- Thoughts under the Financial Crisis-

 
<< Prologue >>

It was September 22nd. I gave a warning to all our company executives “not to conclude any more contracts in USD”, or in the worst case, “embed a severe exchange rate review clause, e.g. every 3 months”, because I was so sure that the USD value will dramatically and very quickly drop to somewhere around 70 JP Yen per dollar or even lower within a year.

   Due to no money savings of US citizens in bank (they mostly live with debt on their credit cards), the US has no measures to save their economy other than FRB who prints USD bills and issue additional US national fund (UNF). A famous global economist estimates that the US must issue 500 billion UNF this year, 700 billion UNF in 2009, and further 1,000 billion UNF in 2010 as debt-financed. The question is who buys it. It is now inevitable that USD may lose the status as global key-currency. Note: The 94% of UNF in the past was purchased by foreign countries, not by US citizens.

   Therefore, it would be too optimistic if you would think the bottom of the global economy will come soon. Despite of many countries’ help for lowering the impact of crisis the US created, the above debt is so huge, and many of them are still hidden from public eyes, i.e. the turmoil of US financial institutes and Automobile industry that became visible to us is just a part.
 

Japanese Yen / USD Exchange Rate Trend

<< Impact to the IT Industry >>

   Some consulting companies say that “Outsourcing and Software development companies will prosper under this economy crisis”; however, but it sounds to me “easy to say” since the current economy situation is not a recession, but a worldwide crash.

   A small outsourcing deal could save only a small amount of money for customers; therefore, we should think of a sizable outsourcing under this crisis to save a reasonable amount of money to contribute to your company business. However, as the size of outsourcing becomes bigger, you would need a lot of time and effort in preparation work in order to make the contract perfect such as, a) to be sure that all the mandatory scope of works are covered, b) no fraying around the edges in processes and their relations, and c) service quality is satisfactory, and have a room to improve it without extra money to spend, etc.

   Even software development may not be easy. We all expect that new software or applications will contribute to increase not only the business integrity but employee’s productivity (same as a cost reduction effect); however, again, who makes the decision to investment money now for the future effect (including the time of debugging and minor adjustments/upgrades) is a big question, probably nobody can decide such an investment under the financial turmoil.