Recession: A Quiet Opportunity for your Software-Intensive Business

Posted by Robert Merrill on November 22, 2008 under Uncategorized | Read the First Comment

(I wrote this in March 2008, but since I went all WordPress, all the time, I had to recreate it as a blog post).

Here we go again. The high-flyers are belly-flopping, and the rest of us get soaked. It’s recession time.

Whether out of necessity or knee-jerk reaction, a lot of software-intensive businesses are going to be letting software contractors and employees go in an effort to cut costs.

Cost-Cutting

The direct effect, obvious to everyone, will be downward pressure on hourly rates and salaries for software professionals. If the tech crash of the early “oughties” is any indication, larger consumers of software resources are going to use the opportunity to lock in lower rates with their vendors and hold firm on raises for their employees. They’ll benefit from the savings due to reduced headcount, plus slightly lower unit costs. They’ll reduce capacity, put a few more projects on hold, and work everyone else a little harder. Belt-tightening and cost-cutting—that’s the obvious response of the software-intensive business to the recession.

The indirect effect, however, will be a richer talent pool. It’s just my perception, but unlike the 90’s boom, salaries haven’t skyrocketed in the 00’s, and software professionals have tended to stay put rather than trading up.Out of panic or necessity, some companies will break up some truly fine software teams. Some of those people will now be on the market. Hence, the opportunity.

Good People

Good people tend to attract good people and form good teams, and good teams are more productive. Software productivity is harder to measure than cost, but it’s also a lot more variable. The difference in productivity between a weak team and a strong one is at least two to one especially on small to medium projects. And productivity—the cost to produce an “ounce” of software—is only half the story. More effective software organizations also produce more useful software per ounce—fewer features that never get used, and more features that really help the business—through the better governance, better user involvement, and better processes that tend to follow good people.

If your software-intensive firm has the means, a recession is a great time to strengthen your software-development capability through thoughtful recruiting.

I’ve heard it said that out of chaos comes opportunity. For the software-intensive business, the quiet opportunity of the recession will be on the productivity side of the equation, not the cost side.