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The impact of Silicon Valley Bank’s closure has affected tech companies, with some initially concerned about paying staff and other expenses. Ceiba explains how nearshoring software development to Latin America helps increase companies’ resilience.

How did the collapse of Silicon Valley Bank happen?

  1. What went wrong at Silicon Valley Bank?
  2. What is the impact of SVB’s closure on technology companies?
  3. What does the future look like for the tech industry now?
  4. Why is nearshoring to Latin America the solution?
  5. How can nearshoring to Colombia help tech companies looking for greater efficiencies in their software development approach?

The sudden closure of Silicon Valley Bank (SVB) has caused shockwaves across the tech industry as both new and established IT companies look to innovate in the aftermath of its demise.

SVB provided banking services to a US region famed for its technological innovation and world-changing creativity and the consequences of its failure are widespread.

Here Ceiba explains how today’s economic downturn affected the tech industry’s best-loved bank and examines how tech companies are now changing the way they operate.


Silicon Valley bank

What went wrong at Silicon Valley Bank?

SVB launched four years ago in the heart of Silicon Valley and grew to become the 16th biggest bank in the United States, providing financial services to the technology industry.

Tech boomed during the pandemic, as consumers were forced to spend more time at home and invested heavily in apps, platforms and other essential digital products.

The bank received huge sums in deposits and invested much of that money in government bonds, the price of which fell recently due to increased interest rates.

IT companies then needed to respond to inflation and other aspects of the global financial downturn, and some withdrew their money.

The SVB Financial Group didn’t have enough cash to cover this, so sold bonds at a loss, which made customers and investors nervous and triggered a run on the bank.

The bank – which had been worth more than US $200bn – shut down within days.

What is the impact of SVB’s closure on technology companies?

Many tech companies kept the money they needed to pay their employees and cover other essential business expenses in SVB accounts.

Fortunately, most US banks, including Silicon Valley Bank, are insured by the country’s Federal Deposit Insurance Corporation (FDIC) but accounts are technically only protected for up to US $250,000.

Technology companies naturally deposit much higher sums than that, which means many of SVB’s customers could not initially guarantee that they were insured depositors.

The bank’s sudden closure impacted companies and individuals across the IT sector. Even though US federal officials have since taken the step of guaranteeing uninsured depositors full access to their money – tech companies are now keen to mitigate future risks.

What does the future look like for the tech industry now?

The situation with SVB has been contained, but it has fired a warning shot across the entire IT industry, with tech businesses taking this opportunity to mitigate risks and focus on improving their efficiency and flexibility.

Today’s global financial situation, including the inflation and increased interest rates that led to Silicon Valley Bank’s closure, mean now is the optimum time to seek responsible IT solutions.

This includes cost savings and higher levels of economic efficiency with regards to software development and the design and implementation of digital products.

Why is nearshoring to Latin America the solution?

Innovation is essential and the collapse of SVB has forced start-ups and established companies to seek new methods to safeguard their resilience.

Outsourcing services to experts in near or neighboring countries, in a process known as nearshoring, is one solution to the problem of avoiding fixed overhead employment costs.

Nearshore software development helps companies reduce the financial burden of employing permanent staff, especially when so many tech projects run short-term.

At Ceiba, we take care of hiring, training, job benefits and the application of agile methodologies, so our clients can focus on securing the digital product they desire.

Our software development services can easily be scaled up or down to meet companies’ needs and ensure peace of mind in challenging times.

You may be interested in: Why businesses choose Colombian software developers in Latin America

How can nearshoring to Colombia help tech companies in crisis?

There is a reason Colombia is known as the ‘Silicon Valley of Latin America’. It is fast-becoming the go-to location for software developers in Latin America.

Colombia is already one of the world’s most popular outsourcing and offshoring destinations, with a thriving digital ecosystem, a rapidly expanding software and IT services industry, and a highly-educated tech-focused workforce.

Ceiba is at the heart of this digital revolution. We design, develop, test and maintain world-beating technological solutions for companies at the forefront of their industries.

Our agile, experienced and bilingual staff utilize cutting-edge coding and testing practices, as well as peerless technical judgment, decision-making and teamwork skills.

To find out how Ceiba can help your company develop a revolutionary digital product in challenging times, contact us today.

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