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Preparing for recession: Why freezing tech hires doesn't make business sense

16th August 2022

Blog post

With the word "recession" overwhelming US news headlines and seeping into most corporate strategy meetings, employers are increasingly pondering where, when, and how they should "trim the fat."

Though there is undoubtedly truth behind the impending recession unease with backward GDP growth over the past two quarters and rising central bank rates, now is not the time for knee-jerk reactions - especially when it comes to SAP and tech recruitment. 

In fact, ramping up SAP and tech hiring efforts while others are momentarily freezing new hires while they assess the situation can actually offer your business a competitive advantage. 

Keep reading to find out how the tech and broader labor market currently stands in the United States according to July 2022 figures and our advice for preparing your business should a recession take hold. 

In July 2022, the tech unemployment rate reached an all-time low

With tech unemployment rates plummeting to a historic 1.7% in July and job posts for tech roles rising an estimated 49% in the first half of this year, CompTIA's analysis of the July BLS report tells us that, despite recession fears, tech professionals are more in demand than ever before. 

Outside of tech, the labor market created over half a million jobs in July 2022 - double the expected forecast of 250,000, and the overall US unemployment rate has returned to pre-covid levels of 3.5%, showing widespread growth across almost every industry. 

But especially notable were the gains made in the professional services space, which includes SAP, with a reported increase of 89,000 jobs in July 2022, according to the BLS report

In contrast to LinkedIn's reported revenue drop across all sectors, tech and SAP employment statistics prove this industry is yet to be affected by growing recession threats.

Combine these figures with SAP's 12.7% year-on-year revenue increase announced in their Q2 2022 report and 34% increase in cloud revenue alone, and there's no doubt demand for SAP and tech talent will continue accelerating as companies race to migrate to S/4 HANA before the 2027 deadline. 

What these figures mean for SAP and tech recruitment 

With the widespread job growth we're seeing across almost every industry and the ever-growing need for SAP and tech professionals seen in July 2022, it's clear that cutting labor is not the way to go if you want to recession-proof your business. 

There are certainly ways to cut costs without skimping on labor. 

Asking vendors for discounts on raw materials, investing in technologies that create more efficiency, and cutting unnecessary expenditures make better business sense than going for cheaper, lower-quality hires and here's why. 

The rebound effects of hiring freezes or cheaper tech recruitment 

Let's look at what may happen short and long-term if you opt for a discount talent strategy during this economic uncertainty. 

1. Discount demands backfire

With minuscule tech unemployment rates and more jobs available than unemployed workers, asking your current consultants to offer lower rates isn't as bright a move as you think. 

Ask your SAP and tech workers for reduced rates, and they'll simply go elsewhere, because they can. The abundance of opportunity available to these sought-after SAP and tech professionals puts them in the driver's seat - not you.

2. SAP projects get delayed

When you hire SAP and tech talent to further your digital transformation, they actively engage in highly complex and mission-critical work. 

Changing talent structures or losing these essential workers in a vital work stream can severely delay your SAP project, halt your progress, and ultimately decrease the project’s profitability if you’re a consultancy and increase the cost of the project if you’re the end customer. 

Is this worth shaving off a few dollars for a month or two? Most likely, no.

3. Project quality decreases

You're ultimately losing money in the long run by purchasing cheaper labor or freezing essential hires to push your tech or SAP project forward. 

Without the best tech and SAP talent by your side, you're settling for less - the knock-on effects of which will be felt not only throughout your organization, as projects don't run smoothly, but on your customers too, as you fail to meet their demands.

4. Teams cut and run

If you want to cut SAP and tech labor costs, you risk rumbling already established teams by putting them under too much pressure.

With increased workloads, high expectations, and insufficient talent to help them deliver your SAP project, competitors can easily sway your top players with better offers.

Why tech talent is a smart investment pre-recession 

While competitors are slowing hiring before understanding the bigger picture, you can take this opportunity to strengthen your internal teams and have a solid talent pipeline in place to get you through the recession and beyond. 

Customer demand is still very strong and will continue to be as the ramping up of digital transformation continues. Failing to reinforce your team with strong talent now might mean lower earnings in the future when you don't have the resources you need to transform at the same pace as competitors. 

In fact, digitizing services and creating more efficient processes through technologies like SAP is one of the best ways to lower overheads, making it even more essential that you have the professionals you need to implement these technologies and help you increase productivity, efficiency, and ultimately, profits. 

Bottom line? Budget your materials - not your tech talent

At RED Global, we only see SAP and tech recruitment going in one direction, and that's up. With 80% of SAP customers still on the legacy package, we predict that the S/4 HANA 2027 upgrade deadline will continue driving market growth, as these customers will take 3-5 years to migrate, keeping all SAP contractors at max capacity for the foreseeable future. 

You can face the reality and see this oncoming recession as a fantastic talent shopping opportunity when you can hire the best talent while others are afraid to put their hands in their pockets or you can risk losing out on higher quality, productivity, profits, and talent—your choice.

But you don't have to make that choice alone. Talk to RED Global.

Want to create a recession-proof talent strategy for your business? Tap into the exclusive SAP and tech talent network, data-backed expertise, and incredible support of recruitment consultants who know SAP better than anyone else. 

Book a strategy call with our dedicated team at RED Global today. 

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