Founded in 2002, Managed Solution was barely 6 years old when the 2008 financial crisis hit. Yet, even as a young company we managed (pun intended) to pull through and grow to become the organization you now know today. That is why, today, we're talking about technology and economy.
With that in mind, we sat down to interview our CEO, Sean Ferrel, to discuss the recent economic events and how they pertain to Information Technology and the Tech industry in general. Read on to explore a top-down examination of a post-covid financial climate and gather insight and advice for your business.
A lot has been a lot going on with the U.S. economy since the pandemic. Recently though, we’ve seen some real negative indicators with bank collapses on a level reminiscent of the 2008 financial crisis. As a business leader, could you share some insight with us about today’s current economic environment?
Sean: In the last 3+ years there’s been a lot thrown at businesses. From COVID-19 to hybrid workforces; all the way up to how the housing markets have been affected. When people started to work from home it changed the places where people wanted to live. This drove a lot of inflation in certain areas that didn’t previously have these high-salary workers in the market before.
However, the housing market is one aspect. At the core of it, we could argue that there’s been a supply problem across the board. We see it an automobile makers and shipping components. For example, we rely on other countries for things as simple as [computer] chips. Manufacturers couldn’t get the chips to put into cars so a lot of cars couldn’t be built, which then created low supply, and the big companies with low supply were able to charge more for the commodities and goods we needed.
Even with our food and beverage companies. There was a problem there as well due to the lack of potential employees. So, whether it was auto-parts or workers in factories: businesses couldn’t produce as fast as they [normally] would. The demand for goods was still high, the supply was low, and ultimately people charged, and are still charging, more for their product.
Now, the more supply that these companies create and market - the less demand they might get for the product if it becomes more saturated. Meaning they’d have to bring down their inflated costs.
They also have to pay more in taxes if they produce more of something. So, a lot of companies have kind of sat for a minute and said, “well, we're getting a lot of money for our product than we used to get, so why should we produce anymore just to get taxed more for it?”. Which is why many have continued to drive the same amount of supply out of their organization and the inflation has remained. Of course, there’s more nuance to it, but essentially that’s where we’re at.
I think the reason why we’ll run into the “recession”, however, is simply because the dollar goes less far. Things are more expensive and the only way to combat that is businesses paying their employees more. This is challenging and leads to businesses charging their customers more and it becomes a very vicious cycle. One that, unfortunately, will eventually come to a head when businesses can longer afford to pay their employees more and will likely automate their processes instead, or they’ll have to downsize. So, I do think there will be more layoffs coming.
What’s interesting though, we all read about the layoffs at Google, Amazon, and Microsoft. It wasn’t because the companies were doing poorly -- they have more cash in the bank than ever. It’s merely due to the fact that their demand is going to go down because of people’s dollar’s not going as far.
How do you feel our current economic situation compares to that of 2008?
Sean: Compared to 2008, it’s a very different market. Back then it was the way banks were lending with negative amortization loans. Essentially, saying “we're going to loan you for this half a million-dollar house -- which you probably couldn't afford with your salary this much money -- and in three years we're going to increase your interest rate adjusted from an initial 5% or 4% interest rate up to 12%.
That increased the cost of the mortgage and people just got wiped out really fast. They couldn't afford it and hence we had a huge market where things were foreclosing, people didn't have the money and they borrowed against the home and their credit was tapped.
In today’s world though, people have been making a lot of money. It’s been a good economy for a long time, and I don’t think people are tapped credit-wise at this point, so we’re not going to see a big downturn where people are liquidating everything they have. But we definitely need to see some changes happen.
From your perspective, what are the main shifts the economy has had on the tech industry?
Sean: In the whole tech-sector; you have four things that happened in the workplace:
What I see there is a problem in general with “can technology solve it?” one, but two, “does the workforce for technologists -- like the people that we employ -- have the skill set”?
Technology has sprawled a ton, so it’s almost impossible to find enough talent out there to keep up. There's a huge lack of it from security talent to cloud talent, etc.
