, so we're moving to recruit overseas."

To free clients of paperwork, Spectrum sponsors the foreigners - from Europe, Russia, India and elsewhere in Asia - for the visas or green cards they need to work here. The most popular skills are those associated with Microsoft Office Suite and database management systems such as SQL Server and Oracle.

When one company, Computer Associates International of Islandia, Long Island, could not find the talent it needed, it entered into a relationship with the State University of New York at Stony Brook to double the number of computer science graduates at the university. In addition to funding, Computer Associates is contributing personnel as senior lecturers and many of the students are given internships at the company and will eventually be hired there.

Ultimately, said Mr Barr of Stanford University, a company's attitude may its best recruitment asset. Companies that do not do a good job at fielding new software-based products and services will go out of business. "Some companies know that their future depends on software," Mr Barr said. "But some don't."