How will the cost of living affect the technology sector?

There are steps technology leaders can take to mitigate the effects of a looming recession.

Anastasios Papadopoulos, Founder and CEO of Integrated Management Systems (IMS), explains how the technology sector is impacting the cost of living and how to navigate it.

With the rising cost of living in the UK and beyond, you can’t imagine the impact it will have on the tech industry. According to the Office for National Statistics, 91% of adults in the UK reported an increase in the cost of living between June and July 2022. As inflation rises, the tech sector is facing a series of knock-on effects due to continued supply. Chain issues up to salary caps.

However, after the crisis, the leaders of the technology industry are staying strong and strong, focusing on accelerating their solutions to adapt to the current climate.

Passionate Investments or Beware the Future?

Technology investment is one of the many factors affected by the cost of living. TechNation reports that UK tech investment will reach a record-breaking $18 billion by 2021, the highest in Europe. This was three times higher than the same period a year ago and paints a very promising picture for 2022.

But now it is understandable that investors are more cautious due to the current economic situation, the numbers will decrease compared to last year. Tech UK has highlighted its forecast that the UK economy will face a “technical recession” in the second half of this year. However, there are still some long-term benefits to technology investments for risk-averse investors, including long-term financial recovery.

So what is the current impact? And how can industry leaders respond to future threats and technology future-proof their businesses against the predicted economic downturn?

Inflation cycle

We are now entering an inflationary cycle. The Bank of England is raising interest rates to fight inflation, aiming to keep inflation below 2 percent. As the recession looms, it faces a critical decision about how far to go to limit its impact without stifling investment and growth.

With higher interest rates, the goal is to limit borrowing and encourage more saving than spending, making investments more difficult. It mainly discourages investors from making long-term investments. For technology leaders (not so long ago) enjoying investment opportunities, this change will change the way they need to demonstrate confidence in their projects, products and growth.

Like any other industry, technology products are very expensive to import due to global inflation and supply chain complexity. Businesses are spending more. The current battle is balancing production costs with business growth.

Additionally, there are many jobs on offer – but often lack the talent to fill the roles. This forces employers to pay higher wages to attract talent, which in turn encourages inflation. But the skills shortage is being reinforced by a wage cap to balance spending and cash flows from other companies and industries. When the crisis takes a stranglehold on lives, talent can turn to opportunities that help them get out of control.

The effects of raising interest rates to reduce inflation may take a few years to work. Therefore, it is imperative that technology leaders know how to respond to the coming threats and strengthen their products and operations.

Focus on determining your product-market fit

Knowing where to start in times of crisis can often be difficult. But going back to basics is always a good starting point – and a good way to start is by focusing honestly on product-market fit. In a fluctuating market, finding sales momentum can be critical to staying strong and standing. What companies need to do is clearly define their market needs and the ways in which they can refine their product offering to that market. Does the product need to adapt to changing habits? Is the target audience still valid or does it need to be revised or added? Such times require adaptation to evolve with the situation.

Also fundamental to riding the wave is taking guesswork out of the equation. Quick customer surveys and product feedback help you make incremental changes based on research. Gauging the temperature of the market should be part of your ongoing evaluation, allowing you to make small improvements to your offering and create customer feedback loops (both of which can lead to big future growth). This includes demonstrating that you are listening to customer needs, solving problems that competitors haven’t addressed, and creating meaningful value for customers. This also creates the agility needed to keep pace with changing market conditions.

Using digital transformation

Many companies are still hesitant to take full advantage of digital capabilities. But digital transformation provides an added edge and ability to not only survive, but to scale and grow. Sustained digital investments can help manage a crisis while creating competitive advantage and long-term benefits. Using technologies such as AI; CRM; digital analytics; And with digital marketing, you can establish cost-effective tools, prevent redundancy, free up time for your team to focus on more important business tasks, and gather insights to help you measure, adapt and innovate.

Trying to achieve this can be a difficult process. You should turn to digital transformation agencies who are ready to guide you through the process and provide creative solutions. For example, these companies can provide you with the framework and foundation to scale effectively, meet business needs, and make tough tasks that much easier.

Bottom line

Overall, there are many opportunities for technology companies despite the challenges they face in the current economic climate. This includes opportunities to win both customers and investors.

Plus, storytelling is a powerful way to show your people, your market, and your investors what you can do. It’s a good time to show why the company is with you so you can be supported in both a competitive and uncertain field and climate. Even in turbulent economic times, investors are always on the lookout for good deals.

Define your needs, refine your product and develop your technology. Then you’re ready to tell your story.

Related:

Worry of recession among UK tech leaders – CommsCo survey finds 83% of UK tech leaders are concerned about a looming recession but optimistic for 2023.

The importance of digital skills bootcamps to the success of the UK tech industry – Brett Shanley, founder and CEO of Knoma, discusses the role of digital skills bootcamps in developing the UK tech industry.