Tercera Shares 5 Predictions for 2022: The Labor Shortage Takes Center Stage

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Dec 17, 2021, 09:30 ET

CHICAGO, Dec. 17, 2021 /PRNewswire/ -- Tercera, a growth-focused investment and advisory firm specializing in technology professional services, today revealed the trends it believes will shape the $460 billion cloud professional services market in the year ahead. The talent shortage will continue to loom large in 2022, stalling growth for many firms, compressing margins, and forcing service companies to look towards new markets. Unfortunately, despite best efforts, it will also impact the progress of diversity efforts.

"The talent situation will create both headwinds and tailwinds for people-based services businesses in 2022," said Chris Barbin, founder and CEO of Tercera. "Those that successfully navigate the Great Reshuffling will be in an incredible position to capitalize on the growing demand for digital services, but not everyone will be in that position. It's time to plan."

There are five predictions that Tercera believes will shape the IT services landscape in 2022. The full set of predictions, including the firm's best guess for the price of a single bitcoin on Dec. 31, 2022, can be found on Tercera's blog.

Talent becomes the biggest barrier to growth for tech companies.
The labor shortage – combined with high demand for tech skills and an influx of capital into services – means businesses are going to battle it out for the talent they need to hit growth targets. Attrition rates will be 2-3x higher than they were coming into the pandemic. CEOs will shift more of their time to recruiting and away from customer-facing sales, and Chief People Officers are at last going to get the accolades and raises they deserve.

Gross margins take a hit.
Inflation and talent scarcity will drive up costs across the board. Beyond increasing wages and spending more on recruiting, firms will spend more on benefits, learning & development, and marketing to build their employer brand, all of which will temporarily compress margins. Founders will look to raise capital earlier than in the past to smooth cash flow challenges and support growth.

Large companies lose talent to freelance markets.
Many tech workers left traditional jobs in 2021 to start their own business or take on part-time freelance work so they could spend more time with family or explore their passions. That trend will continue well into 2022, as freelance platforms like 10K, CloudDevs and Upwork make it easier to match global talent with a growing number of customers who are hurting for talent. Large consultancies and cloud vendors will develop deeper partnerships with these on-demand platforms, or look to develop their own.

Latin America stays red hot.
Investment activity in Latin America (LATAM) has exploded and shows no sign of slowing in 2022. The region is now home to a stable of 26 unicorns and has the second fastest growing IT specialist population, second only to Asia Pacific. More services firms will expand into LATAM to build out nearshore delivery centers, taking advantage of the proximity, lower cost labor and access to an increasing number of STEM graduates. As LATAM interest picks up and more capital enters the region, the competition for tech talent in the major hubs will lift wages, but not to the extent of other markets.

Despite best efforts, diversity progress slows amidst the fight for talent.
The pressure for people-based services firms to bring on talent in such a competitive space means diversity goals may, unfortunately, take a back seat to hiring and revenue targets. While the percentage of minority and under-represented groups within IT service firms won't significantly improve in 2022, we expect that board diversity will fare better due to instituted requirements from investment banks, stock exchanges and the public sector. The firms who can keep their foot on the diversity, equity and inclusion (DEI) pedal will be rewarded with higher engagement and performance.

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About Tercera
Tercera is an investment and advisory firm founded to accelerate the growth of people-centric businesses. Specializing in the $460 billion cloud professional services market, the Tercera team is composed of invested operators who know first-hand what it takes to build and scale a successful cloud services business. Tercera (Spanish for 'third') is on a mission to identify the people and partners who will lead the next wave of cloud computing - the Third Wave - and provide them with the capital, counsel and connections they need to scale faster and take an outsized share of the market. For more information, visit: https://www.tercera.io/.

SOURCE Tercera