In the latter, bad newsis piling up. Deutsche Bank wants to cut 18,000 jobs and is not alone. Volkswagen plans to cut 7,000 alone, 5,400 at Ford, 4,500 at Bayer, 4,000 at Thyssenkrupp, 1,400 at Siemens and also cable giant Leoni plans to cut 2,000 jobs.
How do you see the IT industry at the moment? Is it on a growth path or stagnated by the numerous crises of the potential customers of THE IT service providers? When I am asked, I often say: I have had the feeling for some time that the IT industry is not growing as rosy as it did many years ago.
On the one hand, I see that IT consulting companies have some consultants without a project and on the other hand I read again and again that thousands of IT jobs are being sought and every company tells me how to look for IT experts.
In this article, I would therefore like to ask the question: is the IT industry nearing recession?
What do magazines and experts say?
First, I looked at current articles and magazines. I would like to show you three selected articles from magazines, each representing one of the two theses (recession yes/no). Below are the six selected articles and the most important content.
Pro: the economy is declining
I found a first article in focus: “It is grotesque how the recession in Germany is being talked away“. The content is that Finance Minister Olaf Scholz recently halved growth to 0.5%. Statistically, growth is also well below analysts’ estimates. The reasons are the fact that orders are collapsing due to events such as the US-China trade war, the rather weak chinese economy, the recession in Italy, and worries about Brexit.
Another article confirming the recession in the first article, I found in the world: “Bechtle expects significantly lower organic growth in 2019” The content is that Bechtle boss Thomas Olemotz says: “The organic pace of growth in the first quarter “is unlikely to be able to continue in the course of the year due to the economic situation”– the background is that the manager speaks of a weak economy: “If the economy slows down, we will sooner or later feel it, even if the IT economy has been relatively robust recently“.
I found another exciting approach in the T3N. “Skills shortage – IT specialists are too expensive for most companies“. The content is that companies are barely growing because no skilled workers are found. The reason for this is that the majority of applicants are so expensive that they can no longer be used profitably in e.g. consulting. The lack of staff is thus hambyging the growth of IT companies.
Contra: Growth still at a high level
On the other hand, there are also articles that show the strong growth of the IT market. I found a first article in T3N: “Digitization – 40,000 new IT jobs in 2019“. The content is that 40,000 new jobs are being created in Germany and the demand for IT jobs is increasing.
Another article is from Heise: “Skills shortage: number of open computer science staff at the highest level“. The content is that the number of vacant IT jobs has reached a record. According to the article, there are 54,000 jobs and it takes an average of 132 days to hire an IT specialist. Of the 23,000 unemployed, it specialists were also successfully recruited.
A final article can be found in the magazine Computerwoche: “Software and IT services market is growing by five percent“. The content is that cloud and big data migrations and conversions will make the market grow strongly. The article is recommended to focus on trending topics.
I think it remains mixed. In any case, the events of recent years have had a significant impact on certain sectors, but the IT market appears to continue to grow in large parts.
To better understand this and to back it up with numbers, I found another article in the magazine IT-Zoom. The magazine quotes a Bitkom study as saying that IT growth this year is only 1.5%, and that the strong years are over. In general, there are winners and losers in IT. Here are some numbers:
- The software segment is expected to grow the most – 6.3 percent to EUR 26.0 billion
- The market for IT services also increased by 2.3 percent to EUR 40.8 billion
- On the other hand, the hardware business is slightly down, with a decline of 0.7 percent to EUR 25.4 billion.
- Sales of traditional desktop PCs (-8.4 percent), servers (-7.0 percent) and multifunction printers (-3.8 percent) are expected to decline significantly
My first conclusion is that our economy is not growing as strongly as in previous years, but there are still areas of the IT industry that are growing very strongly. However, the following statistics clearly show the decline in the strong growth.
What is my experience?
My first feeling has now been reinforced by the statistics. I would now like to focus a little more on the IT market. We learned from the articles that some areas are descending and other areas are growing. But what are my experience as an insider in the IT market?
Pro: IT Consulting in Recession – Insourcing of the Corporations
My first thought of a recession came when I heard that two big banks in the metropolitan area, as well as many other large companies, want to reduce and even completely replace the number of external service providers, and have done so as of 01.01.2019. With regard to the growth of some IT service providers, I noticed that due to this turnaround, the employees and sales figures of the companies have actually stagnated for some time and that the companies still have good existing business, but no new projects are coming.
Furthermore, I noticed at the last job fairs that although many jobs were still advertised, very few were advertised compared to the years before. My contacts, who are currently applying, also tell me that companies are very hesitant and selective. Apparently there are currently no direct projects. I believe that IT consulting will enter a recession due to the insourcing of the corporations and the high level of competition.
Another trend is the cloud migration around Amazon and Microsoft, which mainly hits the hardware sector and even makes many jobs obsolete.
Contra: Product houses and open source on the rise
I notice this at the moment, that the product houses in particular tell us that their own software sells excellently and that significant growth is expected. Due to insourcing, large customers no longer rely on consultants but on external products.
Companies are increasingly relying on open source. According to a Bitkom study, the use of open source grows over 7% per year. This is due to the increasing quality of open source solutions. The winners are freelancers who adapt open source products for the end customer and, of course, the open source providers themselves.
Furthermore, highly specialized knowledge consulting, e.g. on big data, will always be needed. Advisers as an extended workbench will no longer be as common in companies, but specialized knowledge service providers will always have a place.
It is clear that the IT market is no longer growing as strongly as it had been in previous years. Some areas of IT, such as traditional IT services or hardware, are under more threat and are even shrinking, according to forecasts. It is now important to identify the trends around cloud and software development and to position themselves in a sustainable position, because the opportunities are still there.
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