Joel’s Market Pulse - Q2/2025

In this Q2/2025 market analysis, Joel Liukkonen takes us on a deep dive into the current state of the market and how the tough market conditions affect tech professionals in 2025.

The uncertainty in the market has risen to new levels as the possibility of trade wars has taken concrete steps and geopolitical crises have expanded, making the market more unpredictable and thus, the companies more hesitant to invest.

The Effects of Uncertainty

Global Trade War

On 2nd of April the United States announced new tariffs for more than 100 countries and territories, taking the world closer to a global trade war. This led the markets to become extremely turbulent, especially the stock market. China responded by announcing counter tariffs a few days later, making everyone even more nervous of the possible next scenarios, effects to inflation and global supply-chains. According to Nordea, these events led the uncertainty indicators of trade policy and economic policy to increase significantly, highlighting the negative psychological effect of tariffs.

A few days later, most of the tariffs were paused for 90-days, yet the uncertainty remained. Economic Policy Uncertainty uses three different components to measure an uncertainty index and their estimates show that trade policy uncertainty has remained significantly higher than it has ever been before despite the pause. The level is significantly higher than even during the peak of Covid-19. This supports the idea that the fear of global trade war has remained high even when the tariffs are not in place. Predicting the trade policies has become extremely difficult.

Oil Supply

Simultaneously, the latest events in the Middle-East have made the oil-prices turbulent as Israel and Iran entered a new phase of their conflict and as the US decided to support Israel with its own strikes. As the area provides a large portion of global oil shipments via the Strait of Hormuz, around 20% of global oil supply. Worries are related to a potential decrease of global oil supply due to the conflict and thus, increasing oil prices notably. This could lead to higher inflation and possibly even to stagflation. However, it all depends on how long the conflict continues or how long the effect of conflict takes place. Evli’s Head of Fixed Income Juhamatti Pukka analyzes the effects to be rather short-term for geopolitical crises. Yet, the whole situation provides new uncertainty.

Finland’s Exports

The uncertainty is also seen in the Finnish market where it proved to affect the order books negatively. Based on the TeknoBaro-questionnaire conducted by Teknologiateollisuus, many indicators have worsened due to tariff worries, especially in the orders. Teknologiateollisuus highlights that the situation affects especially bigger corporations which can be seen to be negative for the whole Finnish economy as they employ around 35% of Finnish workforce. This situation will also reflect on the demand for smaller companies later on as many smaller companies in the Finnish economy tend to sell to the bigger companies or act as their contractors.

The positive take away from the questionnaire is that companies have increased their investments to digitalization, especially in Data and AI compared to last year. This is a positive development as in Q1/25 market pulse, it was discussed that investments explain ongoing recession in Finland the most. It is also likely that investments for digitalization increase in the medium time period whereas other investments can still be on a lower level. These investments could be seen more as investments for efficiency rather than new products which is of course a positive thing yet, they don’t necessarily provide new business for companies. Other investments for digital products would still be needed to stretch the investment gap from late years and to increase new business opportunities.

Bankruptcies in Finland

Another worrying statistic is the number of bankruptcies in Finland. This was discussed already in the Q4/24 market pulse, but the numbers have only been increasing (graph 1). How much of this can be explained by the global events cannot be accurately evaluated, but they certainly have an effect. IT-consulting companies are not on a similar trend. Based on Tilastokeskus 1-5/2024 the amount was 41 and 1-5/2025 it was 38. Regardless, the lack of demand impacts IT Services and decreases revenues, margins, and in some cases also leads to, for example, personnel reductions.

Overall, the broad picture of the global economy is grey and filled with uncertainty. Visibility of companies is blocked, making it harder to make investment decisions. Nevertheless, Finnish companies should keep investing in digitalization as there is so much “investment debt” from the past years compared to similar countries like Sweden. Bold investments in digitalization could provide a competitive edge during uncertain times and especially when the uncertainty starts to vanish and market conditions improve. The positive indicators of increased R&D should be kept going also to improve the Finnish economy.

IT Service Market Having a Rocky Road

Whereas, tariffs don’t directly impact the IT service market, the indirect impacts are likely as customers get more hesitant about making investments. Together with already tough market conditions and high competition, this will provide challenges for IT service companies that have already been suffering from low market growth and decreasing profits during the last two years.

Negative Growth

Inderes’ report from May provides another perspective to the situation. Based on it, the IT market growth for publicly traded companies was negative during Q1 (on average -4.3%) and the profitability was at its lowest for years. Out of 10 publicly traded companies, seven shrunk, two stayed put and only one achieved growth. Even this growth was mostly explained by their security business, which includes a significant portion of non-IT related services. Thus, overall none of the public companies grew their IT services business. One could say that the longer tough period is now seen in the IT service market as the economic turn has yet to happen. In the Q1 numbers the effect of uncertainty and tariffs are not seen yet which can indicate that the number for Q2 or even Q3 might not be much better.

Smaller Consultancies, Bigger In-House Teams

The situation has led many of these companies to adapt to the new market reality and there have been multiple change negotiations this year as well as there were last year. Lately Vincit, Gofore, Siili and Netum had their own and it's not likely that they will be the last ones seen this year as IT service companies are fighting overcapacity. Overall, the change of inhouse personnel has now been either negative or zero for six quarters in a row for publicly traded IT service companies (graph 2). Having more people and for a longer term without a project easily leads to more aggressive pricing that will affect the profitability even further. This has already been seen in the market both public sector tenders and private sector companies contract negotiations.

