“IT services and application software vendors are set for a rocky year”
The Covid-19 work from home (WFH) economy is set to shake up the digital landscape, but results will be uneven across technology sectors and geographies, writes Courtney Fingar.
“Covid-19 will acclerate the shift to digitalisation. Transition journeys that were going to last a few years will now be forced into happening in a few months. That means a number of digital industries will benefit,” says Mohammad Chowdhury, a partner at PwC Australia who leads the firm’s Telecom, Media and Technology (TMT) consulting practice.
“They will benefit immediately through high degrees of usage — such as [videoconferencing platform] Zoom or e-commerce companies — but then there will also be a longer term shift in consumption patterns as a result of Covid-19.”
Broadband users are one example. “Your typical broadband package in a lot of countries is 25 or 50 megabytes per second but what you will now find is a lot of households and companies will up their speed. Most of them will stay there, they won’t necessarily go back and I think the same will happen with usage of other technologies. That means certain industries should be seeing sustained growth beyond this crisis.”
A report from Global Data, however, predicts that most TMT sectors will be negatively affected by the pandemic, the difference just being how much.
Global Data analyzed the impact of Covid-19 on the leading companies operating across 17 separate sectors within TMT. To show the relative impact on each sector, an index was created of the equal-weighted, mean Covid-19 score of each sector’s constituent companies ranging from -100 (significant negative impact) to +100 (significant positive impact). The index showed no sector with a positive score, with the worst performer being IT services with a score of -60,
Collaboration software vendors and cloud services providers are among the least negatively impacted by the crisis in the near term, as well as telecoms operators and cybersecurity companies.
“Unlike many other industry sectors, telecom operators are reasonably insulated from the Covid-19 crisis as reliable connectivity becomes the critical commodity for home-working, home-schooling, and local and national crisis management systems,” the report says. Additionally, “the suddenness with which Covid-19 has forced office-based employees to become homeworkers is great news for cybersecurity companies, which will be expected to keep the home-working army secure against a growing number of Covid-19-inspired phishing and malware attacks.”
Meanwhile, IT services and application software vendors are set for a rocky year. IT services companies face first the difficulty of trying to deliver existing projects while their clients are on lock-down for months on end, followed by a major slowdown in IT projects as companies scale back spending to protect 2020 profits.
Consumer electronics also have poor prospects, with supply chains constraints preventing them from meeting temporarily high demand, as shut-in customers crave gadgets for entertainment, but with that demand likely to tail off as the global economy heads into recession.
IT infrastructure companies may get hit with supply-chain problems in the short term, but have brighter prospects for the longer term, according to Global Data.
As the fortunes of technology sectors diverge post-coronavirus, geographical discrepancies will be exacerbated leading to wider differences in TMT marketplaces and carrying larger economic consequences. Greater reliance on technology “will create a stronger digital divide” between countries with strong tech capabilities and those with poor connectivity. Slow uptake of 4G and Internet of Things and low internet usage in developing countries will be more detrimental in the current environment, says Mr Chowdhury.
“Most developing-country internet infrastructure is mobile and cellular. There is a plus and a minus. The minus is there is not a lot you can do to change that overnight, mainly because of obstacles like smart phone penetration. A lot of these countries have actually got mobile broadband that is useable,” he says. “If you go to, say, Bangladesh, 4G networks are everywhere, it’s just the usage of them is low because of the handset problem.”
On the positive side, he says, a lot is being done using mobile big data to solve mass problems in emerging markets. One example is Malawi, where mobile big data tracking people’s movements is being utilised to help plan where mobile clinics should be set up.
“Developing countries will just have to be more agile in adopting mobile-led solutions to big problems. That’s probably one of the upsides that could come out of this,” Mr Chowdhury says.