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Recession-proof your IT budget

Speaking to the Enterprisers Project in 2018, Rose Manjarres, SVP of Digital & Technology for CBRE said that the 65%–85% of the jobs that will be available in 2030 haven’t been invented yet. That’s quite a testament to how fast the tech industry has evolved over the past several years.

But even the most prolific industry leaders are pumping the brakes these days. In the face of historic inflation and supply chain disruptions, tech giants like Google are preparing for recession, and even VC funding is slowing. 

The Conference Board, a business research firm, released a survey of 750 CEOs and C-suite executives that said more than 60% of business leaders expect an economic recession in the next 12-18 months. Some analysts believe that the recession is already upon us.

Tech sectors that support the financial services industry are well positioned to weather the storm. Within fintech, many CIOs are wondering what steps they should take to manage IT budgets in the economic downturn. 

In tough times, companies face tough choices. Drew Cranston, VP Revenue for Core10 says when it comes to software development, business leaders should look at the development process as a whole. Otherwise, belt-tightening measures may backfire. 

Cranston says, “Some firms are only spending on mission-critical development projects, even when there are broken systems or inefficient processes that add time and cost to software development.”

Fortunately, there’s a tech budget-friendly, cost-saving way to meet development needs.

OUTSOURCING

Reducing cost and minimizing risk are especially important for tech startups, who must achieve substantial growth quickly to survive. The right outsourcing model can help CIOs manage IT budgets in the recession. 

Cranston says. “With outsourcing, you eliminate facility overhead. Your organization is leaner because you may only need one or two FTEs to oversee a project and can scale talent up or down as needed. With the right partner, firms are able to move product development forward and get solutions into the market quickly while keeping costs under control.”

That’s one reason why this recent survey says outsourced software development is going to skyrocket by 70% within the next year.

Here are three ways outsourcing makes sense during a recession:

1. Full-time tech labor is expensive

Outsourcing software development can cost less than building an in-house team. When you outsource, you don’t pay full-time salaries, benefits, or overhead that you’d be responsible for with permanent hires. 

Plus, Cranston says, “It can cost between $25,000–$60,000 to recruit, onboard, and train a full-time employee. That’s a big financial commitment to someone who might leave for another job opportunity in the near future.”



2. It enables better cost control

Cost control is always important, but it’s especially important in times of economic uncertainty. 

With a well-drafted outsourcing contract, you can set clear expectations upfront and negotiate payment terms that work with your budget needs. Spend time upfront laying out payment terms. It’s not necessarily about bottom line advantage, it’s about building predictability in your development costs. 



3. Outsourcing can help you preserve capital

Equipment purchases and other long-term capital investments become your outsourcing partner’s responsibility. So your operations capital expenditure can be reduced, and you can redirect those dollars toward other priorities.

There are other advantages of outsourcing that can help you weather a recession: Specialization, and “rent to own.”

You can work with outsourcing firms that only hire engineers and developers with specialized skill sets, like fintech. This means you don’t have to waste project time on training, certifications, or downloading industry knowledge. Specialists can step in and get your product to market quickly – which means you see ROI faster.

If you have a handful of development items you want, and a small budget, the “rent to own” approach might be best. For example, you could spend $35,000 for an engineer to complete your to-do list as a trial. At the end of the trial, you assess your priorities and decide how you want to proceed. 

This uncertain economic cycle isn’t totally unfamiliar. We’re old enough to remember the financial crisis after the dot-com bubble burst in 2009.  With the right model, outsourcing can be a wise solution that won’t break the

If you’re not sure which outsourcing model is right for you, get your pricing guide here or reach out with questions.

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