COVID-19 pandemic creates divide of haves and have-nots as businesses hit pause on big IT projects and embrace cloud services
Businesses – particularly large enterprises – are hitting pause on long-term, big IT projects to conserve cash during the COVID-19 pandemic. That doesn’t mean they’re not spending, as precious technology dollars are flowing into cloud services and other technologies that enable remote working and continuing operations during social distancing.
The Lowdown: Estimates by the analyst firm Canalys place worldwide cloud spending at $31 billion for the first quarter – January to March – up 34% over the same period the previous year. Cloud service providers are among the big gainers in the COVID-19 crisis; Microsoft saw subscriptions for its Azure services jump 59% in the last quarter, and Amazon Web Services posted its first $10 billion quarter.
At the same time, technology vendors – including those offering cloud services – are seeing a slowdown in traditional IT projects that involve hardware infrastructure, software licenses, and complex build-outs.
While companies such as Microsoft, Google, Amazon, and Zoom are reporting surging growth based on the strength of their cloud and collaboration projects, other vendors are either reporting declines or anticipating losses. Even vendors that bridge the legacy and cloud segments, such as VMware and Nutanix, are furloughing staff and cutting budgets because of the shift in priorities.
The pause goes deeper than the enterprise level as channel partners report their midmarket and SMB customers are pausing IT hardware refreshes and digital transformation projects.
The exception to services weathering the downturn is in managed services. Kaseya says its MSPs are seeing surging demand for support for existing clients, which saps capacity without increasing revenue. The surge is placing stress on SMB MSPs by forcing them to burn cash reserves.
The Details: The 2112 Group noted the divide between tech vendors and solution providers growing versus those experiencing slowdowns in its latest study, “Evolving Impact of COVID-19 on Vendor Channel Programs.” The report noted that channel professionals are seeing customers react to the uncertainty caused by the pandemic, the lack of clarity about how the economy will restart, and when the recovery will begin in earnest.
The report finds that 25% of channel professionals believe they will meet or exceed their original 2020 sales forecast by 5% or more. Conversely, 47% believe they will miss their original 2020 sales targets by 5% or more. The chief difference between those expecting growth and those anticipating decline is product focus. Vendors with cloud and managed services, productivity and collaboration tools, and analytics applications are growing while vendors with on-premises products or technologies that require on-premises support are anticipating declines.
The Impact: The expectation is that the COVID-19 pandemic will spur accelerated migration to cloud services and the adoption of digital transformation strategies. At the midmarket and SMB levels, managed services will likely continue to thrive as smaller organizations turn to service providers to provide the technology and support for which they cannot acquire independently.
Based on the current trends, 2112 – which publishes Channelnomics – believes businesses will continue to look to technology vendors and solution providers to provide resources for work-from-home and distanced operations even after the pandemic passes. According to 2112’s report, 78% of channel professionals expect more companies to embrace working from home and 72% anticipate less business travel through 2021.