As the world grapples with the Coronavirus outbreak, we are going to feel the economic impact of this unprecedented threat for a long time to come. As we enter into a recession worse than 2009, economic recovery, along with the health recovery, has started weighing heavily on everyone’s mind.
While the governments, doctors, and nurses respond to the outbreak on the health front, economists, consultants, and business people have started to think about the future. What will be the shape of the economy and business post Covid19? How will businesses respond to the new challenges? What kind of strategies can help businesses to get back on track?
The Workforce Impact Of Coronavirus
However, we need to look at two aspects before any of that. First, we need to understand the current fall-out of the pandemic. How has it impacted the business and the workforce? Then, it is crucial to map out the possibilities of how Covid19 itself will play out. So, let’s start to understand the current business impact.
Remote working on the rise. But it is limited primarily to knowledge industries (IT, Consulting). However, uncertainty in client businesses will impact the availability of work. Many companies are putting projects on hold. Consequently, unemployment is increasing. In the US, more than 3.5 million people have already lost jobs due to Coronavirus’s impact. Globally, it is expected to put more than 25 million people out of a job. In the US, the unemployment numbers will be close to around 5 million.
How long will it last?
The unemployment in the formal sector is not only a result of short term pressure but also a result of long term uncertainty. It is becoming increasingly impossible to predict the near and mid-term scenarios. According to Morgan Stanley and Goldman Sachs, any recovery can only be expected in or after the third quarter of the year, depending upon how fiscal and monetary policymakers respond. McKinsey’s predictions are even dire. According to their briefing note, recovery by Q2 2020 is an optimistic scenario. If the current grim situation continues, the recovery may extend beyond Q1 of 2021.
As businesses are looking at a long road to recovery, and nobody can predict the exact situation once life starts to normalize, people and businesses are pausing all normal activities. This uncertainty of the future is what is going to drive the actions of companies around the world.
EY released a report, “COVID-19 Business continuity plan: Five ways to reshape,” outlines a few steps that businesses will need to take. The report suggests a three-step approach; Assessment of short-term liquidity, assessment of and quick response to financial and operational risks, find supply-chain alternatives, determine the impact on budget and business plans, and revise if necessary.
Business Priorities Post Covid19
What EY is necessarily suggesting is to build business resilience. Businesses will look at building resilience systems and processes as they realize that even the best of them can be crippled in the event of an unforeseen circumstance. Martin Reeves, Nikolaus Lang, and Philipp Carlsson-Szlezak, in their article in the Harvard Business Review, suggest six pillars of resilience.
- Redundancy – Build multiple developments and delivery channels
- Diversity – Get people from diverse backgrounds and context together
- Modularity – Loosely coupled organization structures, with the flexibility to scale a few while de-scaling other areas
- Evolvability – Continuous improvement and agility of responses
- Prudence – Keep evaluating a variety of scenarios, and test contingency strategies for each of those scenarios
- Embeddedness – Isolated, the company-centric approach will not work. Build the eco-system and work together to tackle business challenges.
Impact on IT Projects
IT and software projects are not going to be any different in adopting the same strategies. However, unlike other functions and domains, software operations do not have elaborate supply chains or machinery requirements. There is only one component for software development function, and that is people. Hence, while talking about the response and future strategies to be adopted by IT functions, it is thinking about how the development teams and delivery functions will be structured to deal with the uncertainties and build resilience to counter those uncertainties.
It is not that the CTOs and CIOs were not working in this direction earlier. Software delivery processes have evolved to imbibe most of the principles described above. Most of it has grown around the trend of increasing reliance on contingent workforce through flexible staff augmentation. The Oxford Economics Workforce 2020 Report found that over 83% of responding executives said that they plan to increase the use of contingent, intermittent, or consultant employees in the next three years. In addition to this, IT functions across the world are relying on specific skill sets. The 2018 Future Workforce HR Report released by Upwork suggests that 78% of HR managers agree that the skills will become more specialized. Along with these changes, the advances in Artificial Intelligence (AI) and the subsequent increase in automation are making many of the old skills obsolete. Another finding from the Upwork report is that 61% of HR managers predicted that the majority of today’s jobs would not exist in the next ten years.
The scale, suddenness, and extent of the impact of Covid19 are only going to accentuate the use of specializing, contingent staff augmentation. The CIOs and CTOs will adopt the strategy that will be characterized as follows;
- Long term investment only in core capabilities. All non-core activities will be handled in short, frequent cycles, thus creating a better risk response.
- Use a specialized workforce to drive efficiency and quality. This strategy allows for quicker value delivery, thus enhancing the opportunities.
- Spread the dependencies between captive and contingent workforce. This division will allow for better scaling up and down as the opportunities arise.
- Let dependable partners handle most of the strategic initiatives. Such a long-term association will ensure better strategic alignment while still providing flexibility, cost optimization, and efficiency.
- The flexible staff augmentation approach would also add to the security of the workforce, as their risk response would also be built-in.
No matter what, we are going to face a different world post current crisis. Efforts to increase resilience at the level of individual business will be crucial, but not sufficient. It will be a coordinated response from the entire eco-system that will drive the resurgence. It is paramount to consider what we have learned and configure our plans to incorporate those learnings into our future strategies.