As we are fast approaching the end of the year, are businesses hesitant to invest in acquiring new IT talent? The answer to that question is complex. Even before the rising inflation painted the US economy in a poor light, over 47 million Americans had already left their jobs voluntarily in what’s been called the Great Resignation. And after exhibiting “stagflation” symptoms for months, the looming possibility of a recession has been enough to make many companies rethink everything, including the IT needs.
According to a PwC survey that polled over 700 US executives and board members across many industries, over 50% of the respondents claimed they were planning staff reduction. As if those numbers weren’t enough to cast dark clouds over the horizon, researchers at Forrester also predict that most organizations’ IT departments can expect a significant decrease in spending in the upcoming years.
This starkly contrasts 2020 and 2021, when companies pushed hard to attract and retain tech talent. And while it’s well known that incumbent organizations cannot compete in the post-pandemic digital era without a deep reserve of tech expertise, the significant hurdles in obtaining such personnel have been magnified by the latest financial and economic crisis that continues to shake America.
Budget cuts: Is IT immune?
Businesses with more than a thousand employees saw a decline in hiring rates, indicating that these companies are holding off on adding new staff in anticipation of a future economic downturn. The shift in how spending is being approached is a complete one-eighty to the significant economic upheaval early in the COVID-19 pandemic that resulted in many industries going on a hiring spree.
It’s true that in early 2020, many companies prioritized investing heavily in digital infrastructure to support widespread remote working. But everything has changed radically once again in under two years. A few months ago, IT stocks fell to three-week lows due to shrinking margins and growing concerns about a global economic slowdown, and the BSE IT Index dropped 3.6 percent.
However, according to certain market analysts, despite the economy’s unpredictability, some businesses still seem keen to spend on IT services. Although IT spending cycles might be delayed, some specialists expect a consistent investment pattern throughout 2023. In fact, according to a recent Wedbush Securities survey, most IT firms’ clients still plan to spend money on technology in both the last trimester of 2022 and the first half of next year.
If these projections are accurate, slower spending cycles will affect the IT sector, but not nearly as much as other industries. Why? Because, from cloud-based computing and e-commerce to data mining and artificial intelligence, the economy is becoming increasingly dependent on digital technology. Today, information technology affects almost every business.
Hiring during a recession
While the ability to assemble a team with the best talent is a critical factor in the profitability and productivity of any company, it can be tempting to stop hiring entirely during economic downturns. However, those businesses that keep hiring could have access to a much larger talent pool because more applicants are looking for work as unemployment rates rise.
This means you might gain access to more talented workers if your company can afford to hire during the recession. But it also means you must still face all the inherent hiring challenges during a trying financial period. Am I implying this is an inescapable Catch-22? Not really. There are still options available for you to benefit from talented people who would otherwise be unavailable while not having to assume the risks of recruiting.
Look into nearshoring
Due to the improvements in remote work that resulted from the COVID-19 pandemic, IT outsourcing is now a much more viable option for many companies when it comes to handling business processes, especially for those in the tech sector. With nearshoring, you can access remote workers who are frequently less expensive and who have a variety of skills you might not have in-house.
As a form of outsourcing, nearshoring involves assigning software development work to businesses or qualified independent contractors in nations close by or in a similar time zone to your company. It is a model that gives you access to affordable IT solutions without the risk of hiring or looking for experts in a specific tech area.
One of the biggest draws of nearshoring is not having to go through the trouble of vetting individual developers, allowing you to check out different nearshore companies instead, saving valuable time.
Nearshoring vs. Offshoring
As opposed to offshoring, with nearshoring, any potential language barriers are much easier to overcome because it is more likely that people from nearby regions will speak the same language or be fluent in both languages, which is already beneficial for communication and forming relationships.
Since there’s a smaller distance between you and your remote team, it also minimizes the typical risks associated with outsourcing abroad because working cultures, languages, and time zones are similar.
While some employers might still have valid reasons to doubt the effectiveness of remote workers, for most companies working with nearshore development firms, this alternative presents several advantages if they have the proper infrastructure. Beginning with the fact that outsourcing to these companies is significantly less expensive than doing so elsewhere, they have other benefits that you should consider:
- Faster turnaround times
- Flexible work policy
- Cost savings related to office space
- More productivity
- Less sick leave
For many agile businesses seeking to choose an outsourcing solution, nearshoring is simply an excellent cost-saving option. It is the ideal middle ground between the outsourcing options because it gives both parties a chance to discover more about each other’s distinctive identities while giving them enough in common to feel at ease with one another’s cultural backgrounds.
If you must hire, invest in the proper tools
In the past, businesses that kept hiring during a downturn could benefit from the market. If you can afford it or if outsourcing is not an option for you, as I explained above, hiring new employees during a potential recession means you might find talent that was unavailable before.
It’s not all good news, however. You must be able to manage the influx of candidates efficiently. Sorting through a slew of applicants for your company is one of the first difficulties you’ll face. The number of job applications has skyrocketed in specific fields, so this won’t be a simple task. In fact, you’re likely to receive more applications than you did, based on the unemployment rates during these last few months.
The first step is to write a concise job description. Nailing this down can help you attract the right talent and make things easier later on when you have to sort through the clutter. And speaking of clutter, try to organize your hiring process by automating it. This will remove the tedious tasks from the process, freeing up your time to focus on candidates with the qualities you are looking for, while also increasing your productivity and reducing stress.
Do you, for instance, employ an applicant tracking system (ATS)? If not, this could be the ideal time to test a few to see if one can assist you in managing your applicant flow.
Additionally, think about incorporating applicant testing into your hiring procedure. When you make hiring decisions based on data rather than intuition, you are more likely to find employees who fit into your company’s culture and stay longer.
Try a skill gap analysis
A skills gap analysis can help you find a skill set that your workforce needs but may not have. This type of analysis can help you identify areas for training and development or decide how much money to spend on new partnerships or technology.
A skills gap report provides a clearer picture of the talent that already exists in your organization and considers the skills your business will require in the future. With this knowledge, your hiring team can actively seek candidates and hire new workers to help you achieve your long-term objectives.
There’s no way around it, your recruiters must use the proper monitoring tools in order to improve recruitment strategies and reduce hiring problems. With the aid of analytics on recruitment data, you might find more qualified candidates faster and lower the cost per hire by using predictive analytics.
Hiring or nearshore outsourcing while in a potential recession
Many industries are pausing or actively planning for a hiring freeze because of high inflation, fluctuating interest rates, and other factors. When this occurs, the labor market’s demand may abruptly change in favor of employers. Companies that hire during a downturn can emerge from difficult times better positioned for the future.
The problem with that remains the same. You may not have the resources to attract talent or find yourself in a position where it wouldn’t be financially wise to bulk up your staff. If that’s the case, selective nearshore outsourcing allows you to create more flexible costs that enable you to refocus on your company’s capabilities.
Outsourcing has many advantages that can help you weather an impending recession or streamline production within your business. It’s undeniable that when the economy is in a slump and your revenue starts to suffer, your company cannot afford to spend the way it always has. And this might be the perfect time to cut costs with nearshoring.
