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Forced adoption accelerates growth in uncertain times for the technology sector

By Chris Lewis 29 Apr 2020

Adoption of Zoom during Covid-19

Everything has changed … yet many things will stay the same

So much has changed in a few short weeks: health fears for family, friends, and colleagues; living with the constraints of social distancing; and dealing with significant short-term economic dislocation arising from lock downs.

And yet … so much is similar, in many ways there is just more of it!

Before and After Covid-19

Many parts of the technology eco-system will benefit both from short-term demands caused directly by COVID-19 and the mitigation measures put in place by governments around the world, and the acceleration of existing long-term, systemic trends as a result of enduring behavioural change brought about by our current circumstances. As we look forward to a time when a level of normality returns, we explore some of those themes which are most likely to accelerate as a result of COVID-19 and the forced adoption of new technologies, working practices, and ways of living, that it has caused.

The Digitisation of Everything

In the lock down period everything is happening digitally: shopping, communication with family, socialising with friends, entertainment, fitness and children’s education. All of this is happening in extremis and well beyond the early-adopter age groups we often associate with these digital services. Grandparents on TikTok? – right or wrong, it’s happening!
We expect much of this forced adoption to stick when normality resumes:

  • More diverse categories of eCommerce applicable to a broader demographic;
  • The concept of ‘Everything on Demand’ – immediate delivery of any good or service (and not just from Amazon);
  • The morphing of business models – for example, restaurants continuing to offer gin or wine tasting kits delivered to households for virtual (or in future, physical) gatherings;
  • Virtual parties – groups of friends in disparate geographies socialising by video; so much better than a phone call; so much easier than organising to meet in person.

For those able to capture the consumer imagination, and for those supplying the enabling technologies, there are exciting times ahead.

The Connected Remote Business

As office-based businesses have faced the challenge of remote working on a sudden and massive scale, technology has been rapidly rolled out to facilitate work getting done, the continuation of management processes, and collaboration between, and communication with, colleagues and customers alike.

  • Within days, video conferencing has become the norm, Zoom the most talked about beneficiary (doubling its share price in Q1), but others, like European champion StarLeaf, are too enabling the economy to keep turning in a secure way;
  • A renewed focus on employee engagement is driving rapid adoption of platforms like Interact with its next-generation intranet, which enables businesses to communicate effectively with large groups of remote workers to maintain culture and focus;
  • Perhaps most importantly, we are seeing the beginnings of accelerated adoption of cloud-everywhere (i) in industries like banking and insurance, that have for years struggled with core system migration, believing it to just be ‘too difficult’, and (ii) into tertiary processes within enterprises and SMEs to ensure that everything that could be done remotely, can be. This will benefit both the major public cloud providers, but also the services businesses supporting corporates with their cloud transformation journeys.

The Resilience Agenda

All aspects of resilience will be at the top of every Board agenda for some time. Beneficiaries will include:

  • The automation vendors (BluePrism, UIPath and Automation Anywhere) and their services partners (like Roboyo in Germany, Digital Workforce in the Nordics and Symphony (now part of SYKES) in the UK) enabling many office-based tasks to be completed with far fewer people directly involved;
  • Cybersecurity where the level of threats has risen significantly during the COVID-19 crisis and where the attack surface has grown materially with millions of new remote workers on a global basis;
  • GRC (governance, risk, and compliance) software solutions like those offered by Norway-headquartered, Corporater, as enterprises seek to better understand, monitor and mitigate systemic risks in their businesses and how those risks trade off against performance;
  • On-shore and near-shore IT support and software development where concerns over the near-term capability of India (in particular) to deliver with its ‘at office’ infrastructure will surely drive workloads back to North America and Europe.

Near-term, the public sector is a good customer to have

In addition to these macro themes, there will be areas of the economy able to benefit from a cyclical upswing in customer spend. In the near-term, the B2B world will see businesses that are supplying the public sector, do well. In particular, there will be a significant ‘healthcare dividend’ – in fact it’s already being seen in hospital IT deployments – and also massive investment in built infrastructure and a mass-roll-out of advanced broadband; a sort of New Deal for the 2020’s. Technology and service providers supporting these segments will benefit in the coming months and years.

In the diagram below, we set out some of the areas we expect to benefit the most in the short-term and as the global economy begins to recovery. We will explore some of these segments in more detail in the coming weeks.

Forced adoption accelerates growth of technology sub-sectors: short-term vs long-term impact

[Click to enlarge]

Short and long term impacts of COVID-19 on tech sector

The near-term future is uncertain; but looking a little further out points to strong opportunities for both technology sector leaders and disruptors to seek out profitable growth whilst making the world a better and safer place.

 

Chris Lewis

Partner

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