November has seen uncertainties in the technology market with news of layoffs and hiring freezes from big names in the industry – Meta, Amazon, Salesforce, and Apple to name a few. These have impacted thousands of people globally, leaving tech talent with one common question, ‘What next?’
While the current situation and economic trends may seem grim, it is not all bad news for tech workers. It is true that people strategies in the sector may be impacted, but there are still plenty of opportunities for tech experts in the industry.
Here is what Ecosystm Analysts say about what’s next for technology workers.
Today, we are seeing two quite conflicting signals in the market: Tech vendors are laying off staff; and IT teams in businesses are struggling to hire the people they need.
At Ecosystm, we still expect a healthy growth in tech spend in 2023 and 2024 regardless of economic conditions. Businesses will be increasing their spend on security and data governance to limit their exposure to cyber-attacks; they will spend on automation to help teams grow productivity with current or lower headcount; they will continue their cloud investments to simplify their technology architectures, increase resilience, and to drive business agility. Security, cloud, data management and analytics, automation, and digital developers will all continue to see employment opportunities.
If this is the case, then why are tech vendors laying off headcount?
The slowdown in the American economy is a big reason. Tech providers that are laying of staff are heavily exposed to the American market.
- Salesforce – 68% Americas
- Facebook – 44% North America
- Genesys – around 60% in North America
Much of the messaging that these providers are giving is it is not that business is performing poorly – it is that growth is slowing down from the fast pace that many were witnessing when digital strategies accelerated.
Some of these tech providers might also be using the opportunity to “trim the fat” from their business – using the opportunity to get rid of the 2-3% of staff or teams that are underperforming. Interestingly, many of the people that are being laid off are from in or around the sales organisation. In some cases, tech providers are trimming products or services from their business and associated product, marketing, and technical staff are also being laid off.
While the majority of the impact is being felt in North America, there are certainly some people being laid off in Asia Pacific too. Particularly in companies where the development is done in Asia (India, China, ASEAN, etc.), there will be some impact when products or services are discontinued.
While it is not all bad news for tech talent, there is undoubtedly some nervousness. So this is what you should think about:
Change your immediate priorities. Ecosystm research found that 40% of digital/IT talent were looking to change employers in 2023. Nearly 60% of them were also thinking of changes in terms of where they live and their career.
This may not be the right time to voluntarily change your job. Job profiles and industry requirements should guide your decision – by February 2023, a clearer image of the job market will emerge. Till then, upskill and get those certifications to stay relevant!
Be prepared for contract roles. With a huge pool of highly skilled technologists on the hunt for new opportunities, smaller technology providers and start-ups have a cause to celebrate. They have faced the challenge of getting the right talent largely because of their inability to match the remunerations offered by large tech firms.
These companies may still not be able to match the benefits offered by the large tech firms – but they provide opportunities to expand your portfolio, industry expertise, and experience in emerging technologies. This will see a change in job profiles. It is expected that more contractual roles will open up for the technology industry. You will have more opportunities to explore the option of working on short-term assignments and consulting projects – sometimes on multiple projects and with multiple clients at the same time.
Think about switching sides. The fact remains that digital and technology upgrades continue to be organisational priorities, across all industries. As organisations continue on their digital journeys, they have an immense potential to address their skills gap now with the availability of highly skilled talent. In a recently conducted Ecosystm roundtable, CIOs reported that new graduates have been demanding salaries as high as USD 200,000 per annum! Even banks and consultancies – typically the top paying businesses – have been finding it hard to afford these skills! These industries may well benefit from the layoffs.
If you look at technology job listings, we see no signs of the demand abating!
As the saying goes, the “Future Ain’t What it Used to Be”. This has certainly been true of 2020. There have been many aspects of business that have rocked the foundation of what “used to be”, i.e. technology, changing business models, and digital transformation – all amid the onslaught of the coronavirus. All of these have affected every industry and every business, quite literally around the world.
Some businesses and individuals are beginning to effectively address and deal with this continuously evolving landscape. Others are unsure how to proceed. And still others are freezing like a deer in the headlights of an oncoming vehicle. While no one can predict the future with certainty, it is still possible to assess their rapidly changing environment and develop business scenarios to consider the various potential outcomes.
COVID-19 has impacted all businesses, industries, and individuals. It has impacted how both business and work is conducted. Even after the crisis has passed, new ways of doing both will be required. The businesses which are thriving right now understand these changing requirements and how they might impact their Future of Work. They have learned what is required for them to compete through a New Holistic approach in order to be agile and adapt to sudden changes and a very competitive global marketplace.
