22
May
2020

The crisis is a good time to consolidate

The crisis is a good time to accelerate changes that are already under way and pushes us to do things that could have been postponed in good times. This is forcing us to look for new outputs and goals, and to think about how to do better in the future. One way to do this is to join forces and develop business together. Consolidation has been going on in both the Estonian and European markets for some time, but the crisis could give it an even stronger impetus.

The coronavirus crisis that began with the coronavirus epidemic has affected all sectors of the economy – some more than others. The impact in the software development sector has certainly already been felt quite strongly, and its effect will intensify in the coming months. However, software companies are definitely most affected by customers’ uncertainty about making investments.

As in any crisis, the current situation is both good and bad. On the one hand, the market is getting better and it is easier to find specialists. On the other hand, many customers are forced to reduce their development volumes or postpone projects altogether.

Software development is largely an optimism business – if customers are optimistic about the future, they will also cautiously invest in their software solutions. Uncertainty affects the sales of software development projects and the start of new projects the most. This is even more the case for exports, as postponing projects from a foreign partner is emotionally easier than with a domestic developer.

At the same time, software development is one of those sectors of the economy where you can also work successfully from your home office, and due to restrictions, the work has not had to be interrupted. The business will not stop, although there will certainly be companies that will have to close down after the projects have ended.

Obviously, our main destination countries in Scandinavia, as well as Germany, will emerge much better from this crisis, while in Italy or Spain, the situation may take longer to improve. However, the business services sector is especially important in the recovery, compared, for example, to the travel sector, where the setback will be large in all countries.

We feel the impact of the crisis, especially in our customers’ caution to make new investments and the pressure to implement existing solutions more sparingly. Our business is highly dependent on the well-being of our customers, which is why the crisis is a good indicator of who has been able to put together a viable customer portfolio and who has not done so well. We have strong communication and good cooperation with our long-term customers, so we are optimistic about the future. Of course, both we and our customers have been affected by the crisis, many of our customers have been forced to cut their development budgets, and we have also tried to meet them in the middle as much as possible. It is in the interest of both parties that we get through this crisis well and that good cooperation continues for a long time.

In the current context, it is quite difficult to foresee the future – no one can predict exactly how long the medical crisis will last and what the effects will be on the economy. Rather, we are conservative in our forecasts, and we expect the economic downturn to last for some time.

The crisis situation is unpleasant for everyone, but we would dare to think that companies with a longer history, a stronger customer portfolio and a wider reach will survive it better. If in good times smaller competitors emerge like mushrooms after rain, then crises are usually the time of joining forces. We also look around in Estonia and other markets to see if there are any teams that could join our group. In any case, we are working towards a stronger way out of the current situation than when we entered it.

The crisis is definitely a time when it is worth looking at things a little more broadly and thinking about whether it might be easier to get through difficult times together. If potential partners feel that they might try to survive the difficult times by increasing cooperation, and look for stronger growth after the crisis, then it is worth contacting us.