Red Hat forced to hire cheaper, less senior engineers amid budget freeze

Email tells bosses to down-level open positions to control costs

Exclusive Next year, IBM's Red Hat plans to cut back on hiring senior engineers in an effort largely aimed at controlling costs.

An internal email sent on Wednesday by Timothy Cramer, SVP of software engineering, to Red Hat managers directs hiring requisitions to be made at a lower level of seniority than usual.

"All new plan reqs should be opened at a level below senior (e.g., Associate Software Engineer or Software Engineer)," the message says.

"While this change allows us to use our budget more effectively, it also helps us balance the organization as we have many engineers with senior titles. We recognize that this will mean we need to plan for training and mentoring, promotions, and internal mobility as well, and we are here to support you in that."

All new plan reqs should be opened at a level below senior

The hiring budget update also says that current requisitions and backfills – positions vacated that need to be filled – should be offered at a reduced level.

"All current reqs and future backfills will be down-leveled by one level by default (e.g., Senior Software Engineer to Software Engineer)," the memo explained.

The email was provided to The Register by an anonymous individual claiming to be a Red Hat employee, and was confirmed to have come from Cramer by a Red Hat spokesperson.

Our source expressed concern that this decision, which applies to new hires, will harm the company. If Red Hat is unable to offer competitive pay or hire senior people, our source suggested, that's likely to limit the company's access to talent and to make it more difficult to retain existing skilled employees.

"The best talent wants to work with other like-minded and skilled people," our source said.

A set of FAQs prepared to address employee concerns about the situation indicate that Red Hat managers understand the staff retention risk the decision creates. The response to a question about how the policy will affect employees who want to move jobs within Red Hat but don't want a title and pay demotion acknowledges the challenge of implementing this policy.

The reply notes that "moving reqs a level lower could hamper [employee mobility]" and says the managers involved can make an exception request if necessary.

Cramer's memo describes the situation as "a great challenge for [calendar year] '22."

"We need to deliver on our 3-year strategy (where we are the tip of the spear) while balancing a lean budget increase (essentially, $0) and continuing to invest in our current associates as a priority," he wrote.

We need to deliver on our 3-year strategy ... while balancing a lean budget increase (essentially, $0)

This represents a significant change from IBM's latest quarter when Red Hat's parent was "aggressively" hiring to "[bring] in technical talent in Red Hat," as CFO Jim Kavanaugh described the situation during IBM's Q3 investor briefing.

A spokesperson for Red Hat confirmed the authenticity of the leaked email though said the message lacked important context.

"Tim’s group represents one function in Red Hat that had a tremendous amount of growth this year," Red Hat's spokesperson said. "We are excited to see his team incorporate and leverage the almost 1,000 new hires they brought on board while we invest in the other aspects of the business.

"As a whole, Red Hat has added more than 2,200 new associates this year to help us meet demand for hybrid cloud technology and to grow in areas like managed services and edge. As we continue to invest in those areas and beyond, we anticipate continuing that growth across Red Hat."

In 2022, that figure is currently set at around 200.

"Even with an almost flat budget, we still aim to hire around 200 additional associates next year, with more than 25 per cent of them scaling up our SRE organization to align with our 3-year strategy goals around managed services," said Cramer in his memo.

Red Hat has been described as a financial bright spot amid IBM's more beleaguered lines of business. The Linux biz, acquired for $34bn in July 2019, grew 17 per cent, according to IBM's Q3 2021 earnings report.

Though IBM does not break Red Hat's results out from the rest of its Cloud and Cognitive Software segment, up 2.5 per cent to $5.7bn in Q3, our source told us that Red Hat booked almost $1bn in business for the quarter, which was about 90 per cent of IBM's target.

Whatever IBM is doing with Red Hat's rising revenue – now at an annual run rate that's likely above $4bn – those results aren't showing up in Red Hat's hiring budget. ®