Signs of Economic Crisis Visible in the IT Sector

He believes that the industry, which has been moving at lightning speed so far, could soon undergo a challenging transformation.

War, energy crises, shortages of raw materials and chips, inflation, droughts, and slowing economic growth are starting to crack even the most stable pillars of the global economy. Many large companies are already beginning to prepare for the expected impact, with lay-offs at Google, Facebook, Netflix, and Robinhood, and at other overseas giants tightening their belts.

U.S. Tech Firms Already Preparing for the Crisis

Eyal Zucker (Photo by Exadel)

“The technology sector has been the biggest winner in the economic and digital boom of the past decade. In the last 10 to 15 years, global companies have popped up and become giants from virtually nothing, completely transforming and digitizing everyday life and business. Obviously, this has also meant that the demand for IT professionals has been almost unlimited. From the United States to Asia, employers have been struggling to meet hiring demands, and virtually all IT specialists found jobs easily. But that could change now,” says Zucker.

“In North America, market players are already preparing for the effects of an increasingly gloomy global economy. Several leading corporations, startups, and scaleups are tightening their belts and preparing for the recession by announcing layoffs and staff cuts. These effects will spill over into Europe and Hungary, and are expected to change the dynamics of the technology labor market," he adds.

Large Companies May Turn to Outsourced IT Support

The business philosophy of private companies follows a simple logic: they react quickly when they detect that the fundamentals in their environment are changing. If the business environment is booming, they expand. If they see darker clouds ahead, they become cautious, restructure, cut costs and inevitably turn to more flexible, cheaper, easier, and faster ways to conduct their business.

Technology is no exception. In times like these, it may be more profitable for a large company to reduce its in-house IT staff and outsource some of the tasks and projects to external partners. Such people can be hired more flexibly for a job and it may be easier and quicker to terminate the contract if necessary than it would be for an employee.

In times of crisis, companies necessarily make decisions based on financial arguments, and, considering even financial or legal aspects, it is easier for them to work with subcontractors and negotiate prices with other companies, than to negotiate with employees about, for example, wage reductions and cuts. Therefore, in times of austerity, this alternative may seem more favorable, because outsourcing is simpler and more cost-effective from this point of view.

Can the Hungarian IT Sector Benefit From the Transformation?

“It's not that IT professionals will soon have to worry about not being able to find work, but rather that austerity could drive companies towards IT outsourcing. It is more flexible and cheaper to work with a subcontractor than to keep specialists on the payroll for the same capacity. The transformation is already underway in the world's most developed markets, and sooner or later it will have an impact in Hungary – although it may not necessarily be all negative in this region,” concludes Eyal Zucker.

He argues that there is more room for expansion than ever before for IT development companies that are working with multiple partners, in multiple sectors, and in multiple programming languages.

“I believe that even within the next year, the tech job market could become much more dynamic, as engineers will join companies that present a more secure environment during a recession,” he points out.

In this respect, Hungary could even be a winner in the coming period, as there are many talented and qualified professionals on the market, and if local outsourcing companies can make a competitive offer, this sector could provide attractive career opportunities for many professionals.

Even Hungarian Experts Are Seeing the Change

Exadel opened an office in Budapest a few months ago and is in a phase of dynamic expansion. According to the head of the development center, the IT market trends are also felt by the candidates.

“Many talents who apply to us also mention, as a motivating factor, that they consider a multi-partner, multi-disciplinary development center a more stable option for the future,” explains Zucker.

The recession is not likely to discourage the development of digital solutions, rather stimulate them, but the expansion and especially the structure of the technology sector will change and tip the scales from companies that are driven by debt finance to companies that make a profit and have a healthy cash flow.

According to Exadel's leader in Hungary, the general "rule of thumb" in this type of recessionary environment is that companies that invest in themselves are the most likely to survive.

"In the case of a technology development company, this means that we train and educate our professionals even more. We operate a serious internal education department and provide development opportunities for our colleagues in a wide variety of fields. We have a mentoring program and participate in many external initiatives, for example, together with the Budapest University of Technology," he notes.

"We believe that the true strength and resilience of our development center in Hungary is determined by the expertise of our team, so our goal remains to provide them with the maximum opportunity to develop both professionally and to build their careers."