At Ecosystm, we have developed a new 360o Future of Work practice, based on the changing business environment and what companies need to adapt, pivot and thrive. The 360o Future of Work practice is comprised of four components:
- The Business (organisation)
- The People (employees)
- The Technology (tools)
- The Work Environment (where work is done)
The Business component is of course the driver. The People component is key – they are one of the most important assets to make the Business successful. They are the Talent. The Work Environment and Technology are critical enablers. As enablers they allow the People to be more collaborative, innovative, creative, and effective, to contribute to the Business’s success.
When all four components work in unison, the outcome is an effective Business designed to meet future challenges, competitors, and the unknown black swans – we call this organisation the “Empowered Business” (Figure 1). It is essential that each of these four components be understood and discussed and organisations seek advice in detail with respect to the specific business strategy in order for the Company to not only succeed, but thrive in the New Natural State of Equilibrium.
What to Expect
In subsequent articles, the 360o Future of Work practice leaders (Ravi Bhogaraju – People & Organisation; Tim Sheedy – Technology; and I – Work Environment) will discuss each of these components in detail and provide some insight as to how best to prepare for the new Natural State of Equilibrium, a post COVID-19 world.
For more information about the 360o Future of Work practice Or to speak to one of our experts, contact us on info@ecosystm360.com
2020 was originally forecast as a good year for technology spend. Many categories took a hit in 2019 – hardware, telecommunications, datacentres – even the software and IT services segments came down from their high growth rates of previous years. The consensus for growth in IT spend in 2020 was somewhere between 3-4%. But that growth is now under threat by the COVID-19 virus that is spreading across the globe. The 26th February was a significant day, as the number of new infections outside of China is now greater than those in China. Furthermore, the growth in infections is not isolated. Iran, Italy and South Korea all have experienced significant growth and the virus has hit Brazil, directly from Italy.
With the situation changing every day it is hard to have a firm view on how it will impact broader economic growth as well as the technology spending. Much will depend on the ability of countries to control the spread of the virus along with the fiscal stimulus packages of governments across the globe. Some countries are in a better position than others to push money into economies to keep them growing.
But even with the uncertainty, it is worth noting some feedback we are getting from tech buyers, vendors and economists. While much of this feedback is anecdotal, we believe it is indicative of trends across the market. The next few weeks are critical. If China shows that they can stop the transmission of the virus, that will help global confidence which has been hurt by the newer outbreaks in Italy, Iran and Korea.
Overall Economic Spend is Slowing
Businesses across the globe – particularly those in heavily impacted economies (such as China, Italy, Japan & South Korea) and those impacted by the slowdown in China (Thailand, Australia etc) – are putting the brakes on spending across the board. And there are not too many initiatives in businesses today that don’t involve technology. We are seeing projects delayed and – more rarely – cancelled. Several central banks, such as those in Thailand and Singapore, have lowered their growth forecasts, as has the IMF and OECD. Ratings agencies and economists have also reduced their growth forecasts for heavily impacted economies. The USA is avoiding much of the slowdown although the Nasdaq High Tech Index was down around 8-9% on the 28th February – the market has priced potential future slowdown into share prices already.
Limited Face-to-Face Collaboration Will Slow Tech Spending
We are also seeing the projects that are underway slowing down: more staff are required to work from home; experts can’t fly in to help drive projects; and without teams meeting physically, collaboration has become harder than ever before.
This doesn’t mean the projects aren’t happening – the timelines are slipping. Will this impact the overall spending in 2020? Yes! But not by much at all, as many projects these days are delivered in 3-6 months – not 24 months like years gone by. So, delivery will mostly happen in 2020, but more in the second half than the first half. But again, with the situation changing every day, the scenario might change. As soon as growth in the number of infections slows down and the travel bans are lifted, we can expect activity to slowly return. But the further out that is, the more projects will decrease scope, be cancelled or be shelved for another day.
Another factor impacting innovation and the resulting technology projects is the lack of face-to-face collaboration between management teams. Some businesses have already put into place initiatives to ensure their board and executive management do not meet face-to-face. This is because they are considered the most valuable assets to the business – and are often likely to be in the age group most heavily impacted by the coronavirus (over 50). While not suggesting that collaboration cannot happen in virtual environments, it is sometimes a shared experience or non-business interaction that might drive a new idea for the business. And that idea might end up driving tens of millions of dollars of technology spending.
