Overview
Should you keep investing in IT during a recession? The recent years were definitely not the best period for many industries. At first, a lot of supply chains and business processes were disrupted by the coronavirus pandemic. Then the stability of the economy was badly hit by a very unstable geopolitical situation in the world. To deal with the increasing inflation, central banks are raising interest rates. Many companies have no other choice but to lay off their employees and freeze various projects. Nevertheless, even amid all these issues, worldwide IT investment is growing and is expected to reach $4.6 trillion in 2023. Just compare: in 2022, this figure was $4.4. trillion and in 2020, it was $3.87 trillion. Should you invest in IT during a recession? And is it a good time to invest in IT and digitalization?
Our software development company started its business journey more than 15 years ago. Over the years of our work, we’ve managed to understand how different market conditions affect the desire of businesses to invest in tech companies and new technologies and how organizations and enterprises usually react to various circumstances. And in this article, we are going to share our vision of the ongoing situation and explain why many businesses make a decision to continue investing in techology during a recession.
Digital transformation and business stability: Is it good to invest in new techologies during a recession?
The coronavirus pandemic is officially over. However, we still can feel its consequences. In 2020-2021, a lot of companies were obliged to shut down. Others had to reduce their spending, others needed to fully change their business model to stay afloat. Such a situation demonstrated that not every business that is profitable during stable times can survive when everything seems to be turned upside down.
If we analyze what companies managed to get over all the difficulties, we will see that these are highly flexible businesses that are open to changes and innovations and are ready to take risks and adapt to new realities. Let’s consider the simplest example. Due to the strictest lockdowns that many governments all over the world introduced during the first COVID-19 waves, traditional offices had to stay closed. Those companies that were ready for changes offered their employees to work remotely. It wasn’t absolutely easy. They needed to introduce new channels of communication and new formats of interaction between employees, they had to change their business processes, but at least they could continue working. Those businesses that were not ready for such changes had to freeze their operations.
What was the core of all the required changes? The answer may turn out to be rather unexpected. That’s technology. To organize smooth work processes in a remote format companies needed to have or to be ready to create the required technological infrastructure that could enable efficient virtual cooperation. Without any doubt all these changes made companies continue investing in IT during crisis.
Speaking about remote work, we should not only mention the work-from-home model itself but also touch on a broader aspect of the digital economy. The demand for online education, telemedicine services, and eCommerce reached enormous levels amid the pandemic. Given such conditions, it was quite obvious that those retail stores that shifted their focus to eCommerce had higher chances of surviving than those that were just waiting for a better time to come.
Of course, such changes required investments but these “pains” transformed into the greatest gains in the long run. In other words, companies invested not only in software products, tools, or technological infrastructures but directly in their future.
Nevertheless, not only the pandemic can be viewed as a driver for IT investment growth. General market trends and increasing competition should be also taken into account. To keep leading positions and win bigger market share, a company should perform better than its rivals. Automation is one of the ways to do it. It helps not only to optimize labor costs, reduce human involvement in some processes, and increase safety at the workplace but also allows employees to concentrate on various complex and creative tasks to achieve better results. And here is when we need to turn to tech solutions again.
It is interesting to mention quite often institutional investors make a decision to keep investing in IT companies during recession because they strongly believe that such business have the highest chances to stay strong.
What technologies should you invest in?
In our practice, we met a lot of executives who asked us to provide them with some universal approaches to transform their businesses via tech innovations. Unfortunately, it is impossible to offer any single formula that will work in all situations. When we have a request to help with the development of a digital transformation strategy, we should study the needs and goals of your business, as well as take into account the current state of your industry and market conditions.
It is crucial to create a strategy that will be fully tailored to your company. It should not only address some separate issues but also open new opportunities for your business in general. And only such a strategy is worth investments and efforts for its realization.
Today one of the most widely discussed technologies is artificial intelligence (AI). That is why a lot of managers believe that they should start their transformation by introducing AI-powered tools. Investing in tech companies that provide AI solutions is also gaining momentum today. However, we recommend you consider other approaches as well. The role of cloud computing in digitalization is often underestimated. But based on our practical experience, we’ve come to the conclusion that migration of your apps, data, system infrastructure, and business processes to the cloud can become a good starting point in many cases.
Thanks to relying on cloud technologies, you will be able to leverage better flexibility, scalability, and efficiency of your processes. You will have the possibility to optimize costs and offer mobility to your employees. All this makes the cloud a more attractive option in comparison to on-premises servers that often slow down the digital transformation.
How to maximize the value of your IT investments?
It is not a rare case when executives try to reach the desired results and at the same time minimize IT investments. Unfortunately, it doesn’t work this way. Actually, the exact amount of invested money shouldn’t be the main parameter for analyzing the feasibility of you tech investing strategy. You should focus on the value that they will bring.
Below you can find a couple of practical tips that will help you to understand what can increase the value (not size) of your IT investment.
- Niche expertise. Instead of looking for specialists who have some high-level knowledge in dozens of aspects, it’s better to find an expert who will have the most relevant skills and experience. First of all, this approach to hiring will guarantee you better business results. Specialists with niche expertise will cope with all the tasks faster and will ensure higher efficiency of the offered and built solutions. Secondly, it’s important to understand that headhunting and recruiting are rather expensive and time-consuming processes. In order to optimize the resources that are required for these tasks, it will be a good idea to onboard those employees who will be able to bring you the highest value.
- Scalability and flexibility. These principles should become your top priorities not only in developing software solutions but also in designing your business processes. Your software should be built in such a way that will allow you to quickly update it and make it more powerful. The same should be true about your team. You should be ready for introducing changes, adopting innovations, integrating new tools, and hiring new experts to achieve the goals of the project. Of course, when you want to expand your team only temporarily, it is not feasible to consider in-house hiring but such models as dedicated teams or staff augmentation can become an excellent option.
- Software development partner. Cooperation with an outsourcing partner will help you not only to fill in the existing gaps in your in-house team but also to get access to the expertise that your company lacks. Thanks to outsourcing you can work with experts from all over the world and get access to the most relevant and up-to-date knowledge about cutting-edge technologies. Moreover, as a rule, this cooperation will turn out to be a more cost-efficient model than in-house hiring.
- Concentration on core business activities. While investing in IT during crisis and driving digital trasnformation, you shouldn’t forget about your core business tasks. That’s why it can be an outstanding idea to invest in software development services provided by an external team. It means that when developers are working on your software development project, you can focus on your main functions, products, or services. As a result, you will have the possibility to achieve several types of business goals in parallel.
Final question: Is a recession a good time to invest in IT?
If we needed to provide only a short answer, it would be “yes” (but a lot of factors should be considered before IT investing during recession).
We are living in the era of digitalization and there are no signs that indicate that something here will change soon. Today the right digital transformation strategy and smart IT investments can become your strongest competitive advantage. However, another concern is whether your in-house team has all the required skills and knowledge for the development of this tech investing strategy and its further realization.
If you feel that external help is required, you need to find a reliable IT partner. At Softacom, we are always open to new ideas and projects. We never apply any universal “one-size-fits-all” solutions and we always do our best to find the most feasible approach to each business situation. Before providing any solutions, we will closely study your case, consider different scenarios, and offer the one that will bring the highest value to your business even during the most difficult economic periods.
If you have a question “Should I invest in IT during a recession?”, you can contact and we will help you evaluate the feasibility of your project.
