Addressing uncertainty in the IT industry

No industry on Earth has been immune to the effects of the COVID-19 pandemic. While some businesses, like grocery stores and consumer paper products manufacturers (think toilet paper), may have seen an uptick in sales, the vast majority of industries have seen revenues fall or flatline due to rapidly changing demand patterns. This trend will continue as people wait to see how the world will be reshaped by this deadly and disruptive disease. For companies considering how to allocate resources during this uncertain time, IT can represent a particularly difficult challenge. Business leaders understand the importance of technology in protecting their company, achieving strategic aims, increasing efficiency and reducing costs, but new IT projects require capital to implement, which requires cash flow to service. If you’re reassessing your IT spend during this time, it may help to take a step back and look at the industry as a whole. Let’s dive into the numbers and consider why you may still want to invest in IT despite COVID-19 related setbacks.

Numbers show a mixed outlook

Based on the number of jobs added in the IT sector recently, one might think the industry is moving in the right direction. But numbers can be deceiving. While the U.S. Bureau of Labor Statistics reported that the country added 8,500 new jobs in the IT sector in March, analysis revealed a loss of “19,000 IT positions in companies across all other industry sectors.”

There are many reasons why these numbers may be at odds. Companies with declining revenues could be cutting in-house IT personnel in favor of contracted services. We definitely saw this dynamic at play in the wake of the Great Recession in 2009. The decline could simply be the result of companies going out of business as a whole, and not representative of the impact to IT specifically. Or perhaps companies with more sophisticated IT systems no longer require a large headcount. While we can make such educated guesses, in truth, it will take some time before we can fully understand these paradoxical statistics. But the labor market is only one indicator of where IT is headed in 2020. We must also look at IT spending as a whole.

Back in January 2020, before the pandemic truly took hold, Gartner predicted that global IT spending would hit $3.9 trillion in 2020. That represented a 3.4% increase from 2019. A reasonable prediction. But newly conducted research, also from Gartner, now predicts that IT spending worldwide will actually drop 8% from 2019 levels, reaching only $3.4 trillion in 2020. Although this is unwelcome news to many in the IT industry, it’s clear that companies understand the value of IT systems and were poised to invest in IT more than ever this year. The global pandemic simply disrupted those plans. So, what does that mean for your IT spend going forward?

Why invest in IT now?

Ultimately, the decision of how to approach your IT spend will come down to your unique financial circumstances and business needs. But consider this: Well designed and executed IT systems will almost always drive efficiencies and reduce costs for businesses. In other words, there may be an upfront cost now, but it will almost certainly pay off down the road. In other words, a positive Return On Investment (ROI). That may be reason enough to consider investing in projects like new custom software development.

Here’s something else to consider: Your biggest challenges and opportunities aren’t going anywhere. Although the COVID-19 pandemic has certainly thrown things into disarray, it hasn’t changed inefficiencies in your operation or eliminated challenges that could be solved with new investments in software or other technologies. If you’ve already identified an opportunity to improve operations or services that could be met with a new piece of custom software, that opportunity likely still exists. You may simply have to adjust your strategy for how to approach that opportunity. The key will be to conduct a thorough cost-benefit analysis to determine whether the expected return is worth the capital investment.

Businesses with severely restricted cash flow may have no choice but to wait before launching major IT projects. But those with some funds available could use this time to improve their competitive position, improve operations and reduce costs by implementing new software. If you partner with a reliable, experienced software development firm, you will be more likely to keep costs to a minimum while maintaining your project timeline. Also, consider partnering with a firm that isn’t located in a major city as this can also often lead to savings from the outset.

Our world’s reliance on technology grows each and every day. So pandemic or no pandemic, an investment in IT is an investment in growth and innovation. By performing a thorough market analysis to identify opportunities while conducting an internal analysis of your current financials and the benefits new IT investments could bring to your business, you can formulate an IT budget that moves your business forward even while the rest of the world remains on pause.

About Saturn Systems

Saturn SystemsSaturn Systems is an entirely U.S. based software engineering firm that provides a broad range of services, from project-based development and quality assurance testing to fully integrated staff augmentation teams. Saturn's Rural Outsourcing model couples the lower cost of doing business in Duluth, MN, with an experienced engineering team - making Saturn an attractive alternative to high-priced metro firms and the inherent difficulties of offshore services.

Leave a Reply

Your email address will not be published.