Are you IT-ready for the economic crisis?

The pandemic has struck hard - and not only in the tens of thousands infected - but also in the overall economic state of countries. 58% of enterprises expect a significant decrease in revenues over the coming months, according to PWC , and with that many impacted industries you can not help but wonder ... Will there be an economic crisis? If oil at USD 19 a barrel (down from 60) is a sign, then yes.

What has happened so far?

Even though until now companies around the globe were in full process of Digital Transformation, the pandemic boosted this process by a lot. For example, before this pandemic, working from home for the majority of the companies was a big NO, but now - in less than 2 weeks - companies accommodated the majority of the workflows and everything is done via Skype , Teams , Zoom ... etc and it works.

At this point, the thriving industries are couriers, e-shops, pharmacies and retail - and even among them, the more digitalised have a very clear edge. People are getting used to work-from-home and avoid most direct interaction with others, but at the same time people are dreaming about the day when they will be back at their office, see their colleagues and take control of their lives again .

What to expect ?

 As I’ve said in the beginning, like it or not, ”winter is coming”, and the only thing we can do is prepare. As a simple definition, the economic crisis is but a relaxation period, when companies are taking a closer look at their spending and start making hard decisions. It all starts with companies looking at the day-to-day spending and cutting expenses and for a while ... that will be enough; but just for a while.

The first expenses to be cut are the easy ones (training, travel, team buildings, etc). When companies realize that more expenses must be cut, they start looking at the salary costs and now the hardest thing for a CEO begins. Before this,  each company was out there fighting to find the perfect people to hire for their projects and now, for the company to survive, they need to let people go and for those that were in this situation know that is very hard from many aspects , from deciding who to lay off to the legal part of the things.

While for European welfare-states this is solved by Governments, Romanian enterprises are wary of partial, slow reimbursements from the State, should they ever need to let people go and pay them compensations.

How can companies reduce the impact ?

Reducing the impact of an economic crisis depends on the preparation made by each company. While during the previous recession, companies used to ensure a buffer of 30% - 35% of projects that were outsourced, now we see companies doing the opposite: hiring full time employees (especially in their IT departments).

Is this the right thing ? Nobody can tell you that the decision to hire in this period is a good or bad thing, but what everybody can say is that you need to have a buffer in order not to be in the position you need to fire people - when the storm arrives. For us, as IT service suppliers, ongoing projects carry on, while new ones get postponed. The wave of crisis needs to – and will – gather momentum, before reality faces us point-blank. When the wave hits, some will be covered, others will not. When business demands an up-surge in the software development force, the most handy thing to do is call upon recruitment and open your positions. When another management meeting decides this project is no longer current-affairs, lay-offs need to be dealt with (most often, at high costs). In turn, Romanian IT engineers are becoming increasingly reluctant to shift jobs, and recruitment of software developers by non-IT companies has almost hit a full halt.

It is then when companies can tell mere IT providers from real partners. While regular IT providers are happy to take orders and act on increasing team sizes, true partners recognize the need for flexibility, and are able to juggle assignments of their staff, to match the evolving needs of their counterparts When economic survival is at stake and perfecting digital channels is a must, how can an enterprise bring together revenue uncertainty and an acute need to invest in IT? The future belongs to those who are able to adapt - and digitalisation is one adaptation no one can afford to overlook in this period.

If you disagree (or if you agree) with any of the above let’s talk !