3 Factors That Will Reshape the Tech Services Industry

The tech services industry has changed quite a bit over the last couple of years. It’s logical. The disruption caused by the COVID-19 pandemic has pushed virtually every business under the sun toward digital solutions, driving the demand for tech professionals, products, and services way up. To accommodate that demand, tech companies heavily invested in new tools, hired more team members, and even launched new services.

And while all those measures helped tech services companies better position themselves in today’s business world, the reality is that the tech sector is still being reshaped. With the influence of the pandemic winding down, it’s now time to deal with its yet-to-be-understood consequences. As if that weren’t enough, there’s also a couple of factors that will impact the tech sector: the challenging economy and the dynamic nature of clients’ demands.

In fact, those factors are already reshaping the tech services landscape, so I thought it’d be a good idea to see their influence in the short and mid-term. Here are the 3 main factors that are affecting the tech services sector.

1. Economic Situation

It’s highly likely that we are heading toward a recession caused by global high inflation, disrupted supply chains, and the Russia-Ukraine war. It remains to be seen how much we’ll be affected by this economic downturn, but something is certain: It will affect virtually all countries worldwide.

How does that affect the tech services industry? To completely understand that, it’s important to remember a phenomenon that’s been taking place even since before the pandemic. I’m talking about the increased interest from companies of all industries to digitally transform their operations. In other words, businesses are increasingly relying on technology to gain competitive advantages. Naturally, that drives the demand for tech talent up, which, in turn, accentuates the shortage of engineering talent we’ve been seeing for years now. 

So, on one hand, we have the looming threat of a recession, and on the other hand, there’s the long-standing issue of the scarcity of tech talent. What will result from these factors clashing with each other? The most evident consequence is that some companies will drop their demands for software engineers and other tech professionals. Pressured by the need to cut costs, many companies are already reducing their job openings.

Yet, that drop in demand won’t be nearly enough to recuperate an even demand-supply balance. That means that demand will still be high, even in an economic crisis, which means that the wage inflation we’re seeing today will sharpen as we move forward. In fact, we’re likely headed toward a stagflation for the tech sector.

In that context, companies will still need to keep doing business during an economic recession while dealing with wage inflation in tech. Basically, that means that companies will have to adjust their strategies to find the right talent to keep their businesses afloat but without compromising their limited budgets, a huge challenge that will require smart decisions and even the possibility of taking a few risks.

2. Specific Business Modernization

When the pandemic first hit, a lot of companies ran amok in search of the tech talent they’d need to modernize and digitize their infrastructures. Hurried by the unexpected disruption, those businesses invested heavily in adopting new technologies to streamline their operations and achieve more flexibility, one of the keys to addressing the dynamic nature of the new market and client demands.

One of the most sought-after technologies to achieve those goals was the cloud. The reasons were fairly simple: The cloud guaranteed system availability, instant scalability, broader access, and more robust security. However, migrating systems to the cloud proved to be more challenging than expected, to the point where many companies failed in their processes.

Given the shaky landscape we are in right now, failing a process as crucial (and costly!) as a cloud migration could be devastating for any company. That’s because there’s less capital available to drive digital transformations. As a result of that, companies will drop the broad-based projects to modernize their operations in favor of a more specific modernization strategy. 

So, rather than adopting new technologies in the hopes of elevating their entire workflows, companies will now begin to invest in technologies whose value can be specifically traced and measured. That means that businesses will likely focus on smaller projects that generate specific business benefits instead of going for bigger projects with somewhat unclear benefits. 

3. Increased Sustainability

Finally, there’s the increased focus on environmental, social, and governance (ESG) principles that are seeping into every practice in companies all across the globe. Over the years, both clients and employees have started to hold brands accountable for the way these companies operate. In other words, businesses’ missions, visions, and principles are now under public scrutiny to check whether they are aligned with the public good.

That preoccupation will only grow stronger as we move forward. Companies will need to embrace ESG principles to ensure diversity, inclusion, and social responsibility in all their actions. Failing to do so will result in the loss of clients and the inability to find new team members. 

That’s already notorious in the tech services industry. While the sector is (fortunately) already developing D&I initiatives and adopting a more sustainable approach to the way companies do things, we still have a long way to go. Walking that path will be crucial, as businesses will also check on their partners and suppliers to see whether they are aligned behind the same ESG as they are.

What To Do Now

The 3 phenomena I mentioned above will surely impact the tech services industry—and they will do so sooner rather than later. That’s why it’s important for tech companies (and for businesses that deal with tech companies) to develop a strategy to weather the convoluted times ahead.

There are plenty of things to consider here, but I think that the soundest thing you can do to prepare for these changes is to do everything in your power to retain your tech talent. The talent shortage in the tech industry will combine itself with rising inflation to such an extent that it’ll be extremely difficult to hire engineering talent moving forward. 

Having tech talent by your side will let you invest in specific business modernization within the constraints of your budget while also providing you with a competitive edge over other companies struggling to secure tech talent. 

Additionally, you’ll need to start considering developing an ESG-related agenda. Doing so will lead you in a different transformation process that will better position your company in the eyes of clients, partners, and prospective employees. Doing that while retaining your tech talent feels like the only way you can prepare for the changes that are coming your way.