Cash Flow is Impacted – Which Slows Business Investment
Cash flow is already being impacted. Small and medium enterprises (SMEs) are already feeling the pinch, and they don’t have access to the funding tools that many large businesses use to get through tough times. SMEs really represent the biggest threat to spending: if a large business has to lay off some staff, they can then get a project going as soon as the economy or their sector recovers and employ the people they need, as required. But in countries like Australia and the US, small businesses represent almost 40-50% of economic activity. If SMEs shut down or even restrict spending, it takes some time for new businesses to start up and fill in the gap they leave. SMEs don’t tend to buy software or services from the large vendors – they tend to use small and medium services and software providers – so it is these smaller technology businesses that are immediately threatened if the coronavirus spread continues. The multiplier effect quickly comes into play here to reduce consumption, employment and economic activity.
We are also aware that some businesses that are directly impacted by the virus (such as those in the travel sector) have informed their suppliers that they won’t be paying any bills until mid-year. This could also put a small technology provider under – whereas a larger one should be able to survive the cash-flow crisis. Despite most economies having a low interest rate environment, the access to capital is not easy, particularly given the risk to the overall economy. A further challenge to global expenditure and an accelerated recovery is the US elections which provide distraction to businesses in the US and globally.
Cancellation of Customer Events Will Limit Technology-Led Innovation
Many vendors have cancelled or postponed their customer events, even in relatively unaffected markets such as Australia. And nearly every vendor will attest to the spike in opportunities and deals that get signed after these events. The coming together of potential and existing customers with thought leaders, tech evangelists, bleeding edge customers and the partner ecosystem drives new ideas. Individuals get inspired to act – they hear about best and next practice and kick off conversations within their businesses. They see how technologies can impact other businesses and use those assumptions within their own business cases. Sceptical customers become converts, and those already considering projects sometimes accelerate them.
With these events cancelled tech spending will not collapse. Companies still have budgets and these budgets will be, for the most part, spent. But it is the innovative initiatives that will suffer – the exploration of new technologies or services, the experimentation and testing that won’t happen because people simply won’t know about it. This is the spending that is typically not budgeted for – the new spend that often has a big impact on business results and customer outcomes. These customer events are learning opportunities – without the events the learning will be harder and slower to push out. So, this will likely have more of an impact on spending in calendar Q2-Q4. But without other assets in the market or other chances to educate clients and prospects, this spend simply won’t happen.
The COVID-19 virus is also impacting the technology supply chain. Many technology products are manufactured in China – or rely on components manufactured in China. Factories across China have been shut down – and while some are coming back online, it is hard to know how long it will take them to get back to full capacity. Transport services in China are impacted –globally 200,000 flights have been cancelled since the public emergence of the coronavirus. Some products are waiting but just cannot be shipped. A number of vendors have flagged the impact of the slowdown to the supply chain on their revenues, including Apple and Microsoft. With limited supply, prices are rising, which slows down demand. While this may show some short-term opportunity for the cloud providers, the hardware companies and the software providers that rely on the availability of hardware will feel the impact. In the longer term, it may lead to business reviewing their supply chain and risk analysis. This presents an opportunity for India, Vietnam and other potential manufacturing hubs.
The Overall Impact of the COVID-19 Will be Real and Measurable
Ultimately, we believe that the coronavirus will wipe up to 1.5% off the total tech spending for 2020 – bringing the overall average down to between 1.5% and 2.5%. Part of this is based on the fact that technology spending is coming off a poor year. Confidence was just starting to climb with some of the hardest hit segments expected to return to growth in 2020. This confidence will disappear – and could lead to further price competition. Which is good for the buyer but bad for the whole vendor supply chain!
But again, this depends on the response of central banks and the ability of countries to control the spread of the virus. The development of a vaccine would be ideal but appears to be highly unlikely. The sooner it is brought under control – along with effective targeting of fiscal stimulus packages – the lower the impact on overall economies and the technology spending of businesses.
Some sectors will witness growth – telecoms providers, collaboration software and tool providers, remote and online education providers, cloud providers and healthtech will all witness growth – in fact many are already! Digital spending will increase as face-to-face opportunities plummet – this will drive opportunities for advertisers, digital agencies and developers.
Now is the time to make contingencies – vendors need to get better at digital marketing and selling and simpler implementation. Tech buyers and implementers need to put in place best practices for remote working – many companies witness an increase in productivity when they get remote working right.
Please let us know your feedback or thoughts in the comments section – we look forward to keeping the analysis going – and stay healthy!
This post was authored by Tim Sheedy, with valuable assistance from Phil Hassey, Sash Mukherjee and Claus Mortensen.
