You get what you measure – that’s one of the principles I follow in business. Learn what is worth measuring and why. Here’s my point of view on the changes I have recently noticed in the IT sector.
- General market environment
- The sales and recruitment process
- The current clients’ leads
- The wisdom of the crowd
- Backtracking – a quarterly review
To be able to make the best business decisions, every organization must evaluate the present state of the market as accurately as they can.
The same is true for our industry, which has recently seen tremendously diverse market conditions. We saw a severe downturn in the second and third quarters of 2020. Some businesses cut staff, while the majority of businesses ceased adding new workers.
However, a surge in IT services started in Q4 2020. We went through 18 months of rapid expansion, which was reflected in the state of the labor market and the rising expenses. Companies competed in terms of digital ideas, and our industry felt the effects of that rush up to the end of Q1 2022.
We can observe a noticeable slowdown in Q2 2022 and the beginning of Q3, which is caused by the uncertainties surrounding the global macroeconomic situation. Even while the situation is still favorable, everyone is concerned that it will become worse, which leads to a self-fulfilling prophesy.
Given that it is difficult to determine at this point whether the slowdown is a temporary occurrence or the start of a long-term shift, it is to be expected that businesses will be wary of what comes next.
In this essay, I’ll demonstrate how Future Processing does this and what areas we prioritize based on data that is unique to our sector as well as more general macroeconomic data.
general market situation
At Future Processing, we do a broad market environment assessment every quarter (or as needed). The required data is prepared by one of our coworkers. The analysis’s objective is to evaluate the present scenario and how it affects our company.
As part of our study, we look for information related to pertinent current events, such as:
1 the quantity of Covid cases in specific nations.
2 the Ukrainian conflict.
3 the new Chinese shutdown.
Next, we examine important economic concerns pertaining to both our nation and the nations from which our clients are sourced. For instance, the most fascinating Poland-related subjects in Q1 2022 are:
1 limits imposed by Covid have on operating a company.
2 the proposed laws governing distant employment.
3 The anticipated rate of inflation and its effects on us, particularly in terms of its growing rate.
4 WIBOR (Warsaw Interbank Offered Rate) was terminated, and the POLONIA reference rate was introduced.
5 Updated The Polish Deal
6 Bond return percentage
7 Work expenses in Poland
8 The EU and Poland’s disagreement
9 The Polish PMI
When examining our clients’ marketplaces, we keep an eye out for:
1 The PMI for Manufacturing and the PMI for Services
2 Indicator ZEW
3 The anticipated and existing interest rates
4 The Gartner study on anticipated IT spending
We evaluate the risks and possibilities for the firm based on this data. In addition, this data enables us to comprehend how the macroeconomic environment will develop over the coming years as well as how laws will affect how the organization does business.
Smaller SoDA member organizations can also come to their own judgments about the current developments and their potential effects on business by keeping up with the news about SoDA’s operations.
The hiring and sales process
The duration of the sales process is one of the unique indicators that any business may employ.
Every organization often has a sales model that specifies the typical length of the deal-making process with a new client. Sales cycles typically lengthen, become stuck, stumble, or even fail more frequently as the market condition worsens. The change in the amount of time required to finish a sales process or the efficiency of doing so is one of the factors that may be included in an analysis of market change.
You may keep track of recruiting procedures’ length in a similar manner. Data may be tougher to get by in this situation, but because the competition also engages in these procedures. However, you can see applicants who participate in many hiring procedures who put off responding because they are awaiting a response from additional employers: this may take longer than typical when employers compete for candidates.
the leads from current clients
At Future Processing, we pay close attention to the sales leads generated by our current clients since they provide us with details on the portfolio’s business state and may also provide us with a signal about the mood of the market as a whole.
The crowd’s knowledge
Our focus also extends to our customers’ and partners’ partners’ knowledge. Hard statistics and economic projections may be a great starting point for a discussion with our network that aims to get deeper insight into a few particular topics.
Clients
Numerous clientele from different nations work with our organization. Additionally, we have a large number of partners and staff members working in other markets. Because of this, a simple conversation may provide a wealth of useful information. How is the situation in your nation? How is business doing for you? What forecasts do you have for the future? These are a few straightforward inquiries that can be useful.
There is no set formula; all that is required is constant communication with others in order to make connections and offer your own knowledge. As a consequence, you will frequently learn something important about a certain nation, industry, or technology.
professionals in the field
Industry experts might be a useful resource for knowledge. I believe it’s wise to follow people from a variety of professions since you may develop your own perspective on current events and how they may effect you in this way.
For instance, I follow traders who have quite diverse perspectives on the market. These traders include those that approach the stock market with boldness and those who explain what is worth short selling and why.
I think it’s useful to follow stock market speculators because they typically have a solid understanding of the markets and tend to make more correct deductions than financial institution analysts do, especially those who have had some experience with bankruptcy.
The LinkedIn community
If your network is extensive and global, it is also a good idea to follow individuals on LinkedIn often. In this manner, you may see indications of market movement from a variety of angles.
For instance, by following the hashtag #layoffs, I was able to learn about layoffs in the US at the end of Q2 2022, which had previously escaped my knowledge.
Partner businesses
Access to several businesses in the sector is provided through organizations like SoDA, which might be advantageous. We can establish a good rapport with the other member firms. In addition to the advantages of our continued engagement, these connections are important for assessing the state of the market.
We can confirm our own findings, gather additional information about particular topics, or spot a shift in trends thanks to our network of connections in other businesses in our industry.
You may create your own network of partner firms and periodically communicate information on the current market situation in your sector with them, whether or not you are a member of an industry organization like SoDA.
Reversing course: a quarterly review
Another useful method for gathering knowledge is the examination of actual facts about historical occurrences.
For instance, what we do in our business is summarize each quarter in great detail and go over key financial data (revenues, costs, profitability) as well as other important business factors (voluntary employee turnover, job offer acceptance rate, changes in remuneration on the market, the number of sales leads, etc.).
These facts directly relate to our business and provide us the ability to evaluate the state of our operations and the accomplishment of our objectives. But there’s more to it than that; they also hint to potential future events. Therefore, in addition to financial information, we require significant data. We keep an eye on the trends and assess how well our outcomes match our projections. We can determine what is changing and why by analyzing differences, and as a result, we get information that indicates what could occur in the next months.
For instance, even if new recruits enhance sales, a firm focused on rapid growth is willing to incur greater expenditures associated with hiring new talent, which simultaneously decreases the rate of return. Another business may be expanding more slowly while concentrating on raising its rate of return at the same time. Therefore, both businesses measure the same variables, but because they have distinct objectives, they will interpret the results differently.
Make sure the data you analyze is standardised correctly. For instance, based on our experience as a service sector organization, the strongest month in the first quarter is often March since it has the most working days and the fewest vacation and sick days. Because of this, we must first determine the real income to working day ratio in each month before comparing March to other months. We can therefore determine whether our firm is genuinely expanding or whether it is merely “the March effect” in this way.
Part 1 has come to a conclusion here. Next week, Part 2 of the essay, which includes advice on what to watch for and a summary with market forecasts, will be available on the blog.