Monday, December 11, 2023
HomeStartupSix months in the past Dexter Cousins warned Australia’s tech expertise bubble...

Six months in the past Dexter Cousins warned Australia’s tech expertise bubble was about to burst too – his recommendation then is simply as necessary now

Editor’s observe: This column was first revealed in July 2022. We republish it now amid widespread job cuts in tech as a result of Dexter’s recommendation then is simply as related now.

Ask any founder their prime three challenges, and expertise is more likely to function amongst them.

Report low unemployment, closed worldwide borders, the nice resignation, distant staff, hovering salaries and a world expertise scarcity have created probably the most complicated expertise disaster within the trendy period.

Enterprise leaders plead with authorities and the schooling sector to unravel the issue. However any assist they supply might take years to provide tangible advantages.

Many enterprise leaders I converse to really feel helpless proper now. However might issues be about to vary?

I’m a recruitment veteran. I’ve recruited by way of the dotcom crash and the GFC. I ought to have recruited by way of my third crash in 2020. Now all the indications recommend we’re headed for a world recession in 2022.

What makes me so assured? While we aren’t technically in a recession, each main financial downturn I’ve seen has been preceded by a purple sizzling expertise market. 

1999-00 My cellphone and fax by no means stopped! Then the tech wreck occurred. Ice chilly jobs market.

2007-08 Everybody wished to work at an funding financial institution for triple their wage and received it. The GFC hit. Ice chilly jobs market.

2020-22 Has been the most popular expertise market on report! I by no means thought I might see a day when folks would refuse to work in an workplace two days per week. Or entry-level builders could be paid $150,000. But right here we’re.

Expertise markets are like some other market. Worth is decided by provide and demand.

If the market will get inflated an excessive amount of it creates a bubble. Then the bubble bursts.


Is there a tech expertise bubble?

Let me take you again to March 2020. The markets tanked 30%, the world shut its borders and went into lockdown as a world pandemic put us all on purple alert. Australia soared to 9% unemployment in a month! Companies shut and we confronted the best financial disaster of our lifetime.

The one approach for many companies to function and survive through the lockdown was to go totally digital. Some have been ready for it, however most weren’t. The demand for tech expertise soared, and on the identical time borders have been shut. For a short while, it regarded just like the demand for tech expertise may very well be met domestically.

Most tech startups had 3 -12 months of money runway – at one level it regarded like we might lose as much as 75% of the startup ecosystem.

The federal government stepped as much as present help and stimulus in Jobkeeper. And by July 2020 the economic system was pumping once more. Tech valuations soared, Afterpay hit $150 and made the ASX 20. VC poured billions into tech startups. Collection A rounds quadrupled. The tech ecosystem was flush with money.

However the demand for tech expertise received larger and larger.

The cashed-up tech corporations smelt blood and aggressively poached expertise from tech startups, providing 30-50% pay will increase in some cases.

The big corporates, banks and telcos additionally focused expertise from startups, providing huge salaries to make up for no fairness.

The one approach for startups to battle again was to supply extra money. Or lose skilled employees for much less skilled folks. The one drawback is that salaries rose throughout the board. Entry-level builders are actually incomes greater than startup founders and leaders.

The tech expertise scarcity has created the largest expertise bubble in my profession. 


The quickest solution to remedy a expertise scarcity

Cease hiring.

Don’t wish to pay $8 for lettuce? Cease consuming lettuce.

Pretty quickly you’ll discover you are able to do with out and rapidly the price of lettuce is again to $2

The identical dynamics work within the expertise market.

Picture: AdobeStock

If 2021 was the 12 months of “Progress in any respect prices”, then 2022 is the 12 months of “Reduce prices in any respect prices” 

Because the starting of 2022, we’ve seen Tesla, Paypal, Coinbase, Robinhood, Klarna, and Netflix all make job cuts of 10-20%

We’ve additionally seen high-profile startups like Quick run out of funding and shut their doorways, leaving 300 folks with out a job.

And as these job cuts are occurring, we are actually listening to of headcount freezes at Meta, Uber, Lyft, and Twitter with extra to observe.

Within the US discuss of the nice resignation is being changed with discuss of an awesome recession.

