OP #258: Is It a Buyers or Sellers Market?

Reminiscing on some recent conversations with talent and digital services partners.

Author

Darren Herman
May 21, 2024

Good morning OP Community  

šŸ“– Itā€™s a good week for content around marketing and AI.  How AI Will Reinvent Marketing (Andrew Chen) and What Does a Chief AI Officer Look Like In the Modern Marketing World? (Barry Lowenthal) are solid pieces for all to read.

šŸŒ Ari Paparo writes a solid piece about the open web titled, Did It Have To Be This Way. ā€œWhy canā€™t we have nice thingsā€ sums it up pretty well.

āš” On June 5, Iā€™ll be paneling at the Boston June Generative AI Meetup, hosted by my friend Judah. The event is hosted in Cambridge at the MIT/Microsoft NERD campus.  Iā€™ll be alongside Klieda Martiro (Glasswing), Mike Gualtieri (Forrester), Jason Burke (TBD Angels), and others to be announced.  If you are interested in attending, I have 5 free passes to giveaway. You can use the following code at checkout:  DARREN100OFF.  Hit me up if you are planning on attending and would love to say hi. Sign-up here.

šŸ”Š For those interested in learning about Private Equity, here are three good podcasts to listen to: Karma School of Business, Capital Allocators and The Twenty Minute VC. The first two focus on more traditional PE buyouts whereas Twenty Minute VC focuses more on Venture Capital but not solely.

šŸ€ What a season for the New York Knicks. We gave it our all and by the time the end of the game rolled around on Sunday afternoon, we had zero starters available to play - all due to various injuries. This team is special (Posting & Toasting) and have built a culture that few teams have. I loved how New York got excited about NBA basketball again, with an energy not felt since the Jeremy Lin days. Iā€™ll write about the run in forthcoming OP letters but wanted to pay my respect to this incredible team, today. For those who do not want to wait, read Dear Knicks.

Here are some articles to get us started today:

As always, please reach out with any questions or comments. My goal is to make the OP letter better with each sendā€¦

Thank you for reading.

-Darren

Is It a Buyers or Sellers Market?

We're in a unique phase in the market. The S&P 500 has breached 5,300, and the Dow closed above 40,000 for the first time, signaling some optimism as inflation shows signs of cooling. However, consumer spending appears to be declining, and the broader economic outlook remains challenging with several unfavorable macroeconomic factors at play.

To gauge the market's health, I frequently engage with my talent and digital services partners. These conversations help me understand the pulse of the talent market and whether we're currently in a buyer's market for digital services like transformation work.

Iā€™m hearing that the digital talent market is slowly rebounding. After years of being exceptionally hot, it cooled down over the past year but is now showing signs of a gradual recovery. This is encouraging news for candidates looking for digital roles.

In contrast, the market for digital servicesā€”encompassing digital agencies, transformations, and systems integratorsā€”currently favors buyers. Many agencies report a slower pipeline for new business and fewer projects up for grabs.

These insights are based on firsthand discussions with a dozen or so partners and firms within the ecosystem.

Why is this happening?

The pandemic accelerated digital transformation across the board. Companies lacking digital capabilities had to develop them immediately, while those already in the game had to scale up quickly. Businesses that failed to do so found themselves at a severe disadvantage. This urgency led to a surge in hiring digital talent and initiating numerous digital projects, often at premium rates due to high demand and limited supply.

Now, we're starting to see the results of these pandemic-driven digital investments. Ideally, these investments are providing operational leverage, but are they truly paying off?

On one hand, investments in core infrastructure are likely beneficial, as these are used regardless of the pandemic. These should be adding value today.

On the other hand, pandemic-specific workflows that are no longer necessary might not be as beneficial now. While they were essential at the time, their value today is questionable.

So what?

During the pandemic, companies significantly increased their digital spending. Now that these investments have been integrated into their operations, the focus is on realizing their benefits. As a result, businesses are beginning to hire again, preparing to capitalize on further growth.

The below links are articles that I read during the past week. I am sharing them because I think they are interesting. I may not agree with everything in every article. If you come across an article that you might think I or the OP community would like, I encourage you to reach out and share it. I reserve the right to select whether or not it gets shared in the OP.

Expectations vs. Reality (Edward Zitron)

AI and Problems of Scale (Benedict Evans)

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