A storm is building in the horizon for the US economy, enlivening the fears of a recession that could reach the farthest corners of Latin America and the Caribbean. In spite of the alarm bells, experts and executives in the IT services industry expect partly cloudy skies for the region.
Tech analysts in the region don’t deny the risks for the US economy, which would add to the more than two years of economic turmoil caused by the Covid-19 pandemic, the supply chain crisis and high inflation at a global scale. Nevertheless, they hope that technological transformation and innovation will soften the blow.
“Recession gives long term opportunities to the firms that are proactively ready in terms of having the systems for innovation, because those are the times when you can fix a problem through innovation,” said Rajeev Gupta, head of the Nearshore/Latin America region and Mexico Country Head at Tata Consultancy Services (TCS), during his participation in the Nexus 2022 panel State of IT Globalization: A New World Order of Innovation and Influence.
“Have your firms ready. When there is some disruption, whether it is in the form of recession or in terms of competition, you’ll adapt to it as an opportunity instead of a challenge,” he added.
Tech could serve as something more than a life jacket for companies in the middle of the storm, added tech analyst and economist Anthony Porter. Innovation and transformation through technology has the potential to give the companies an edge over the competition, turning headwinds into strong tailwinds.
“There’s a lot of companies like Microsoft that came out of a recession and were built right after,” commented Porter during the panel discussion.
Latin America and the Caribbean are already feeling the pressure of worldwide economic turmoil. High inflation, the storm that is headed towards the US economy and uncertainty over the economic future of the region cut down the flow of venture capital funds into its startup ecosystem. Just last year, those funds flowed abundantly.
“There’s a lot of companies like Microsoft that came out of a recession and were built right after”–Anthony Porter
The last couple years were tremendously difficult for Latin America and the Caribbean, but the crisis also accelerated digital transformation to an unpredicted speed. Adoption of new technologies turned the region into a hotspot for tech investment and innovation. And changes are not expected to stop. On the contrary: they might continue at an even faster pace as the US economy is threatened by recession.
“If you believe that the entire strategies of organizations were going at the speed of a racing car pre-pandemic, post-pandemic they’ll be going at the speed of an airplane,” said Gupta.
Although speed is important, he added, companies should also be keenly aware of where such a fast pace is taking them.
It has happened so many times before, through the centuries, and it’s happening all over again. Technological development is changing our relationship to geography, shrinking the world and making it feel like a widely connected global village.
For companies, this translates into an enlargement of the tech talent pool. Now software programmers, engineers, cybersecurity experts and the like are up for grabs anywhere in the world, as long as employers are willing to meet their wage demands. Considering the state of the US economy, firms have a greater incentive to hunt for talent elsewhere.
“We need to take advantage of having more and more talent in the Nearshore as long as they provide the required value and an outcome-based approach”–Rajeev Gupta
This has made companies “location agnostic”, in the words of Rajeev Gupta. Firms don’t mind where their workers come from, making country-specific pricing irrelevant, especially in the context of hurried tech adoption.
“Customers don’t ask me what is the price of this X, Y or Z person, what is their location. I think it’s becoming location agnostic […] They don’t really care if the work is done from India, from Eastern Europe or from the Nearshore, as long as the talent is available,” said Gupta. “That’s why we need to take advantage of having more and more talent in the Nearshore as long as they provide the required value and an outcome-based approach”
The topic of changes seen in the hunt for location-specific talent was discussed in other panels during Nexus. Later that day, experts pointed out that, due to the severe shortage of workers in tech, the quality and availability of talent is now the main concern of IT firms scouting for sites.
The Future of the Workforce? Not in Office Buildings
The shift to remote work has been heralded for several years as the next logical step in employment. Though Covid-19 made it a necessity –and an obligation– for many industries, now, with lockdowns out of the picture and the state of the US economy pushing firms to cut costs, a debate has begun as to whether a return to the office makes any sense for the majority of workers, especially in the tech industry.
Employees and employers have been clashing all year over the issue of remote work. While many workers prefer to do most of their work from home, saving time, money and energy, companies believe that a virtual office means missing out on team integration and the flow of creative juices that usually come with face-to-face meetings. For now, experimenting with hybrid models seems to be the plan to follow.
“There’s a big push back to the office, and a lot of companies are reevaluating their real estate plans, their infrastructure plans”, said Anthony Porter. “We want to be sensitive to the need to have personal interactions, but we also think about the human aspect. Some people do their best work when on remote, and we want to encourage that.”
In TCS, the future appears to be mostly remote. The company expects that, by 2025, no more than 25% of its workforce will be in the office more than 25% of the time, according to Rajeev Gupta.