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15 Oct 2008, Posted by Matthew Reinbold in New Work Ways,Thought & Theory, 3 Comments

Next 6-9 Months: Reduced Demand


The market in which freelancers and small software development firms participate in is a highly interconnected thing. Given sufficient size a crisis in one area can ripple well beyond the bounds and reach neighboring regions, livelihoods, and classes. As national governments have become aware of the scale of what they’re dealing with they’ve been quick to join together in attempt to isolate the damage before it becomes irreparable. It will take months, if not years, before we’re able to conclusively ascertain whether they were successful. Until then, however, the rest of us will have to expect that:

Demand for Services Will Decrease
What This Means:

  1. A reduction in consumer spending translates into a reduction in capital investment by companies. Put another way there will be smaller budgets for software development. From ComputerWeekly article:

    The reluctance of banks to lend is contributing to a drop in IT investment for some companies, according to the Federation of Small Businesses.

    Some projects are getting deferred for three to six months while businesses assess the economic situation, analyst group Forrester said. Other companies are being hit by clients who go out of business.

    There will be fewer new clients from large firms looking for exploratory development. A survey of CIO and CTOs recently done by the Changewave group shows that companies looking to spend less in the coming months has peaked:

    IT Spending Survey Results via ChangeWave Blog

  2. Likewise, small to mid-sized businesses will “make due” with systems or processes that they already have. Money that would otherwise go toward software development will be pressed into more mission critical areas like salaries, inventory purchases, and keeping storefronts open in the face of next-to-nill capital help. There will be fewer small-to-medium sized businesses looking to contract development work while the future remains unclear.

What You Can Do About It:

  1. With a decrease in new client work it is time to dig through your email archives and reach out. It is easy to let communications with previous clients die in the flurry of new projects. However, there is no better time than right now to renew past relationships. It is common wisdom that it costs more to attract new customers than it does to sell to existing clientele. By casually having a conversation about what their current needs are and what you’ve been doing you may find that there is common ground for new work.
  2. Treat your existing clients with all the TLC (tender-loving-care) that you can. I maintain there are some extremely healthy reasons for firing clients. However, unless the offenses are egregious, turning the other cheek (or doing business with the devil you know rather than searching for one you don’t) rules the day. Remember, you will not be the only firm who discovers they have spare man-hours. Pipelines over the next 6-9 months may slow (or, worse case, develop gaps). Customers who pay on time, have a volume of work, and compete in recession-proof or non-cyclical industries are at a premium and should be treated as such.
  3. While the competition for stable work will increase that does not automatically mean slashing prices. Cuts made out of fear will communicate to the client that the creative talent brought to a project is more akin to a commodity – and only consumers win in commodity markets. If you’re going to win business and continue to make a good wage its because you’re bringing something extra to the table – better customer service, demonstrable level of quality, longer hours, etc.

For a positive outlook at how this may be a good thing I highly recommend Fareed Zakaria’s Newsweek Article The Bright Side. The cynic in me wonders whether we’ll return to overly ornate clever financial instruments in lieu of real wage compensation when this is done. I can only hope Fareed is right.

What’s Next: