Under the conditions of globalization, more and more countries of the world are becoming IT outsourcing centers. Recent trends show that for many companies that want to delegate software development to an outsourcing company, geographic proximity, cost, and language skills are the determining factors in choosing a developer. As a result, the usual model of offshoring-onshoring is gradually giving way to nearshoring.
2020-04-207 min read
The slippery path through a COVID world
Do you know the feeling when you are in the shower and accidentally turn the icy water on? You scream from chills and rush to the tap. Now, imagine that the housing management office turned off the hot water for a month. First, having showers will seem like hell, and you’ll avoid it. However, people have an exceptional ability – to adapt to the outside environment. Thus, with each cold-water-session, it will bother you less and less. The beauty of becoming tempered.
Coldwater and coronavirus? Yes, I am trying to make an analogy here. When the outbreak happened in China in December-January, it seemed like a cold shower. However, it was second-lasting. Then it went on for minutes, hours, days… until it became the reality we live in. First, there was always “a way to turn off the icy water” – by switching off your TV or blocking COVID-news from your newsfeed. And it could remain this way if there wasn’t for globalization.
The virus spread around the whole globe and it sped up the 2020 stock market crash (caused by Russian-OPEC oil wars). Now we get cold showers every day with no ability to turn it off. With every new number of infected and dead. With all businesses crash and experts’ negative predictions. With job losses and bankruptcy. So, now, you either adapt or… do nothing and sit there with unwashed hair.
Now, analogies to the side – this crisis will influence all aspects of our lives and businesses, and they say that we already live in another world. We had time to learn the lessons the 2008 recession gave us. Your business can never be too great to fail. Instant gratifications don’t work in the long run. If each of us is strong, we are twice as strong together. However, if each of us is weak, we double our common weakness. Great lessons, still, we postponed them like some non-diligent students, and now we have tons of deadlines to face and little energy to invest in it. Even if there was energy – we must stay at home, preventing the transmission of the virus and spreading the crisis instead. What is the lesser of two evils, though?
Economical and social influence
With implemented quarantine, the global economy will suffer because it forces all businesses to put their productivity on pause. The sheer sense of business existence is making money. If they stop producing goods or providing services, they stop making a profit. This makes them less able to pay taxes and employ more people, providing them with salaries (*read – mean of living). Yes, businesses can pay wages to the workers during the quarantine. For a month. Maybe two if they were profitable before. However, the more time the business doesn’t work – the more endangered its existence is, so people lose their jobs. They lose their jobs – they get less or no money. They have no money – they buy nothing but minimal food and means of living. People spend less – businesses that were still afloat, sell less and they need fewer people to work. People lose jobs. They buy less and… A vicious circle of COVID life.
Only think of it – we could solve it if we only could work and buy more from the companies that suffer from recession. However, traditional means of “working harder to overcome the crisis” are not available today. That’s where the 2020 recession differs from all the previous. We cannot go to work because of the quarantine. We buy less under such circumstances even if we have money. The circle becomes even more vicious. Crisis, social distancing, “stay-at-home” routine – all of it makes the new economical environment filled with unprecedented obstacles we weren’t taught to overcome. People cannot travel and support the tourism industry. They cannot go to cafes and restaurants, giving life to small businesses. No, we would love to, but we just can’t. Quarantine is like a rope around your neck – making you stay in one place so you just don’t die. Tearing the rope is hard. Bringing yourself together afterward is even harder. Unfortunately, quarantine accelerates the crisis. Below are some numbers, showing the experts’ forecasts and recent influences over the major industries because of the outbreak:
1) The forecasted global loss to the travel and tourism industry – almost 117 thousand million dollars, while in 2019 the post-COVID predictions were that it would increase by 26 879 million dollars. Asia is predicted to suffer the most, having 225 889 million dollars in 2019 and ending up losing a third of this sum in 2020.
2) Business travels expenditure reduction is forecasted to decrease by 404 billion dollars in China and 190 billion dollars in Europe.
3) Weekly global airline flights change from January 6 to April, 6 – 92% in Hong Kong, Singapore, and Italy; -79% in Spain; – 60% in the United Kingdom; – 50% in the USA.
4) Price of crude oil in U.S. dollars per basket is reduced from 60-70 to 20-30 (differing for Brent, OPEC basket, and WTI).
5) The number of vehicles lost due to auto plant stoppages (March 2020) – 1,700,000 units; in Europe – 880 000 units; in North America – 478 000 units.
6) The percentage of chemical production is decreased by 2.4% globally.
7) The film industry worldwide loss is 7 billion dollars as of March 2020. The predicted forthcoming loss is 10 billion dollars.
8) 75% of companies have supply chain disruption globally.
9) IT expenditure decreased to – 6% with mobile phones, -12% with PC and tablets, -3,3% with servers, -2% with IT services.
What are the future lessons from this COVID-recession?
- In Ukraine, we often say “Головне – здоров’я. Все інше наживне”, which is translated as “Health is the most important thing. Other things are attainable”. The phrase seems so easy and ordinary, like saying that 2+2 equals 4. Turned out, we were amateurs in health mathematics.
- We found out the other side of globalization.
- The unpopular jobs turned out to be the most necessary for society’s survival: medical workers, supermarket assistants and refuse collectors.
- Working from home is not as great as we imagined it would be, sitting in the office.
- Solving public goals is more important than increasing revenue while sacrificing them.
- The governments should not just give bailouts to the industries for the sake of giving. It should serve a purpose.
- The unbelievable cannot happen today. It already happened yesterday.
- The digital world is a “first aid kit”, keeping society alive during such unprecedented times.
