In 2021, venture capital funding hit an all time high with over $220b raised. This led to 960 unicorns who all had money to hire lots of talent at inflated salaries. Most VC backed startups also went out and hired lots of permanent tech talent as well. This created a tech talent crisis. Too much demand and not enough supply.
Fast forward to late 2022 and there is still a tech talent crisis but the landscape has changed dramatically.
Venture funding has dried up. According to Crunchbase:
Venture funding for the third quarter of 2022 totalled $81 billion, down by $90 billion (53%) year over year and by $40 billion (33%) quarter over quarter.
Unfortunately 2023 doesn’t look so bright either. There will still be lots of investment but not at the levels we have seen. There are also the inevitable lay-offs and hiring freezes. Which leads to everyone asking the same question how to hire tech talent in a recession?
However, digital projects are on the rise. Smaller companies are building digital products to drive revenue and large companies are still digitally transforming.
This means that tech talent is still in demand but the way in which they are hired will change. This leads to the question – how to hire tech talent in a recession ?
A recent Harvard Business School report states that:
“COVID-19 has only accelerated the move away from traditional, pre-digital-era talent models toward on-demand workforce models.”
The reliance on permanent hiring is starting to shift. A recent Gartner survey found:
25% of HR leaders said they had started to optimize or reduce costs
Now when it comes to HR optimising costs traditionally we see opex costs (headcount) moving to capex (contingent talent). Simply just hiring contractors is not an option anymore due to IR35 in the UK and job classification changes in the US. Companies are looking at packaging deliverables and deploy project and on-demand talent as recommended recently by McKinsey.
In another Gartner research paper published last year, Gartner predicted that 35% of the global workforce will be gig workers by 2025. And in May, the Mercer Global Talent Study reported that 77% of executives believe freelance and gig workers will substantially replace full-time workers in the next 5 years.
As we move towards a recession and a tighter VC funding market, all companies can hugely benefit from hiring freelance talent.
The hugely respected University of Oxford report suggests that the next five years will see rapid growth in how companies use platform sourcing, including crowdsourcing and outsourcing platforms.
The report focuses on how Fortune 500 firms are adopting online platforms and reported the following benefits for organisations:
Easy access to a scalable source of manpower, skills, and expertise
Platforms provide access to freelancers with highly specialised skills and expertise, making them an attractive option for organisations looking to quickly and flexibly complement the capabilities of their in-house employees on an on-demand basis.
Reduction in start-up and transaction costs
Platforms substantially lower the start-up and transaction costs of a contract compared to traditional outsourcing vendors and contracting agencies. This allows enterprises to quickly hire freelancers to address project needs with minimum administrative cost.
Elimination of conventional hiring barriers
Platform technologies can reduce (if not eliminate) geographical, informational, and administrative barriers in the hiring process. This means they can be used for projects of shorter length and narrower scope. Platforms facilitate the hiring of freelancers on a more flexible, on-demand basis, and allow managers to bring new skills and knowledge to the organisation that would otherwise have remained outside.
You may not be able to relate with a Fortune 500 companies but here are recent examples of companies in the UK using Gigged.AI to move digital projects forward:
A fintech that had built an MVP by engaging with a talented Front End Developer. The project was previously delayed due to a supplier issues. The freelancer helped get the project back on track and delivered on time.
A global consultancy who required a Data Scientist to support on a major client project. Freelancer was sourced in less than a day and helped the project finish on schedule.
A textile company who required Magento Support to ensure revenue could be generated by online sales. The project took 5 days to complete using a freelancer.
A large tech company who required their Cyber Security Strategy reviewed prior to the board meeting. A respected CISO was sourced in two hours and work completed in 3 weeks.
Budgets to hire permanent tech talent are being squeezed but freelance talent is the best way to stay productive whether you are a fortune 500 company, a small start up or somewhere in between.
Key Recommendations on how to hire tech talent in a recession:
Identity key areas resource gaps that freelance talent could be used
Identify roles where a deliverable could be assigned
Create a process to engage talent platforms as opposed to recruitment agency PSL’s or traditional consulting models
Educate hiring managers on how to engage on-demand talent