Curated by: Sergio A. Martínez
Even if it looks otherwise, the software industry is not immune to the effects of recession cycles. During times when spending decreases and businesses become more cost-conscious, budgets for software development projects often suffer, having a significant impact on companies that rely on project-based revenue streams and their employees. And as we’ve seen so far in 2023, an unstable global economy has affected the Technology sector like never before, pushing software businesses today to navigate a very difficult situation where taking the necessary steps to shield themselves from the worst consequences of an economic downturn is critical.
Above all else, a very effective approach for software companies is to be agile and create systems and processes that enable them to adjust staff levels quickly when needed, focusing on minimizing disruption to any ongoing development project. After all, building a flexible team structure with both full-time and contract workers who can respond to current demands ensures that a company remains fully staffed, and resources remain able to be scaled up or down according to the current economic needs of the organization. And implementing effective training methods play an important role here too, guaranteeing that everyone is equipped with the necessary skills to bring a positive outcome for any project even if the team composition has changed. In other words, readiness is key when it comes to dealing with financial unpredictability and having a versatile workforce ready at all times is a big part of this success.
However, in tight budgets, companies often have to make tough choices, cutting back on staff and resources, making it difficult to build adequate teams with the right combination of skills. And if this situation continues for a long period, it can become increasingly tough for teams to maintain their momentum and stay on top of any new trends entering the market, with current staff members often having to take a bigger workload to fill in gaps that larger teams would otherwise occupy. It’s pretty likely that, during economic downturns, a lot of software organizations find themselves limited in the available talent they can hire.
With this in mind, having the ability to scale the size of a software team can be an invaluable asset for any company. Such teams can come together quickly when needed, enabling companies to pivot and take on unique and complex projects that would otherwise be too difficult to tackle. At the same time, this approach allows developers to focus on specific tasks with laser-like precision, resulting in an improved project and output. So, during economically-uncertain times, the most successful software companies can decide about their ideal team size, as opposed to teams limited by what’s available at any given moment. But what is the best option to maintain flexibility in tough times? What choices are available?
Thinking outside the box
In recent years, outsourcing software development has become increasingly popular thanks to the economic uncertainty that has prevailed since the start of the pandemic. Outsourcing allows organizations to take lesser risks, reduce operational costs and, more importantly, attain the necessary flexibility to scale staff up or down depending on the needs of a project, without the cost and commitment associated with hiring additional employees or establishing new departments in the company. Furthermore, it can be easier to forecast expenses when using an outside partner because project costs are fixed and known in advance, as long as a quality vendor is chosen. With companies now looking to stretch their budgets as much as possible to compete during every recession cycle, outsourcing provides an easy option for them to cut costs simply by working with external partners that specialize in the desired tasks.
However, not all types of outsourcing are equal; the specific service must be tailored to match the individual circumstances of a company. Offshore outsourcing, for example, can offer low-cost highly-skilled coding, but working with remote locations (often in different continents) imposes delays, language barriers, and different cultural expectations that can lead to negative outcomes. On the other hand, more localized models such as freelancing might provide heightened responsiveness at somewhat higher rates but with less potential to scale up quickly which, as we already mentioned, is of utmost importance during a recession.
This is where a Nearshore partnership model comes in. By partnering with a Nearshore such as Scio, software companies can benefit from an increased resource pool compared to employing an onsite team, providing additional strategic advantages. Things like access to skilled developers and IT engineers, expanded working hours due to the similar time zones, as well as the excellent user experience achieved by having a more diverse staff are some examples of advantages that companies can get to maintain their competitive edge in difficult economic times, thus allowing them to succeed despite the challenging environment. This is especially true when it comes to the aforementioned flexibility needed to keep the momentum of a project with very specific requirements.
The core benefit of working with a Nearshore partner, in short, is that team size can be dynamically adjusted to fit the specific needs of any project, which eliminates the problem of needing to find and build larger than necessary teams in-house. This means far less time wasted on locating and planning hiring cycles due to sudden additions or deletions from a team, and the ability to rapidly expand or contract their workforce without incurring the traditional drawbacks that come with making similar adjustments. And the ease of access to overseas markets, coupled with localized teams, means businesses can quickly scale up or down without worrying about talent availability, high attrition rates due to tedious onboarding processes, and language barrier issues. With Nearshore teams available at short notice, companies no longer have to strain their resources trying to keep track of volatile demands, enabling organizations to be better equipped to take full advantage of their resource expenditure.
But what if team flexibility is not enough?
In an economic cycle of growth and recession, Technology companies must do their part to protect themselves, and one of the biggest challenges is staying on top of trends, as consumer needs in the software industry are constantly changing and evolving. Adopting or developing new products or services that can help grow their business during both times of growth and recession should play into their strategic planning, of course, and companies should be open to making changes in their business practices, automating redundant processes and streamlining tasks where possible, making adjustments to their product lines if those become over-saturated or if more cost-effective alternatives are available.
And embracing new technologies should never be out of the question, especially with a trustworthy Nearshore partner at your side, which could help increase productivity by taking care of development and training staff on the relevant skills you need. Identifying innovative new ideas for existing services can also help generate new sources of revenue and put the company in a better position when the economy recovers. Staying diversified by offering services across multiple industries can provide stability even in times of economic uncertainty. Lastly, maintaining strong communication with customers allows you to anticipate their needs and prepare for whatever economic situation may arise while also building consumer loyalty which is beneficial both during times of growth and recession.
In short, the world economy is often subject to unforeseen changes, from threats of recession to pandemics. Software organizations must be prepared when unpredictable times arise, no matter how much the market fluctuates. Taking every precaution possible when anticipating economic hardship ensures that a business or organization can weather any storm, making changes as necessary, such as adopting a more flexible approach to staffing, to stay up-to-date on industry trends. Preparation leads to success, so software development organizations must take every precaution possible if faced with an economically trying year to remain strong during the entire season.
The Key Takeaways
- Historically speaking, the tech industry has remained strong in the face of recessions, but that might not be true anymore in 2023.
- To weather these economically-uncertain times, one of the key approaches is having flexibility in your staff, enabling you to increase or decrease team sizes as the situation demands.
- To this end, partnering with a Nearshore company, instead of building on-site teams, is the best approach to accomplish this, enabling a company to access talent as a project and the economy permits.
- However, secondary plans, like having a long-term strategy, keeping on top of trends, and being smart about your development partners, might also help to armor a software organization against any economic downturn.
Scio is an established Nearshore software development company based in Mexico that specializes in providing high-quality, cost-effective technologies for pioneering tech companies. We have been building and mentoring teams of engineers since 2003 and our experience gives us access not only to the knowledge but also the expertise needed when tackling any project. Get started today by contacting us about your project needs – We have teams available to help you achieve your business goals. Get in contact today!