As IT service companies are reducing their headcount, this provides interesting opportunities for other companies to recruit talents to be their inhouse employees. Some companies like Elisa, have even stated publicly that they are heavily focusing on recruiting, possibly being able to benefit from the fact that IT service companies have let go of talented personnel. However, it is unclear how well these people’s skills match what companies want However, if they manage to recruit the talent, it may decrease the need for consultants even more.

Digitalization Projects to the Rescue?

Teknobaro suggested that companies are finally starting to invest more money on digitalization projects than last year which has the potential to positively impact the IT Service market. It’s unclear how much the IT service companies will benefit, if the projects are developed in-house or the investment timeline is long. IT Service companies should focus on actively helping their customers to find new investment opportunities especially around topics that provide real business impact rather than being just one time experimenting.

A hot topic is of course data and AI. But IT services companies struggle on how to differentiate themselves from all other players that are also working on this trendy topic and moreover, how to provide some insights and ideas instead of repeating similar dreams and goals. One might wonder which company takes thought leadership of driving data and AI change and gives clarity what will be the impact and practical use-cases in different industries and companies. Thus, providing a differentiating message that customers are likely looking for and expecting to understand the capabilities provided by technology better.

Too Optimistic Predictions

By now the positive expectations for this year’s bounce back and growth are somewhat gone and deemed to be overly optimistic talk. On the other hand, Inderes expects IT service companies (publicly traded) to “only” shrink 1% on average which however, is a bit better than last year's 1.4% and a bit of bounce back compared to the numbers in Q1. Moreover, they expect profitability to remain close to the same (2025 6.4% vs 6.1%).

Nevertheless, the effects of uncertainty are yet to be seen in the IT service market and that might still provide a shock and lead companies needing to adapt to the situation even further. One could assume that this year is not going to be a bright year for the IT service business but rather similar to last year. It is allowed to be rather realistic than optimistic about the second half of the year as well.

Tough Competition Situation for IT-Professionals

While the majority of professionals are likely to see some impacts of the market situation, the effects can be quite different for each and every individual.. Tough market situation, uncertainty, and competition are likely to cause some issues for tech professionals, no matter with which kind of contract you are doing the work - either as employee or consultant.

Hiring Only the Most Experienced

The market has lately provided a different situation in the job and project demand compared to historic years as the market has suffered from low or negative growth. Hence, many companies have tried to adapt to the situation for example by having change negotiations. This new status can be seen to affect individuals in at least two different ways that are either positive or negative depending on the situation.

For the tech professionals the bad thing is that the market uncertainty makes companies more hesitant to hire people no matter what the contract model, as predicting the future orders and demand becomes harder. Postponing investments might be a possible option for many companies, meaning that the need for a new tech workforce can be relatively limited. Thus leaving more people either unemployed or without a project, leaving more people to compete over fewer openings. Unfortunately this reflects on juniors and recent graduates even more negatively as their experience is lower and some companies might not want to spend their resources to train new people as much as previously when there are more experienced candidates available. And we can see from data that many young IT professionals are unemployed.

On one hand, a positive impact might be that some companies see the market situation as a way to strengthen their inhouse capabilities by hiring experienced professionals which might benefit job seekers. On the other hand, risk-averse companies might prefer having more flexibility and therefore prefer freelancers and consultants as reducing consultants in the tough situation would be much easier from the company's perspective. Also, when the market has been difficult, some companies tend to fight the uncertainty by having the same familiar people working for them even longer. For example, the average length of Thriv cases has increased in recent years as it has been safer for customer companies to keep the person that already knows the domain, team, and project

Overall, the IT professional employment market isn’t among the worst industries but far from the previous years in the early 2020s. It is likely that the negative impacts of uncertainty are greater than positive ones and getting a job remains difficult no matter the contract model.

Lower Hourly Rates

Hourly rates have changed drastically compared to early 2020s. As the market is turbulent and consultancies are facing bench risk, they fight with aggressive pricing competition which Inderes also brings up as one of the problems IT services companies are facing. Some client companies want to exploit this situation as well and try to negotiate the current prices to be lower. For freelancers this probably means a need for cutting their pricing as the market rates have gone down as well which can be seen in our data as well (insert our talent pricing chart that we have shared quarterly).

Shorter Contracts

Another issue caused by the uncertainty is the duration of the contracts as client companies might prefer doing shorter contracts which then causes uncertainty of the project length for tech professionals. In some cases, the budgets for continuations might be more uncertain or it might take longer to get the decision if the project continues or not. Of course this is part of the game for the external workforce. It might still provide challenges for both project planning and be stressful for individuals. However, due to uncertainty it is likely that many tech professionals face this kind of situation, like said before, some companies have still kept the same professionals in their projects much longer as getting new people to join the team would be riskier. Also, the price competition might not be seen in these ongoing projects if the customers doesn’t decide to open the contracts for competition.

Conclusion

It is not expected that the market situation will improve much this year and the difficult times for tech individuals remain. The positive thing is that the Finnish companies have increased their spending on digitalization R&D. When and how much this reflects to the IT Service market and tech individuals is unknown and hard to be evaluated. The situation also affects people differently as there are still technical profiles that are facing high demand from the client companies like data experts. Moreover, demand for seniors has still remained relatively high whereas recently graduates haven’t been as lucky.

The year 2025 will be difficult for IT market and tech professionals compared to many other years in the 2020s yet, there are still relatively many opportunities. Especially people with a certain skillset are able to find projects, meaning that keeping your skills up to date becomes even more important. Learning new technologies widens the reach and makes one more resilient to market uncertainty yet, it doesn’t tackle all of it. One should keep in mind that brighter days will come but follow closely on the events in the market as it seems that uncertainty and surprising events are here to stay for now.