What should we expect in 2022? A CEO’s perspective.
By Larry Gentry, President and CEO, cStor
Every year as a CEO, I attempt, with my team’s help, to figure out what the new year will bring, what the opportunities are, and what the challenges may be. It’s safe to say for most of us that this has been a challenge for the last 2 years. While 2021 was somewhat more predictable, we have still had some challenges that none of us have faced in our lifetimes. I’ve been around a while, and I’ve lived through 3 recessions; there is a rhythm to them and predictability… maybe even a playbook. Surely 2008/2009 was the fastest and deepest one I’ve seen and caused all of us to react quickly to survive and thrive.
Predictions for 2022
So, with these unprecedented times, what do I see, and what are we planning for 2022?
First, COVID is probably here to stay. We have seen at least four variants in the last year and a half. I would expect it to continue to mutate and become part of what we deal with for many years to come. We will probably be taking boosters, or modified boosters, as we do for flu vaccines for years to come. Herd immunity will help, whether by vaccine or sickness, but new variants like new flu viruses will continue to have us being cautious and getting shots. We see clients and employees just wanting to get back normalcy, whatever that is, and enjoy life. I don’t want to get political, but it seems that recently those getting sick or dying are largely unvaccinated or with serious health issues. I don’t think that is going to change.
What does that mean for all of us? Well, that normalcy includes going back to the office. Yes, people can work from home, they have proved that, but they are missing the sense or we, team, us, etc. They need to be around people. We will see people return to work but not in the same manner as pre-covid times. People enjoy the freedom of not traveling as much to drive to the office. There will be a new balance that emerges. This means all the remote work tools and resulting security concerns are not going away and will continue to be a priority for most businesses.
Second, the supply chain issues will not get better this year or possibly even next year. The economy is good, demand is good, and there is a lot of catch-up or pent-up demand to still be filled. When the pandemic hit, everyone cut back on orders because they didn’t know what to expect – no playbook – and didn’t want to get caught with excess inventory. We saw it in IT products immediately, and as clients began to ramp back up in the fall of 2020, the demand outpaced supply. It has continued to get worse since the spring of 2021. We are seeing solutions that typically have 2-3 week lead times that went to 5-8 weeks in the fall of 2020 and are now 12-16 week lead times. It will take a long time to get back in balance, probably a few years.
What does that mean? We are all going to pay more. Price will be less of an issue; availability will be the most important detail. The trucking industry is fundamentally going to need to change. Autonomous trucking/driving and a lane on every interstate would help and solve some problems. The technology is sound today, but to accomplish this, it will take Congress to act. Within ten years, you could see autonomous trucking become the defacto standard for long-haul trucking. It’s a critical way to solve the challenges we face, as well as the labor shortage of truckers.
Third, interest rates are going up. We have all been living on cheap money for a long time. This should have happened three years ago, but COVID hit, and everyone was afraid to do it. 2.7% on a 30-year mortgage, really? I remember my parents telling me about 4.25% and 4.5% mortgage rates and thinking I would never see that in my lifetime. Well, guess what? They will be saying that 50 years from now as well.
This will start to slow down our overheated economy, but inflation will still be a problem for all of us this year. Combined with supply chain issues, we could have some of the worst inflation we have seen since the mid-80s. In the short-term, many companies are sitting on a lot of cash. So, this won’t slow down corporate spending immediately at the business level, but it will for homes, then cars, etc.
Finally, continued labor shortages will hinder many of us from taking advantage of the business opportunities we see. Literally, almost no one is looking for a job. If you want to hire someone, you need to take them away from another employer. We are seeing more clients use contractors – a good idea – for the near future to fill needs. Why is it a good idea? You can easily dial it back by ending the contract when you see the economy slowing down. In the meantime, we are all going to pay more in recruiter fees to hire the people we need… a great time to be a recruiter! We have also expanded our capabilities to help meet clients’ needs during this time.
I’m excited about 2021 and beyond. Yes, there are challenges, but there are also tremendous opportunities even if it still feels like unprecedented times!