How Do Companies Involved in Software Development Fight Recession
Interestingly, a few analysts speak of recession in the field of software development although a good number of IT start ups and even established businesses in the sphere of software development go into red and eventually go bankrupt daily.
That said, the question asked in the headline above is not really a one million dollar question due to the fact that the world of the software vendors is governed by the same business laws that determine the overall business environment: namely, supply and demand.
Obviously, a business environment where software applications are in high demand would secure stable income to more companies involved in software development than a market where spiraling inflation, high unemployment and so on result in stagnating demand for IT products.
On the other hand, the software industry is cursed and blessed to be a very flexible segment of the economy, in general, which means it is highly adaptable to various economic conditions and to some extend is quite ready to withstand even continuous recessions.
A major factor behind this flexibility is a widespread policy of outsourcing to external contractors, which lowers the overall cost of production and minimizes business expenditures to an acceptable minimum.
Some observers share the opinion that software outsourcing affects negatively the software development industries across the economically developed nations in the West, while developing markets in the East, mainly in Asia/Pacific benefit most of outsourced software development projects.
It appears a valid statement, on the surface, but in fact both sides benefit from software outsourcing. Developed economies boost their overall competitiveness and get access to cheaper products, while developing nations gain access to resources otherwise not available in their domestic economies.
In the process, both parties gain knowledge that is hard to evaluate in the context of knowledge-based and increasingly knowledge-driven global economy, where the free flow of ideas, financial and labor resources is crucial for a flourishing world economy.
Thus, software development companies where among the pioneers that set foot in new markets not only in terms of universally utilizable products but also in terms of new business approaches.
For example, follow the sun model, which is the IT industry’s slang for uninterrupted work process that is outsourced to countries in different time zones in a manner the work on a project to never stop, is now widely used across numerous other industries that seek to boost their overall competitiveness and efficiency.
No company, even in countries like Russia and the United States which span several time zones, can take utmost advantage of that business model without outsourcing to contractors abroad.
Software development is time consuming process which depends on good head-hunting practices too. Therefore, software vendors across the world are pressured to maintain a certain level of remuneration that cannot fall below the average for the market, broadly speaking.
Paying more in order to attract well educated professionals means that a company must reduce other expenses in order to balance its budget. Outsourcing of services like software support is an acceptable solution although it makes a company dependent on third-party vendors.
This is the viewpoint of a Western firm, while countries like India, which is world leader in the field of outsourced software development projects, are more than happy to accept a supporting role in this lucrative business segment.
Overall, software development as an industry is affected by the ongoing economic downturn but the companies that are involved in this business are able to solve their problems more easily than other big industries, partly because of the widely accepted model of software development outsourcing.
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