Warren Buffett, the legendary investor and at one time the richest man in the world, once said: ‘Be fearful when others are greedy. Be greedy when others are fearful.’ Eesti Pank forecasts economic growth of about ten per cent this year, but inflation is approaching five per cent. Moreover, we have been living in a pandemic for the past few years, where the globally prevalent virus has had a devastating effect on several sectors. Should one be fearful or greedy in such a situation?

Looking at the results of software companies for the last quarter, a clear trend can be seen – all important metrics are on the rise. Over the past year, sales figures, average wages and the number of employees in the sector have all grown – investment and expansion are being implemented with confidence. The tactical challenges of the past are being replaced by strategic ones. What to invest in? Which market to expand to? How to hold onto key employees?

The situation is perfectly illustrated by the game of musical chairs, a game that most people who have successfully completed kindergarten are familiar with. With music playing, participants walk around a circle of chairs. When the music stops, everyone has to sit down. There are fewer chairs each time. Anyone who is unable to find a seat must leave the game. The same equation must now be solved by companies earning their living from programming. The amount of money and work in the market exceeds the number of high-quality investment projects and good employees.

The aggregate turnover of software companies has increased by 31.1% over the last year. This number reflects the recovery in consumer confidence and the needs associated with the new nature of work – the customer, regardless of sector, now prefers digital channels. Bridging the digital divide and building a digital foundation are needs that will not go away in the coming years. 2021 has been a year of adjustment, one that has given companies a roadmap with which to navigate successfully for years to come. Which companies stay and which disappear will be determined by whether that map is used and whether investments in digital transformation are made.

The number of employees in the sector has increased by 4.8% compared to the second quarter of last year. If this number seems modest at first, it is worth looking at another indicator for a moment, and that is turnover per employee, which has increased by 25.2% during the last year. Several recent studies have pointed to higher productivity among teleworkers. True, this link between Estonian companies and the current data is, to put it mildly, speculative and arbitrary, but it could provide managers with food for thought nonetheless.

Compared to the second quarter of last year, the average salary has also increased by 20.2%. This number again seems unusually high. Can companies keep up with such expectations? If the turnover per employee grows by 25.2% and the aggregate turnover grows by 31% per year, then this equation may even be solvable. Especially in a situation where buying-in has become daily practice and there are limited solutions left in the toolbox for recruiting talent. A logical step could be to involve the company’s key employees in the circle of shareholders, although this practice is more common today among start-ups.

A total of EUR 893 million has already been invested in Estonian start-ups in 2021. That is almost twice as much as the total for last year, and 2021 is not over yet. The market is hot and money is looking for a safe haven. At the same time, the pandemic has created a huge field of work to be done in order to bridge the digital divide made up of companies that have failed to invest in their digital transformation. But there is also work to be done for those companies that are looking to strengthen their competitive advantage. Customers have adopted digital channels and employees have embraced the digital work environment (in the form of teleworking). It is now clear that cloud technology and cybersecurity are no longer simply trends to be observed from afar or about which you read articles describing their potential. In the here and now, client companies have a place to invest, where they can strengthen their positions or bridge the digital divide. In the here and now, software companies are presented with the opportunity to claim market share because someone has to cater to this need that has grown exponentially. Tomorrow may be too late.