Is the digital business an anti-crisis sanitizer?
The previously unknown Zoom broke its records in the number of downloads because the education process, conference meetings, and friendly get-togethers turned online. General practitioners consult the patients via the apps, bringing healthcare to the web. People, whose work was on the Internet, now can work remotely without losing the salaries (still with losses in productivity). Messengers become a way of dating. People marry online. So, does it mean that the digital world will save your business? Well, yes and no.
It depends on the value you bring under COVID-crisis-conditions. People order more food online and fewer clothes because eating is a bigger necessity than fashion. If you lost your job, you are less likely to buy a subscription to Netflix and Apple Music. If people are less likely to spend in offline life, it means they are also less likely to pay on the Internet. Thus, today the most important aim of all businesses is not to stay remembered.
On the one side, people stay at home and cannot go to the shops often, so they will more likely to order online. On the other side, retail companies cannot provide fast delivery, especially when we talk about cross-border shipping. Also, there are certain types of products that frequently occur in the basket (medical supplies, baby-products, cleaning items, food), and those that occur there fewer times (clothes, jewelry, electronics, sports, and fitness supplies).
Bringing your store online always seemed to be a significant step for businesses because globalization broadened their target audience, hence profit. Now, local online shops play a bigger role because they don’t delay the delivery. So, today there’s more sense to target a local consumer more than a global one.
What can e-commerce brands do to stay afloat?
- Choose less pricey delivery options and count on the customers’ understanding;
- Target other manufacturing centers instead of China, Bangladesh, India, Taiwan, and Vietnam, and…
- Support local manufacturers;
- Choose the essential products’ distribution instead of luxury ones;
- The well-thought acquisition is a must. Companies will provide only the items they are sure will be sold;
- Understand panic buying and prevent people from doing so to avoid supply chain overload.
How can the IT industry help?
- Allow customers to track the delivery of the product and be sure that, although slow, it is being shipped;
- Target the user’s purchasing desires best with more advanced algorithms for “recommended items”, according to the previous experience and the customer’s budget;
- Provide accurate supply chain management, with a highlight on the timing, along with the quality;
- Model new cost structures;
- Implement anti-panic-buying features.
There are two types of SaaS business models: vertical and horizontal. Vertical SaaS focuses on a specific industry, like retail, healthcare of logistics, and produces software for it. For example, Salesforce targets CRM only. Horizontal SaaS provides software that would be of use to different sectors, like Slack. You can use it no matter what team you are in – a team of software developers, a team of photographers or general practitioners. It’s a one-fits-all product. Logically, the vertical SaaS suffered more than the horizontal because it had a too specific and small target audience.
What can the SaaS companies do to stay afloat?
- Make payment terms more flexible and prolong them;
- Offer annual contract with a reduced price;
- Negotiate discounts with the clients who want to stay but need to quit due to budget changes;
- Build a “stress-response” scenario in case the worst happens;
- Provide free trials and prolong them;
- Give paused account suspensions;
- Mitigate pricing-per-user structure and provide free seats;
- Provide contact pause.
People stay at home. Those whose work is not possible to be brought to a remote online world, have tons of free time (the free time they’d prefer not to have). This way, Netflix has seen a 30% growth in the number of international users. Over 1 million users were playing Counter-Strike online in April. Before that, the biggest amount of people engaging in this game was only in January 2017 – almost 100 000 users. Being forced to stay at home, people resort to online entertainment, like watching movies, listening to music, and playing games. This way, popular singers conduct live sessions on their Instagram pages instead of concerts. There is even an example of a new unfamiliar type of art delivery – Digital Theater.
What online entertainment companies do is encourage users to stay at home. Although it serves a public role, there’s no way to deny that they [the companies] will only profit from that. In the long run, however, the subscription-based products can suffer from the loss of users if the crisis escalates. No matter how much the people enjoy watching “The Irishman”, he won’t feed them. Still, it seems to be a worst-case scenario. Below are the statistics of how the users react to the brand’s engagement in the COVID-informing.
Here, we witness the revolution. Hospitals, being the places filled with the infected people, are not available for those who suffer from non-virus conditions. COVID-19 didn’t cancel the heart diseases, headaches, indigestion, and depression. People still need medical support, not related to the epidemic. Thus, the digital healthcare system enables general practitioners to treat patients with mild symptoms remotely. EHR software allows keeping track of all infected people, gathering the data about the conditions of each specific case. It will not only provide a general idea of global health but also allow more accurate data to support scientists when developing new drugs and vaccines, and we talk not only about coronavirus here.
For example, Maccabi Healthcare Services is Israel’s second-largest health maintenance organization. It managed to transfer all of its 5,000 medical staff to remote health services in less than two weeks while. London hospitals have used the EHR system to request the test results faster.
Remote software development
Software developers are magicians, creating apps that serve many purposes needed in this “stay-at-home” reality. Another superpower is that they can do these amazing things from everywhere with an Internet connection. In terms of this, it privileges us, although there’s no way to deny that working in the office is more beneficial for the productivity of the team. Also, most companies, both in-house and especially outsourcing ones, have the experience of the remote type or work. They are aware of all the necessary tools that enhance communication and productivity. It seems life prepared us for such a challenging situation.
How can we help your business in COVID-times?
- Improve your contactless payment solution;
- Engage in the development of eLearning;
- Help to improve online banking;
- Create a tracking system to monitor the spread of the outbreak;
- Improve your communication tools;
- Drive the digital healthcare application forward.
Feel welcomed to contact SapientPro during these challenging times. Understanding the risks, valuing the opportunities, we are ready to face the difficulties. Are you with us?