Recession & Inflation Together, What Does It Mean For Your Business?
The current state of the economy is a cause for concern for businesses. There have been increasing estimations over the past six months that global economic conditions are slowing down, yet record employment continues to be observed across many countries – an indication at least partly driven by growth in developed nations like America and China.
However there’s no doubt this trend will change as well, because even though we’re probably experiencing technical stagflation (slower growth and spiralling inflation), challenges are on their way.
Nothing is recession & inflation proof, the impact will be different from one recession to another and from industry to industry, however the pain will be felt by all in various degrees.
Looking at past data, it would seem at the last recession which was 15 years ago, software developer hiring dropped with the following trends:
- 01 Public Administration & Retail Trade (sub -10%)
- 02 Information, Educational Services & Logistics (sub -30%)
- 03 Administrative, Support & Environmental Services, Manufacturing, Hospitality and Healthcare (sub -40%)
- 04 Financial Services, Professional, Scientific, and Technical Services (sub -50%)
Will the trend be mirrored again in the same way? Probably not, and the digital transformation or innovation journeys triggered by the last recession are at different phases of completion. That means the demand will still be there but perhaps not in the same way.
With that said, good software engineers are a finite pool of talent, and demand for such skills is generally high. Recessions end, and when they do companies need to have new products or services in the pipeline to take advantage of that. If companies are slower in bringing new products to market, then their corporate recovery will take longer compared to companies who invest during recessions.
In the past, when recession bites, companies used to cut what was considered as unnecessary spending (tech), however as it’s all about digital and operational efficiency through transformation using technology, will the technology cuts be as the previous recession?
Are there lessons learnt from 2008? Well, every recession is different. 2008 had a very different landscape when compared to 2022 post-pandemic events (supply chain disruptions, geopolitical volatility etc). Many software engineers have been moving to contracting taking advantage of rising daily rates. Remote and hybrid working are more common nowadays. Automation has replaced some activities. The Gig economy is also more acceptable than in 2008.
Is this the right time to right size and use outsourcing models to position the company for strength and success in 2023 onwards?
Rightsizing could mean retain and train high value in-house expertise, whilst outsourcing cost-effective task or execution development. IBM, Apple and many other firms across the globe successfully use outsourcing effectively to scale or weather economic storms and softening the curves.
With outsource software development services from experts who know how these trends will affect demand patterns over time, businesses of all sizes have better chances than ever before to review their technology operating model against unprecedented levels doom and gloom surrounding them right now.
One way businesses can protect themselves from the effects of recession and inflation is by outsourcing software development, which helps reduce risk in times like these because it allows companies to access innovative technologies without investing upfront for research & development.
So is outsourcing something you’d consider to beat inflation and to prepare for riding the next recession wave?
Outsourcing software development is a great way to get high-quality, cost-efficient coding services, get in touch with us to explore a more cost efficient approach to your application modernization or digital strategy.