By the end of 2023, most experts in the tech economy agreed that the major tech recession should be over by 2024. Now we’re here, or more precisely, we are now, and can evaluate the situation based on the facts. In this material, the JetSoftPro team provides a brief overview of the market situation as of April 2024 and forecasts events related to the tech recession.
What is a tech recession, and what does it actually mean for businesses?
The most prominent consequence of the tech recession in 2023 was the mass layoffs of developers, linked to several factors at once.
- Due to global events, companies decided to hold onto their capital and invest more cautiously.
- For a long time, the market was rapidly growing, giving confidence that the demand for developers would only increase.
- Tech companies had built up a surplus workforce of inexperienced developers intended for development.
- The quality of developers’ work began to decline due to prolonged remote work after COVID and the addition of inexperienced specialists to teams.
- Artificial intelligence entered the market promising to replace humans. Cloud technologies also contributed.
- Priority niches for software projects sharply changed due to warfare and technological advancements. If HealthTech was in demand during COVID, now big money is being invested in defense and Artificial Intelligence.
- Emerging technology markets are rapidly catching up with the first ones. Today, Latin America poses serious competition to Eastern outsourcers.
All this led to a tech recession: demand for developer services first stopped growing at its fast pace, then decreased in anticipation of market stabilization, and companies had to lay off people they could no longer profit from.
After the tech recession ends…
It is important to understand that even after the tech recession ends and the market returns to growth, demand for developers is unlikely to return to pre-recession levels. Now, the focus is on the quality and speed of development, and customers really have a choice when it comes to price. Therefore, although we expect growth in the near future, software development players will have to make an effort to sell their services.
Read: Are software developer salaries falling? Market situation
When will the tech recession end?
It seems that the tech recession has already ended now. According to preliminary data for the last quarter of 2023, private companies began to grow faster – for the first time in two years. Median revenue increased from 42% in the third quarter to 70% in the fourth. Also, the increase in revenue growth under GAAP has improved – this is the second consecutive quarter when it grows.
This growth began in the third quarter and is now continuing. Such improvement occurred thanks to some companies starting to grow faster and also becoming more efficient. Along with this, indicators for new customers have also improved, indicating that the tech sector is beginning to recover.
As for public companies, they also started to grow, but a little slower. It’s not as good as for private companies, but still promising.
Despite these positive numbers, the market still needs time to recover, as hundreds of thousands of programmers around the world remain unemployed.
How should tech companies act during this stage of the recession?
The end of the tech recession can be as stressful a period as its beginning, albeit with a different sauce. And here’s why:
- Due to reduced demand for developers, many tech and especially outsourcing companies have downsized their operations, automated processes that now need to be scaled.
- The market is focused on quality and expertise, which means that many developers will have to work on themselves, including both soft and hard skills. It is already evident that competition will increase.
- A large number of new technologies, primarily related to artificial intelligence, still need to be mastered by programmers, and the pace of market development is accelerating.
- To protect investments, customer companies will increasingly lean towards a fixed-price model, which means additional process restructuring for market players.
- Finally, many people remain unemployed, creating additional strain on the economy as a whole. This resource needs to be redistributed.
We should admit that the software developers community has no clear vision of how the market will function further.
Outsourcing companies’ prospects after the recession
JetSoftPro, as a software development one-stop shop, offers software services, primarily outsourcing, so we are facing this problem from within. Although the market is still in disarray, it is worth noting that there are good prospects for outsourcers.
Companies will need to change to get new orders, namely:
- Automate all possible processes
- Implement new quality control and cybersecurity frameworks
- Develop expertise and strengthen brands with expertise in a particular niche
- Rethink lead generation, as now developers will be offering their services to businesses rather than businesses actively seeking developers.
We at JetSoftPro have prepared for this situation in advance and are already playing by the rules that are just beginning to take shape, with quality and business results at the forefront.
We are confident that many of our colleagues need to follow the same path as soon as possible.
