News

The bad economic situation that is taking place all over the world hurts every industry and ICT is no exception. In the last days, many IT-related companies announced they will lay off staff. That’s the case for big multinationals like Yahoo!, Texas Instruments and Xerox but also for Silicon Valley’s Internet start-ups such as Zivity, AdBrite, Imeem, Mahalo, Searchme, Zillow, Pandora, Hi5 and Seesmic reported the New York Times.



It is clear that this situation is somehow worrying for workers and that firing people won’t solve the majority of the problems firms are suffering at the moment, especially the decrease in demand that might be worsened if major layoffs continue.



But there is hope. First of all, the factors that have made it so easy to create Web 2.0 start-ups (low fixed costs, cheap online advertising…) render them flexible enough to promptly react to the crisis and survive while the previous generation of Internet companies “lived hard and died young” according to Brad Burnham, a venture capitalist.



Secondly, nowadays’ firms are more efficient than in the past (today’s web companies need around $200’000 monthly to operate properly while they needed $750’000 per month during the Internet bubble-bust in the late nineties) and those who will survive, will become much stronger after the crunch.



Another effect that might be beneficial is the change in entrepreneurs’ mindset: many of them are now trying to endure and are not only focused on short-term profits as it could have been the case before.



A good solution suggested by a start-up CEO is not to hire many people. In other words, the crisis could be an opportunity to freeze hiring instead of firing workers whether because of the bad economic situation or because the company simply grows too much to survive.



Indeed, many other solutions than layoffs can be found. Limiting other costs, such as delaying software purchases by using free programs like Google Docs instead or re-negotiating contracts like office rents, have been suggested. Putting cash into Treasuries and over-communicating with employees, clients and investors can also help.



It has also to be said that the economic downturn will increase the demand for certain skills such as those around data, applications, process integration, IT architecture and enterprise vendor managers since companies are trying to reduce costs by all means. Last but not least and maybe a bit more cynically, firms specialized in bankruptcy consulting will experience an increasing turnover…



More seriously, many IT executives show some optimism according to a survey by the Chartered Management Institute. 43% of them said they are optimistic about their firm’s future. Regarding the means to bear the crisis, 68% think innovation comes first while only 39% believe cutting costs is crucial.



Jo Causon, marketing and corporate affairs director at CMI stated: “It is vital UK’s leaders remain composed in the face of growing economic pressure because knee-jerk reactions will only serve to exacerbate the problem…”



In addition, 45% of those interviewed declared the workers are more likely to receive training to develop their own skills since recruitment is frozen. That’s good news although employees should receive training at any time as UNI says.



Other good news comes from the salaries. The Australian Computer Society’s (ACS) annual survey showed the wage of ICT professionals increased by 4.9% on average over the twelve months to May 2008. It is not an impressive progression if we take into account inflation which reached 4.2% last year in Australia, but that’s already something.



On top of that, skills shortage in the ICT sector is expected to grow to 14’000 in Australia and 300’000 in Europe by 2010. Although these forecasts might have been calculated before the crisis, it means there is still a margin for the business to slowdown without reducing employment in these parts of the world.



The OECD even projected that “an increasing flow of foreign direct investments (from Europe) to new growth economies in relation to high value activities is likely to reflect a next wave of ICT globalisation as ICT firms will look to new sources of innovation and competitiveness.”