Research roundup: COVID-19 impact on 2020 IT spending from IDC, PwC

Research roundup: COVID-19 impact on 2020 IT spending from IDC, PwC

Global IT spending is expected to decrease by 5.1% in 2020 to $2.25 trillion owing to the detrimental economic impact of COVID-19 but cloud investment is standing strong, market research firm International Data Corporation (IDC) reports.

The organization predicts that a 3.4% drop will be noticed on ICT spending this year, but investments in IT infrastructure will grow by nearly 4 percent to $237 billion due to the high interest in cloud services.

“Inevitably a major economic recession, in Q2 especially, will translate into some big short-term reductions in IT spending by those companies and industries that are directly impacted,” said Stephen Minton, program vice president in IDC’s Customer Insights & Analysis group, in a prepared statement.

“Some firms will cut capital spending and others will either delay new projects or seek to cut costs in other ways. But there are also signs that some parts of the IT market may be more resilient to this economic crash in relative terms than previous recessions with technology now more integral to business operations and continuity than at any time in history.”

Key Takeaways for the Edge Ecosystem
• Despite a 1% decline in telecom spending, carriers will carry on with their plans to deploy 5G networks (IDC)
• More than half of CFOs are forecasting cuts to planned investments, but 34% expect to find new revenue opportunities (PwC).
• Over one-third of companies will accelerate automation and promote new ways of working (PwC)

The economic crisis induced by COVID-19 will slow down spending on PCs and phones, as well as affect the launch of premium 5G devices. Companies will rather invest in infrastructure and cloud deployments to reduce costs and postpone upgrades to on-premise datacenters.

According to Minton, software investments will see a significant drop due to many projects getting delayed so there won’t be a need for software licenses. Spending on IT services will also decline, except in the area of management, support, and operations of technology.

“IT spending is very uneven right now with businesses dealing with the type of crisis that was not envisaged in many contingency plans,” said Minton. “When all is said and done, we expect to find that early adopters of cloud and other digital technologies were best positioned to ride out this kind of storm with the least amount of disruption from an operational perspective, even if the direct impact on revenue is still more affected by external factors that no CEO or CIO saw coming.”

Despite a 1% decline in telecom spending, carriers will carry on with their plans to deploy 5G networks worldwide to address a growing demand for broadband services.

PwC findings on remote work, location and contact tracing, pushing back on investments

Cost-containment actions will continue in the U.S. despite easing up on restrictions to open some businesses, according to consulting services firm PwC. The firm conducted interviews with 288 U.S. finance leaders about post-COVID-19 policies.

Only 80% of CFOs will implement additional cost measures, a 6% drop from the previous two weeks, and 31% expect layoffs. Spending will be strictly controlled, as strategies will depend on how fast the economy will recover and businesses will stabilize. More than half of CFOs are forecasting cuts to planned investments, but 34 percent expect to find new revenue opportunities.

To ensure workplace safety, companies have even been looking at location tracking and contact tracing. Once they get back to on-site work, they have a variety of measures they will be considering:

– 83% of respondents will change workplace safety measures and requirements.

– Reconfiguring worksites to promote physical distancing (73%).

– Alternating teams to reduce exposure (58%).

– Make remote work permanent where possible (43%).

– Accelerate automation and promote new ways of working (37%).

With a significant number of companies either canceling or postponing investments due to COVID-19 and 1.7 million manufacturing jobs lost in April (13% of the manufacturing workforce), CFOs of industrial product companies feel the measures taken are secure enough to welcome employees back to work. Only 15% are considering cutting investments in automation, AI, and industrial IoT, while 2% will cut investments in cybersecurity and data privacy.

Overall, most CFOs feel their companies would need three months on average to find their balance after the pandemic is over, while 27% fear it will take six months or longer. Some fundamental changes will likely take place, as remote work has proven effective for a wide number of businesses.

Augmented reality market saw high investment in 2019

The future may be uncertain, but 2019 was a good year for companies seeking funding for AR/VR technologies and services. The total investment in AR/VR in 2019 equaled some $4.1 billion, the third-highest consecutive year, registered a significant drop in deal volume (27 percent) and value (35 percent) in Q4, according to data captured by Digi-Capital’s AR/VR Analytics Platform.

AR/VR tech, games, education, smartglasses, medical, enterprise software/services (ex-hardware), and solutions/services registered the highest volume of deals, dominated by AR/VR tech and social companies.

Most of the deal volume in 2019 was generated by grants, seed funding, accelerators, crowdfunding campaigns, and Series A and B rounds, while the highest value investments were found in Series F, Series A, Series C, Series B, and Series D rounds, in that order.

The U.S. and China remain the driving forces for investments, followed by Israel, UK, and Canada.

AR/VR M&A activity in 2020 is uncertain as the tech market is roiled by COVID-19 and other market catalysts that could push the market for growth-or keep it constant.

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