August 2, 2023
What’s ahead for 2023 and beyond in the technology industry? After the last few years, that’s a loaded question in any business sector.
We’ve said it before: The only certainty is uncertainty. In the future, we can bank on more volatility, with recession-like economic conditions in North America, a tight labor market, and lingering supply chain issues keeping pressure on costs while dampening demand. But innovation will march on, holding up tech investment.
Smart leaders scout out the business and technology landscape in the year ahead to identify opportunities and anticipate challenges. For companies to stay in the game, they have to be intuitive about what's next.
Defining Factors Disrupting Software Development Services
Our team traveled the world to meet with business client executives and software development partners. From our conversations, we identified four factors that were key forces in 2022, and they will continue to have a significant impact on software development services.
Factor 1: Global Stability Dynamics
Issues with the economy and global conflict are sweeping through the technology world, with executives bracing for more disruptive waves. These wide-ranging macro issues are by far the most frequently cited challenges in the years ahead. A one-two punch of economic woes and world conflict, with no real let-up in sight, have business leaders cautious about the potential for flare-ups in the coming year:
It’s been ongoing front-page news: America grappled with inflation, and the ripple effects spread across borders. High-interest rates ramped up costs while precious finance became increasingly scarce. Yet software development prospects remained bullish as we moved into winter and looked towards 2023 (see Factor 3 for more explanation). Still, the rising strength of the greenback made an already challenging financial landscape more difficult for those buying services or repaying debt in US dollars. While reining in inflationary pressure is necessary, a potential deep economic downturn this year could set many planned software projects for an uncertain release date.
War raged through the summer and autumn in Ukraine, compounding the already short supply of global software development talent and forcing businesses to seek alternatives to Russian and Belorussian development houses. The current winter chill has slowed Russia’s offensive, but the conflict is far from over and will continue to weigh on Central and Eastern Europe, both in terms of the region’s potential as a software outsourcing destination and its overall economic prosperity as energy and food costs escalate. This has a flow-on effect on the global software outsourcing industry.
Factor 2: Talent Supply, Demand, and Pricing Trends
The US market for tech talent softened slightly in the second half of 2022 the year as tech companies that had expanded rapidly during the pandemic, slashed headcount to cut costs. But the song remains the same this year - finding skilled and experienced developers will remain difficult everywhere.
The demand from Western businesses for outsourced development talent has grown by 70%, as costs come into focus, with an increased threat of competitor poaching. It means that businesses must pay competitive salaries and accommodate flexible working arrangements to lure talent, even if the 20 - 30% salary increases developers have been commanding are unlikely to continue in 2023.
The Great Resignation is still in effect, despite growing concerns about job security as the economy stuttered. High developer attrition and turnover rates continue to hit productivity. So too did a new wave of Covid infections and a particularly nasty flu season, a reminder that we are not done with the pandemic just yet.
There’s no end in sight for the overall shortage of technology talent according to most tech analyst firms. More developers will become available as industry cutbacks deepen and the trend towards more remote and freelance work continues.
Factor 3: Increasing Digital Innovation Needs
Beyond headcount, software executives report a particularly severe gap for qualified talent able to rise to the requirements of digital transformation initiatives. The result has presented hurdles to companies’ adopting critical innovative and emerging technologies, which could slow efforts to pursue growth and competitive advantage in 2023.
There’s a lack of developers schooled in the platforms, programming languages, and methodologies that are driving transformative change for businesses. That will require a huge effort in upskilling in the industry, using micro-credentials and on-the-job training to address, particularly as the education sector struggles to recover from the disruption of the pandemic. Despite the worsening outlook, businesses know they can ill-afford not to invest in IT infrastructure, applications, and improving their customer experience. A lack of senior-level tech talent able to perform to a more complex technical level is a real pinch-point for many businesses. We don’t have enough data scientists, AI experts, cloud architects, cybersecurity analysts, and project and program managers to allow projects to move at the speed demanded in businesses and the public sector.
Factor 4: Intensifying Cost and Budget Management
High-profile tech industry cutbacks in recent years had software executives seeing both pros and cons to corporate belt-tightening:
Upside: Potential for a growing number of corporate IT layoffs to drive greater focus on outsourcing as businesses seek to contain costs and give themselves more flexibility in staffing overhead.
Downside: The specter of further pullbacks in technology investment or initiatives that could stunt hiring, including outsourced development teams.
The greater focus on budget management is most evident in the behavior of the tech giants, with the likes of Google, Meta, Microsoft, and Tesla all limiting travel, initiating hiring freezes, and making significant cuts in areas that for years have been untouchable, including software development services. As well as ongoing supply chain constraints in many industries, every organization continues to grapple with the implications of switching to hybrid and remote work models.
Outsourcing is giving the best of both worlds.
Again, expanding technologies have taken quite a toll on companies relying on software development. Talent is sparse and expensive, while customers are only demanding more when it comes to their tech needs. These uncertain times and a likely recession call for flexible solutions. But how can companies focus their attention on meeting goals by using the most qualified talent without compromising budget?
Outsourcing has had an increase in demand due to its ability to lower risk and cut costs. Shifting the focus from recruiting capable talent to boosting efficiency is not only keeping business afloat but is allowing companies to thrive during constantly changing economic conditions.
Start allocating your resources more efficiently and leaving the software development to the top 1% of certified professionals. Accelerance is an advisor in the space of software outsourcing.
Reach out to Accelerance today and outsource software development with firms around the world.