Australia usually lags behind the US, often by six months. During the last two months, I started to listen to of employees layoffs at Envato, Brighte, Banxa, HealthMatch, Una, Booktopia, Bizpay and different tech startups.

Final week Volt Financial institution introduced it had run out of capital and would shut its doorways, with 140 staff shedding their jobs.

Tech valuations have tanked with some excessive profile Aussie tech companies down 90% from 12 months in the past.

This places extraordinary stress on any enterprise to chop prices and make job cuts. With extreme drops in valuation proper throughout the tech sector, it additionally means capital is drying up.

The sector shouldn’t be as enticing to traders because it was 12 months in the past.

Positive some traders are on the market on the lookout for bargains, however with rising rates of interest, the urge for food for high-risk investments is waning.

And with a world recession on the horizon, traders are in no hurry to rescue corporations that could be bancrupt in months.

It’s not solely startups which are impacted by recessions. Australia’s firms will implement cost-cutting measures to make sure they ship shareholder returns.

Traditionally income are delivered in a downturn by way of restructuring (ie reducing headcount) and axing costly know-how tasks.


What a recession means for the native expertise market

NAB just lately introduced that 100 tech roles could be offshored to India. The unrealistic salaries demanded by inexperienced builders and engineers could have prompted NAB and plenty of different Australian companies to rent offshore staff.

Commonwealth Financial institution employs 4400 software program builders. That’s lots of software program builders. Think about what a ten% headcount discount does for the native expertise market?

In line with the Tech Council, there are at the moment 860,000 Australians employed within the tech sector.

A ten% reduce throughout the trade over the subsequent 3 months means 86,000 folks on the lookout for a job. 


It’s now international expertise market

Even when Australia avoids a recession, it’s probably the US and Europe won’t.

Now that borders have opened up we as soon as once more have the choice of hiring worldwide expertise. Australia is a really enticing proposition for tech expertise. The tech scene has matured significantly and the life-style is unbeatable.

Going again to the lettuce analogy, most founders weren’t ready to pay $8 per head. As a substitute they sought various markets and have constructed robust hyperlinks to Jap Europe, India and Asia the place extremely skilled tech expertise might be employed at a 50% low cost.

Early-stage startups have embraced distant working, accessing a few of the world’s greatest engineering and tech expertise from the US and UK. It’s only a matter of time earlier than giant corporates do the identical. 

Within the final two years, we’ve seen the emergence of platforms making it a lot easier from a authorized and compliance perspective to rent and pay offshore staff. And whereas there have been teething issues, as companies turn into extra accustomed to working remotely the price advantages and the flexibility to entry broader expertise markets put rising stress on the native expertise market.

Each time I’ve skilled a downturn the expertise market has gone from purple sizzling to ice chilly within the area of some months. 

There’s each chance that the availability/demand ratio which has inflated the expertise bubble we discover ourselves in might burst in a short time.


Does this imply an finish to the expertise scarcity?

Not fairly. Again in 2005 as one in every of Australia’s first ‘digital’ recruiters, it turned very clear that because of the tempo of know-how innovation the availability/demand metrics would by no means be balanced.

The fact is that being on the forefront of innovation means utilizing the most recent know-how, most schooling services are behind and again then folks didn’t have entry to on-line studying. My resolution again then is identical as right this moment, in actual fact, it’s important right this moment and much more lifelike.

Firms MUST change the best way they go about figuring out and hiring expertise. 

When hiring for tech startups our emphasis should shift from hiring folks based mostly on programming languages to hiring folks based mostly on their propensity to study new programming languages.

With on-line studying available folks with a powerful want to study new expertise can and do. Profitable tech corporations are those that constantly determine these traits when hiring.

One of many largest advantages of closed borders this final two years is that Australia has developed a home workforce able to launching and scaling tech startups.

We should harness that IP and go it on to the subsequent wave of expertise. As a substitute of discarding resumes as a result of an individual doesn’t have Kotlin, we have to take a look at what they’ve completed, and what they’ve constructed and search to utilise that have.

But when we proceed the hiring practices that received us right here – we’ll simply see one other expertise bubble as quickly as the subsequent restoration begins.



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments