What happens to tech markets in a crisis and how to learn from those situations

Without a doubt, 2022 will be remembered for tech layoffs, soaring inflation, the downturn of financial markets, and rising interest rates that are pushing economies into recession. There’s one word constantly creeping around in that context. It’s crisis. 

However, we’ve seen crisis happening before. Moreover, crisis means opportunity. 

Under the looming spectre of economic situation busineses need to ask themselves what can we learn from the past. Here’s what the previous crisis situations on the tech markets can teach us and how to adapt to the current state of things and what’s tech recruiting got to do with it.

Crash.com and how the Internet affected high-tech

The 1990s was a period of rapid technological advancement in many areas. As written by HBR, managers were forced to innovate aggressively to protect their revenues and profits. The upstart of dot-com companies fueled the stock market surge that began in 1995. According to Investopedia, the bubble that formed over the next five years was fed by cheap money, easy capital, market overconfidence, and pure speculation. The 2000 stock market crash was a direct result of the bursting of the dot-com bubble.

The companies that survived the dot-com bubble adapted, had a solid business plan and a well-defined place in the market. The dot-com bust was a tough one for tech, but in the end it weeded out the companies that got funded on business models that didn’t show a clear path to actually making money.

Companies that survived the dot-com bubble adapted, had a solid business plan and a well-defined place in the market.

Fast forward to the next learning curve

From 2002-2008, we saw companies grow more disciplined and only got funded if they showed real promise as moneymakers. During this period Facebook, Twitter, Uber, and many others took off and started the tech boom that continues even today.

Looking back at history, the 2007-2008 financial crisis was the trigger for cloud tech to move into the mainstream and reduced the willingness of firms to invest in innovation. During The Great Recession from 2008 to 2010, big tech companies acquired over 150 companies that were forced to close due to the recession. The result of this was that almost all of the big tech companies became larger, stronger, and more profitable due to their investments through a recession.

Demand for technology is not going away and we need to look at businesses long term.

How Covid propelled the tech industry

Over the past couple of years, the tech sector has been synonymous with growth, even when the pandemic took its toll on the global economy. In 2020 plenty of companies staffed up to support usage spikes caused by remote work and lockdowns, 2021 was the year of hiring and funding boom paired with hyper-digitization. However, Covid-19 pandemic also shut down the world and some companies needed to fire people to stay afloat.

During the pandemic, we’ve seen that tech is firmly at the forefront of helping us deal with various disruptions from the Covid-19 threat, as for example, people use video conferencing and online collaborative tools to work from home. 

Adapt to the current market state 

Fast forward to 2022, we now have a shaky market. Tech stocks mean growth stocks. However, according to Financial Times, as revenues started to stutter, investors increasingly looked for the exit. Venture-backed companies may have ridden the most extraordinary, wealth-generating wave in history. As the economy slows and shows signs of a recession, investors panic since most invest for short-term returns. This is why big tech stocks have declined so much recently.

However, big tech’s up and down swings are temporary. Demand for technology is not going away and we need to look at businesses long term.

“At smooth winds, everyone can move at ease. That's like the tech market in the past years. But at very low (and very strong winds, too), things are different. You will have to adjust your sails carefully.”

How the right tech talent can help you to get through to the next level

According to Venture Monitor, the amount of money being pumped into startups skyrocketed in 2021. Money was easy to get in the previous years. Nowadays companies have to prolong the funding they have from, for example, 6 months to 3 years. Having a business plan and a strategy is of utmost importance for businesses.

In spite of the news we’re seeing about the economy, and the post-Covid effects, the demand for tech and knowledge workers is still present, and there’s still a shortage of talent. Money speaks here too. The average tech salary in 2022 hit the six figure mark for the first time in 17 years, as per a study Tech Salary Report by Dice. However, the companies scaling up will most likely not go on a hiring frenzy.

According to Datapeople’s 2022 tech hiring report, the available labor pool in the tech industry has reduced for 25%. We already see the most demanded programming languages topping the job lists, and AI talent shortage is already a real problem. As more and more global businesses start to embrace emerging technologies in areas such as Web3, the metaverse, the talent shortage is a leading obstacle to digital transformation.

Chasing good and quality human capital might help you to prepare better for what is to come next. It’s about attracting high-quality and niche positions, ones that are not about the short term game. There’s already greater enthusiasm coming out of the pandemic to adopt those next-generation technologies and that will be present after the recession. It’s time to build around that.

What awaits us moving forward is the ability to adapt to new circumstances. The tech sector, like others, is retrenching in the face of an economic downturn. The current slowdown has the tech sector regrouping to identify a clear path forward.

Franklin D. Roosevelt famously said that a smooth sea never made a skilled sailor. As our founder Moritz Drerup would paraphrase it comparing the current economic situation, when the sea is smooth and there is a nice breeze, everyone is steaming along.  “At smooth winds, everyone can move at ease. Everyone will go forward, no matter if you are an expert or simply ok. That’s like the tech market in the past years – steady growth, easy money, good mood. Or as sailors say “Champagne Sailing”. But at very low (and very strong winds, too), things are different. You will have to adjust your sails carefully, check your weight trim and constantly look out for the next gust.”

If you are looking to hire worldwide tech talent or you just need advice get in touch with us. We can help you access top developers even for rare roles or work with you on your hiring strategy and HR skills.

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