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Small IT newcomers are replacing the big IT specialists

Jul 15, 2019

Last year, an article in Het Financieele Dagblad, showed us that the Netherlands no longer likes large IT specialists. Within the Dutch IT market, we do see that the big boys increasingly have to make way for the smaller companies. What are the main reasons for this cultural change? And why do smaller, flexibly operating IT newcomers have the future? In this blog, we provide answers to these pressing questions.

Recession and nearshoring

The increasing popularity of relatively small IT newcomers with their agile way of working is not a development that came out of the blue recently but has been around for ten years. The development has its roots in the economic crisis. Due to the recession, many organizations no longer had the budget to spend tons on new IT systems. The result: the development of new IT systems was cut into smaller pieces. It soon became apparent that many large IT specialists were not well equipped for this method. “Many of these companies are large, unwieldy tankers who have difficulty responding to the demand for more flexibility and customization,” says Sonja Meijerink, CEO of Typeqast. This change in the IT market has, therefore, meant that many large IT specialists have had to cut their usual budgets in half.

Around the same time, the potential of nearshoring in the Balkans was also being discovered by more and more parties. The result of this was that many IT companies returned from the India route taken at an earlier stage, and exchanged offshoring for nearshoring. It was difficult for the big computer engineers to take this step because they had invested a lot of their resources in India, both in the form of large offices in cities such as Bangalore and by hiring large numbers of Indian personnel. For small IT newcomers, their flexibility and lower overhead costs made it much easier to jump on the nearshoring train towards the emerging Balkan countries.

Too little attention to customer interests

Another factor contributing to the decrease of the major automation companies is that many of those companies have lost sight of the client’s interest over time. “For many major players, it’s mainly about the shareholders. Customers are often seen as money”, explains Meijerink.

This image was confirmed a few years ago by a broadcast from Zembla, in which it was explained which tactics some major IT specialists use to attract customers and maximize profits. Also the high rates many large IT companies wield, make them less attractive. Although the rates of smaller IT companies and large IT companies have grown somewhat closer in recent years, the hourly rates for the latter group are still a lot higher. This is mainly because large IT operators have much higher overhead costs in the form of extensive management teams and both immense and expensive office buildings.

“For example, Atos CEO Peter’ t Jong states in the FD article from 2018 that foreign parties offer Java programmers for an hourly rate of 60 euros. At Atos, you get a beginner, with the small IT providers a very experienced engineer. You can hardly get a better reason to go to the smaller providers in the Netherlands. A freelancer is another alternative to consider for that hourly rate. However, you run a greater risk of losing all your knowledge if the freelancer moves on to the next assignment. With self-employed people you have less continuity because they eventually have to move on to other assignments to maintain their independent status, “says Meijerink.

Small teams

Besides, according to Meijerink, large IT specialists have difficulty responding to the increasing demand for small, flexible and dedicated development teams. More and more organizations are moving away from large-scale, often cost-consuming, automation projects and are more often dividing IT development into smaller sections. “If the customer asks for a team of five people, the big boys often don’t find that interesting. They turn their head away. For us, this is a win. It means that we can put together a fast and flexible working team that is perfectly capable of delivering customized solutions to the customer.”

Course

Because of the changed market, many IT giants are forced to shrink. This means that they lose strength and therefore good people. “There is also a high turnover noticeable with the major IT specialists,” says Meijerink. “Smaller IT companies such as Typeqast have much fewer problems with this. When there is hardly any turnover, you can make the promise of a dedicated working method much easier and give customers extra added value in terms of attention, quality, and service. You develop strong partnerships that enable you to accelerate and to adjust development issues if the situation demands it.”
The end of the big automation companies seems to be near
The trend outlined above is expected to continue in the coming years. Smaller IT newcomers are booming, while large corporates continue to shrink. “For example, look at the large Ordina building near Utrecht. Previously, all four towers were from Ordina, now only one. That is symbolic and typical of the current situation on the Dutch IT market”, says Meijerink.

It is, therefore, quite conceivable that the large, traditional IT specialists will disappear completely in the future and will fall apart into several smaller companies. You could even say that the small newcomers are the successful disruptors in the IT market. Dutch companies will increasingly opt for small, flexible and agile, a method that fits perfectly with small and medium-sized IT companies such as Typeqast.

IT development with Typeqast

In the year 2019, the further digitization of services and products requires considerable specialist expertise. As a developer, you cannot do without a thorough knowledge of AI, blockchain, the latest technology stacks, and cloud solutions. Specialists in these areas are scarce and expensive in the Netherlands. Typeqast has the necessary knowledge and has a proven track record with customers. That is because we can bind the very best and smartest IT engineers in Croatia to us.

Curious about the possibilities? Then have a look at the results that we have achieved with customers such as Adeezy, Quickparking, and BoatBikeTours or contact us for proper, tailor-made advice.