CompassList: Can Indonesia Plug Its Tech Talent Gap to Keep Its Digital Economy Growing?
CompassList.com — In 2016, Nadiem Makarim, co-founder and then CEO of Gojek, Indonesia’s first and biggest unicorn, flagged the shortage of local skilled tech workers that could help companies like his scale up their tech infrastructure. “If you want to scale [in Indonesia], you need an army of programmers to come in and coach our engineers directly,” Makarim told a Google Indonesia panel.
Five years on, the scarcity of tech talent in Indonesia – Southeast Asia’s largest digital economy, housing one of the world’s biggest and fastest-growing middle class – is still a pressing issue. According to Minister of Research and Technology Bambang Brodjonegoro, Indonesia faces a shortfall of 9m tech workers between 2015 and 2030. “If we divide it evenly, we will need 600,000 digital talents entering the labor force every year,” he said, referencing a McKinsey report.
Indonesia is not alone in needing more IT engineers, but its shortage is particularly acute. The digital economy has been the key driver of the nation’s economic growth in recent years. Between 2015 and 2019, the sector quadrupled in size – at an average annual growth rate of 49% – to reach an estimated $40bn and is forecast to grow to $124bn by 2025, according to research jointly published by Google, Temasek and Bain & Co.
This is as the World Bank upgraded Indonesia to an “upper-middle income country” last year, noting that 52m, or one out of every five, Indonesians are middle class. Not only is this group spending more – consumption growth has averaged 12% yearly since 2002 – they are also more exposed to technology.
Mobile phone ownership, for example, is near universal in Indonesian middle-class households where most people are used to getting things done online, usually through apps, be it shopping, ride hailing, ordering food delivery, studying or lending and investing.
Yet, Indonesia is producing only 278 IT engineers out of every 1m citizens in the population, says consultancy firm AT Kearney. In comparison, Malaysia produces 1,834 computer programmers per every 1m citizens, while India has 1,159. The shortage has led to soaring wages for early-career tech talent, with monthly salaries reaching IDR 20m – 10 times the average minimum wage in Indonesia.
Faced with such scarcity of IT engineers, especially in fields relatively new to Indonesia like data science and mobile app development, some companies have opted to outsource their tech development work overseas. Gojek, for example, has acquired four Indian software companies since 2016 to build up a strong engineering team to drive the ride-hailing super app’s rapid growth in Southeast Asia.
The government and private institutions have acted to attempt to plug Indonesia’s tech talent shortage. In November 2020, President Joko Widodo signed into effect new regulations, outlined as part of the “omnibus” Job Creation Law, that make it easier for companies to hire foreign workers.
Startups, in particular, are exempted from needing to declare foreign hires in most roles. This part of the law has drawn mixed reactions from the industry, with some praising the move to alleviate the talent shortage, while others highlight the ensuing potential disadvantages for local talent.
Universities respond
Local universities and coding schools, as pillars of tech talent education, are updating their curriculums and approaches to meet the industry demand for skilled workers. In the near term, while the number of IT graduates entering the workforce still wouldn’t be enough to close the gap between supply and demand, Indonesia’s tech workers can continue to be optimistic about their job prospects.
Bima Yudhistira, a researcher at think tank Institute for Development of Economics and Finance (INDEF) said that Indonesia produces between 50,000 and 70,000 IT graduates every year. The number is insufficient to meet industry demand. But the problem does not lie solely in the number of graduates – their competency is also a cause for concern.
Some employers have found it difficult to find fresh IT graduates that fulfill the level of conceptual knowledge and technical skills needed for their work, Saiful Akbar, Vice-Dean of Academics at Institut Teknologi Bandung’s School of Electrical Engineering and Informatics (STEI-ITB), said.
“A few alumni told us that when they screen 100 or more applicants for a job, they’d feel lucky if they can get 10 people answering basic conceptual questions correctly,” he told CompassList.
Tech roles tend to have very clear job descriptions outlining the types of skills and the level of proficiency required, he added. Thanks to such specifications and regular feedback from the industry, universities like ITB have been adapting their curriculum to fit employer needs.
However, the tech sector also often moves too fast for these institutions and their students to keep up. “Sometimes the technology and techniques students learn in university become obsolete by the time they graduate,” he said.
Raymond Bahana, Head of Program for Computer Science at Bina Nusantara University International (BINUS International), agrees. “So many graduates go to find work every year without the right skills,” he said in an interview. “Meanwhile, many companies want to find graduates who already have the right skills and the certifications to prove it.”
Bahana also suggests that the current shortage of tech talent might be symptomatic of a deeper problem. Some students major in computing without ever having attended coding classes at secondary school. “Some schools … only teach basic [Microsoft] Office skills. The applicants to our programs often pick up coding through extracurricular activities or through self-study.
“I think this is a really basic flaw. If there’re no computing lessons in formal education, how do we get students into computing programs in college?”
Market views
As in a typical market, the low supply and high demand for tech talent has led to high prices. On tech recruitment platform Ekrut, the average monthly salary offered to software engineers with two to five years of experience is around IDR 20m, according to internal data shared with CompassList by Ekrut CEO and co-founder Ardo Gozal.
For operations staff with more work experience, that figure goes up to IDR 34m. These numbers are far above the minimum wage in Indonesia, which differs from province to province but averages around IDR 2.5m.
