Will the credit crunch become an ICT marketing salary crunch?
The technology crunch
Forecasts from leading analysts and industry researchers highlight the potential difficulties in 2008. IDC, for example, expects IT spending growth in Europe to hit just four percent, down from five per cent last year, while Forrester foresees an even more dramatic drop, with western European growth in dollar terms expected to slow from 15 percent last year to five per cent. In the UK, public sector IT spending, which has recently accounted for a significant proportion of sales, is now slowing down.
Another indicator is venture capital investment in Europe’s next-generation media technology sector. According to researcher Library House, this took a nosedive at the end of 2007, falling 52 percent in just three months. Reacting to the turmoil, Gartner, at its recent IT Symposium in Cannes, warned IT directors to prepare two budgets. One should be based on business as usual the other should reflect the anticipated downturn in business, which could lead to spending cuts of up to 10 percent on 2007 levels.
In the wake of the credit crunch, it is no surprise that investors and analysts are cautious. Technology sales could continue to fall as businesses postpone planned IT investment, or just make do. If technology investment slows down, that is likely to have an impact on technology marketing budgets.
Marketing budgets down
The effects are already being felt in other sectors. The Q4 2007 Bellwether Report, the quarterly survey of marketing spend across all sectors, reveals that budgets were revised down for the first time in a year in the final quarter of 2007, the steepest fall in nearly two years. Weaker than expected sales revenues, disappointing profits and concerns about the economic environment meant that companies trimmed marketing budgets to cut costs and maintain margins.
Although the report indicates that almost half of all companies have set their 2008 budgets higher than their 2007 actual spend, the Q4 downward revision sends a note of caution going forward. 2008 could see similar downward revisions to budgets if revenues fail to pick up.
According to the researchers, "The survey reveals a marked deterioration in business conditions in the fourth quarter of last year, which companies responded to by trimming their marketing budgets causing 2007 to finish on the weakest note for two years. Some positive news was provided by 2008 marketing budgets being set higher than actual spend in 2007, but we interpret this with caution. Companies will be monitoring the business situation carefully and, if trading conditions and business confidence fail to pick up in the New Year, we can expect these budgets to be revised down as the year proceeds."
Impact on marketers
So what does this mean for marketing recruitment and marketing salaries in the technology sector? Is a technology crunch going to lead inevitably to a salary crunch?
In the circumstances, there are a number of possible scenarios:
• Companies may decide to reduce permanent headcount
• Companies may retain staff and limit rises to salaries and packages
• Companies may readdress the balance between marketing resource and services budget
In reality, it could be a combination of all three.
In a sector as diverse as technology marketing, it is difficult to make generalised predictions about the potential impact on jobs. We need to understand how many companies are experiencing cuts in marketing budgets, and how the downturn might affect different activities such as PR, events, advertising, marcomms, e-marketing.
Some clues can be found in the Bellwether Report:
1. In Q4 2007, only 15 percent of companies reported increased total marketing budgets while 19 percent reported a decrease.
2. Main media advertising saw the largest cut to budgets in Q4, with traditional media such as TV and press hit particularly hard.
3. ‘All other’ marketing also saw an above-average cut. This is in marked contrast to Q3 when both categories saw the strongest upward revisions in Bellwether’s history.
4. Although Internet marketing budgets were again increased to a greater extent than any other category, the rise was the weakest since Q3 2003. 23 percent of companies increased their budgets for the Internet, while 7 percent saw a decline.
5. Sales promotion was the only other category to see budget increases as companies sought to boost flagging sales with greater discounting activities.
Changing skills requirement
The Bellwether Report indicates that certain types of marketing activity might become more important during a downturn and that could affect the requirement and demand for specific skills.
As an example, customers reviewing their technology investments may turn to new forms of technology acquisition through more creative forms of financing. That means the nature of campaigns may change from strategic to tactical, so different skills may be required for short-term programmes. Different channels might become important in different marketing scenarios. Companies may not have the skills for this new environment.
What is important is that companies maintain an appropriate level of communications and balance strategic programmes with tactical marketing. Sales cycles may last months or years, so it’s essential to keep investing in people with the marketing skills to develop relationships and focus on longer-term opportunities, as well as maintaining cash flow through discounting and other forms of promotion. Budgets, skills and resources must support this balanced approach.
Although analysts talk of 2008 being a difficult period, levels of activity and subsequent demand for skills may vary through the year. This is because increasing numbers of companies use a quarterly cycle to plan and implement marketing programmes. That gives companies the opportunity to change the emphasis and level of activity from quarter to quarter in line with levels of business.
Flexible recruitment strategies
Factors like these suggest that a more scalable, flexible approach to technology marketing recruitment is vital for the type of conditions companies face in 2008.
It’s clear that, in shrinking markets, competition will get tougher so companies need to have good marketing people in place. However, with changing skills requirements, there may be a scarcity of good specialist candidates, so an alternative strategy may be necessary.
Short-term project-based resourcing provides a more practical and flexible solution.
Here, a resourcing specialist provides marketing professionals to companies for a range of contract or permanent requirements from mid-term project-based assignments to fully-managed marketing teams. The resourcing approach allows companies to scale up and down in line with business levels and also provides specialist skills that may only be required for specific short-term projects.
The other major advantage of resourcing in a period of downturn is that the costs of temporary staff can be allocated to a marketing budget, rather than to fixed overheads. In other words, resourcing staff are treated as bought-in services, rather than personnel.
In a situation where companies cut headcount, but maintain marketing budgets, resourcing staff could be key to meeting marketing objectives.
Hiring temporary staff can therefore be regarded as an investment in the future to maintain marketing momentum. And, when conditions improve, temporary posts can be easily converted to permanent positions. The resourcing approach also allows companies to take a more flexible approach to their own permanent staffing levels.
Looking ahead
While the technology crunch appears to be a reality in the first quarter of 2008, it should not stop companies carrying out essential marketing tasks that lay the foundations for success in resurgent market conditions. Marketing recruitment strategies that utilise resourcing provide the flexibility to maintain the right balance of strategic and tactical activities.