So, companies are struggling to find the right IT people who aren’t over-charging for the cost of their labor because, again, the employee-cost has inflated. That’s why now there’s this notion of “Do More With Less”. Technology and economy, obviously being closely interwoven in this concept.
Could you tell us what “doing more with less” looks like?
Sean: I think one question is; are companies ultimately building tools that are easier to manage by bolting them together? For example, Microsoft owns Microsoft Azure (the cloud).
They also own the operating system within the cloud, which is windows. Then they own the productivity software we all use, which is Office 365 -- and in that you have your communication tools like Microsoft Teams, collaboration hubs like Microsoft Viva -- all the way down to the computer with Windows operating system.
With that, they can control the market from a cost perspective and drive down costs for these suites of products. Not to mention, more Microsoft people in general are probably out there in the world studying and learning.
Making it a little bit easier to find people who do work in that area. And at the ultimate goal; it's easier to manage the process and the technology by consolidating into one or two platforms as opposed to having many, many vendors.
It’s similar to security too. Everybody's coming to market with amazing security tools that do detection at the endpoint or do secure app management to secure applications in the world. But now there's a lot of them and there's not enough resources out there to ultimately manage many different types inside of one business.
So, that's where the big picture of the project-based work consolidation is happening. You have more talent to manage better and more control & cost optimization by consolidating these infrastructures. Today's technology and economy are extremely closely related so business leaders need to emphasize having the right technology for their companies.
Could you speak about how this all ties into managed services and IT outsourcing? What benefit, if any, could customers gain from these types of services and solutions during this time?
Sean: As I mentioned before, you have the whole thing around hybrid and remote workforces. There are two things that happened:
Where previously companies had one IT person in the office. That’s not the same anymore. If people are working from home, they're working 24 hours a day. There's not really a regular 9 – 5 anymore.
That means the calls are coming in more than ever. The person who worked internal IT doesn't want to be the person hanging on the phone taking those calls all day every day and it’s not like they can run into anyone’s house to get everything set. That’s why we see technical call-based Help Desks becoming more and more popular. So, outsourcing will continue to grow in a bad economy. Outsourcing and centralizing the tools that are being managed by companies.
The second reason why outsourcing is becoming bigger, is due in part to the great resignation. With the inflation of salaries and expense of increased employee turnover, people are looking at companies, like Managed Solution, instead.
Beyond that, when it comes to enhancing security, making their users more productive, or having collaboration tools move into the cloud -- many companies are finding that the traditional IT teams are not always tooled up for this. That's why we're seeing more companies outsourcing a lot of that strategy as well; to help them build a long-term footprint that looks at the total cost of ownership. They’re asking organizations like us, “How do we optimize costs and better productivity for my new hybrid workforce of users and make sure we’re secure?”.
For us, it's a nice place to play in the industry right now, being sort of the managed service provider who outsources all this stuff and the consulting arm to be able to go out and help build the future architecture.
We’ve established that the economy today is different than it was in 2008, but one thing they have in common is their negative impact on people and businesses financially. As a business leader who came out of that, do you have any advice or words of comfort for fellow tech companies like Managed Solution?
Sean: For tech companies like ours, it’s always been a good thing to have multiple vendors on your website such as Microsoft, Amazon, Google, Dell, etc. A lot of the traditional sense has been that those are kind of like VARs, or ‘value added resellers’, who could resell all these products and services.
But my advice, is that you’ve got to pick a horse. Make sure you understand what suppliers (Microsoft, Amazon, Salesforce, VMware, Cisco), are building that understand the economic climate. If cost is a big factor and businesses are having to do more with less technology, who's building the technology in one stack of products to ultimately give you all the tools that you need to be successful?
Consolidation is really where I think all businesses should try to head and are trying to head right now. So, ultimately, as it pertains to technology -- I think picking that horse that you think is going to be best in the race is key. Technology and economy is a huge conversation right now. Technology and economy are both make or break aspects for businesses today.
If you’re interested in speaking to one of our team members for more tech-guidance? Contact us and we’ll be happy to help.
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