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Demand for software from the US falls, how does it affect the local IT sector?

Demand for software from the US falls, how does it affect the local IT sector?
Demand for software from the US falls, how does it affect the local IT sector?

The international technology sector faces a trend of job cuts that also impacts Uruguay, although it can open new opportunities.

Photo: Freepik

Uruguay has been working on the expansion and professionalization of its technology sector to consolidate itself as a regional hub in terms of information technologies (IT), to the point that today this sector is one of the most dynamic and with the greatest opportunities for growth, according to experts. However, in recent months there have been changes due to a drop in demand for services of software from USA, main client in the country.

The gap between supply and demand for IT jobs has been one of the obstacles or, at least, biggest difficulties for the development of the sector: there were fewer professionals available than open positions. Despite this, and “even with less dynamism than previous years, the IT sector has generated more than 19,800 jobs”: “According to our employment observatory, it is the category in which the most talent is sought and this is repeated month after month. “Areas such as software development, cybersecurity, data analysis and artificial intelligence are the most in demand,” he told Alfredo Silvestre Area, managing director of Experis Uruguay and Paraguay.

However, this demand for workers has been affected in recent months. According to him Labor Monitor of Advice, Updated as of March 2024, job applications by companies during the first quarter of the year decreased considerably compared to the last quarter of 2023. “A 33% reduction has accumulated in the last six months: the level of demand has from being around 3,000 employment opportunities per quarter towards mid-2023, to just over 2,000 in the March measurement,” he noted in this regard. Federico Muttoni, director and partner of the Human Resources consulting firm.

Despite this, the demand for IT sector represents 18.8% of the “digital demand” in Uruguay, “which indicates that it continues to be one of the areas with the greatest dynamism in the labor market,” considered the labor market analyst. The gap between supply and demand also remains, and continues to be “an important challenge.”

The impact of lower demand from the United States

In this scenario of differences between available positions and employees with the necessary skills to fill them – a situation that occurs globally, according to Silvestre, based on a recent study by ManpowerGroup, “IT World Of Work 2024”—, the change in the situation of USA as main export market of Uruguay In terms of software, this gap could be reduced, although not in a positive sense.

“It could generate some downward pressure on the employment generation “In a group of activities closely linked to the foreign market, the unfavourable evolution of the demand for labour reflects the situation of the technology sector at a global level, which in the last year has experienced significant job cuts and shows a lower dynamism in the generation of new job opportunities,” said Muttoni.

In that sense, he explained that, as of March, 254 technology companies based on USA had cut around 60,000 jobs — including at tech giants like Google, Amazon, Meta and Microsoft—, continuing the trend that was observed in 2023, when more than 263,000 jobs were cut.

“However, the market diversification and the commitment to higher quality services value added “could help mitigate this effect,” added the director of Advice.

Silvestre also agreed with this, and although he admitted that “the demand contraction of technological profiles” is a consequence of the reduction of “the number of projects coming from USA” for outsourcing and software development companies; “This situation is encouraging Uruguayan companies to diversify their markets and look for clients in other regions, to mitigate the long-term negative impact.” “The search for new markets can open opportunities and reduce the dependence of the American market, he considered.

Likewise, the managing director of Experis pointed out that “the reduction of external projects can encourage a greater orientation towards innovation and local entrepreneurship”: “Companies and professionals could focus more on the development of own products, fostering the growth of the entrepreneurial ecosystem in Uruguay”, held.

Source: Ambito

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