Recruiting for some roles is more difficult than for others. Gozal says that local engineers in highly technical jobs, such as in machine learning and data science, are still rare. The same goes for engineering team heads and CTO-level appointments. Part of the reason, he says, could be because the roles and skills involved are very new in Indonesia. “When companies look for talent at that level, they’d usually find the same groups of people looking for opportunities,” Gozal said.
But not all companies can afford the high wages. “More established, well-funded startups tend to be more ready to pay higher salary increments, but not all startups can pay high wages,” Gozal said.
Corporations, he added, might be more rigid about not departing from existing standards for starting salaries, but as more companies commit to digital transformation, these big firms are also increasingly competing with startups for that small pool of talent.
Gozal did not have specific data on fresh graduate hiring as Ekrut focuses on experienced talent recruitment. Both Akbar and Bahana say that most of their students find employment or start their own business within three months of graduation.
Because talent in new fields and skills is scarce, companies have had to be more flexible in their hiring and set aside time for training, Gozal says. He provides an example of a company looking for mobile app engineers skilled in Flutter, a new software development kit (SDK).
“Since it’s very recent, there are probably not many people in Indonesia who have experience developing apps with Flutter,” he said.
“Some companies would look for people who might not have Flutter experience, but maybe they are coming from the React or Kotlin frameworks. The programming logic is similar, so these engineers can adapt to the new SDK.”
Hiring from overseas
The shortage of quality talent has led companies to outsource their IT development work or move their projects overseas, with China and India being popular destinations. Travel and tourism unicorn Traveloka, for example, opened an R&D office in Bangalore, India, in 2019. Gojek represents a more extreme case, buying over four Indian tech companies since 2016 to bolster its engineering team.
The combination of talent shortage at home and cheap talent abroad has also tempted Indonesian companies to hire from overseas. In the 2016 Google forum where Makarim highlighted Indonesia’s tech talent scarcity, he suggested the government provide incentives for software engineers to come to Indonesia to work in local companies. “It’s not a very complicated road map, but it requires political will,” he said.
Although the presence of foreign hires in the Indonesian tech sector still seems to be limited to high-level appointments, this could soon change with the new Job Creation Law supporting foreign recruitment by startups.
Previously, companies that want to hire foreign workers had to submit an “expatriate placement plan” document, as well as written permission from an elected official and a temporary stay visa for the prospective hire. With the new law, most companies only need the expatriate placement plan document. Furthermore, startups are now exempt from the requirements.
The new law has sparked mixed reactions from the tech community. BINUS International’s Bahana says that while foreign workers might bring positive changes to corporate culture in Indonesia and boost the skills of their local counterparts, the government may need to put some limitations on how many foreigners can be hired. “We might not be ready for a fully free jobs market,” he said.
Similarly, INDEF’s Yudhistira told media that the government should not resort to importing foreign talent as a “shortcut” to plugging the IT worker shortfall. “Letting companies hire foreign workers without permits or placement plan documents would be a blunder that will compromise the intake of local talent in startups,” he said.
Helping students find work
Already, universities are working to better equip their graduates for the job market. ITB and BINUS update their curriculums at least once every two years. They also offer students internship programs, so they can get a sense of the skills needed in their future jobs.
ITB plans to establish a new campus in Jatinangor, West Java, where a new class of students will get early access to the IT industry. Students will get taught by industry experts and participate in joint research with companies. “It would be something like a medical school and its adjoining teaching hospital, where senior doctors can train students in real-life situations,” Akbar said.
There are plans to start with two classes of 40–50 students each at the new Jatinangor campus, with total intake for ITB’s computing programs increasing to just over 400 students in the next batch, he added. The university is also finalizing agreements for industry partnerships, so that the Jatinangor campus can launch its industry experience programs by the time the students reach their third year of studies.
At BINUS International, Bahana stressed the importance of soft skills training that goes along with academic development and work experience. Team assignments and class presentations help computing students, who he says often “prefer to work alone,” acquire essential people skills.
“They tend to have a tough time at first, but after a few rounds of presentations they usually perform well. So when the time for internship comes, they usually do well,” he said.
Skills upgrade, stay relevant
Of course, job seekers and current IT workers should not stay idle. Given the rising demand for tech talent, it makes sense for job seekers to upgrade their skills and meet the expectations of potential employers. Gozal recommends taking certification exams, including those available on the Ekrut platform, and studying for technical tests.
“Most of the employers hiring through Ekrut use some form of technical tests to filter applicants and find the people with the right skills,” Gozal said. “Fortunately, these days it’s easy to find courses to level up your skills.”
IT education platforms like Hacktiv8 and Dicoding provide industry-relevant skills for students of all levels, whether they are beginners or experienced professionals looking to upgrade their skillsets. In some cases, the course providers also have links with employers or recruitment platforms like Ekrut, to give students the opportunity to find work or switch careers after completing their training.
Since 2015, Dicoding has attracted 240,000 members to its online platform to take courses and get certifications. Hacktiv8, which is best known for its tough, small-class offline bootcamp programs, has produced just over 1,700 graduates from its intensive courses since 2016. According to Hacktiv8’s outcome reports, 90% of those who graduate from its program succeed in securing employment in the IT industry.
As for competition from foreign hires, Gozal believes that the concern about a big talent influx from abroad is overblown.
“Maybe it would make sense at the level of VPs or heads of engineering, where the skills are rare,” he said, “but the salary [of foreign workers] is really high. It wouldn’t make sense for many companies to hire junior workers from overseas.”