Something just has to give – makings of an economic bubble

Android Apps
Anyone who has spent a minute with me, would know that I am evangelistic on the growth of a mobile development market in Africa.
I envision an economic opportunity of a life time, which I have on occasion called the gold rush of my generation.

Big words – I know.

In Cape Town, mobile developers and boutique mobile development shops have increased over the past 3 years in an alarming rate.
The introduction or emergence of foreign behemoths, entering the market to essentially explore and exploit the opportunities has led to a supply side push – which invariably will lead to conditions for an artificial market demand for skills.
In a market like ours where skilled persons are few, a demand frenzy will occur and income inflation is likely.
Where every IT graduate has now become a mobile App developer and when two or more are together, it is called a “company”, a lot of fly-by-night operators are on the rise.

In other words – the increase in the number of mobile app developers, of varying quality is hurting the market.
Sure in the short-run, the consumer is able to get the best price available, but the quality is lacking. This can lead to crashing of Apps from these cheap suppliers and the client having to spend further moneys in trying to fix this.
On the other hand, the entering of big global companies into South Africa has been a great thing for developers, they can now jump all over the show to whatever company is willing to pay more – the problem with this, eventually the ceiling will be reached and the system will collapse on itself. As salaries grow at an alarming rate in the market – so too does the cost to the client.

Inflation bubble
Correction is coming soon - either clients will no longer spend money on software products and a large number of developers will be retrenched from the big software houses – this we have seen happen in other similar situation. This will lead to many small companies closing their doors.
Alternatively vendors – the developers of software products, will continue to do work at low margins and slowly strangle profit life blood out of their companies, in attempt to stay in the market.


Reality is, when the correction comes, we are all in it. How will you weather the storm?

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