Covid Impact Report: Enterprise Technology in 2020

In the business press, enterprise technology success stories have barely been out of the news, and with good reason: many sectors of enterprise technology have enjoyed considerable growth as the business world has embraced digital transformation to weather the Covid-19 storm.

However, it would be untrue to say that Covid-19 has not claimed any victims. IT services have been the worst hit, as companies reconsider projects and streamline operations to sure up resiliency. On the hardware side, the industry has been blighted by supply chain disruption.

The biggest impact, however, has arguably been the rise of remote working, which has reshaped enterprise technology demands while putting increased demands on cybersecurity.

Enterprise technology: The winning and losing sectors of Covid-19

Winner: Cloud

Cloud-based collaboration tools, infrastructure and storage have all seen a strong upswing in adoption as companies look to the sector to provide support to a workforce working in a manner never before matched. Remote working has made the cloud essential to the daily operations of myriad businesses across the vast majority of industries, and for key players in the space, such as Slack and Zoom, the profits have been significant.

Short-term loser: Application software

IT software spending has taken a significant dive in 2020 as companies put IT projects on hold, with many also halting upgrades while employees work remotely. However, this impact is expected to be short-lived, with the market predicted to see a rebound in 2021.

Long-term loser: IT services

Many companies have been forced to enact something of a cull in 2020, and projects related to IT services have been hit hard. Some types of projects have been considered luxuries, such as AI or analytics-related projects, and so have been paused in favour of a renewed focus on increased agility, resiliency and continuity, as well as transforming customer journeys. Notably, the impact on this area is expected to be long-lasting and potentially severe.

Cloud growth to continue

Across cloud services, growth is expected to continue for the next few years, with the biggest climb expected in the already significant software as a service (SaaS) space. There will also be steady growth in infrastructure as a service (IaaS) and platform as a service (PaaS).

Cloud industry growth by product/service, 2019-2024

Source: GlobalData

The cybersecurity impact: More nuanced than expected

The headlines surrounding cybersecurity in 2020 would lead many to expect that cyberattacks have surged significantly in 2020 – and it is certainly true that cybersecurity teams have been under increased strain as they work to ensure that their distributed workforces are operating securely.

However, research by DomainTools suggests that this has not translated into a devastating uptick in breaches. Instead, the percentage of businesses that have reported a breach in 2020 remains unchanged compare dot the previous year, at 16%.

That’s not to say there aren’t issues. The company has found that 36% of businesses detect attempted cyberattacks multiple times a day, and Covid-19 has become a key topic to lure unsuspecting users in phishing attacks.

However, increased awareness and prioritisation of cybersecurity has been good news both for vendors and businesses more widely.

The changing cybersecurity market

Growth is on the cards for much of the cybersecurity industry over the next few years, although some areas will see a steeper uptake than others. Web security in particular will see a strong rise, fuelled by the growth in remote working.

Cybersecurity industry growth by product/service, 2019-2024

Source: GlobalData

Company impact: Successes and losses in 2020

Strong success: Amazon

No technology company has gained more from the Covid-19 pandemic than Amazon. In many countries, the company became the go-to shopping source for a wide variety of products during lockdown, causing sales to soar and its stock to rise significantly. The boost to cloud has also bolstered Amazon’s coffers thanks to its cloud division AWS.

Modest successes: Salesforce, Microsoft, NVIDIA

For Salesforce and Microsoft, the rise of remote working and cloud demand has produced notable gains, although have been offset in some cases by reductions in other areas. NVIDIA, meanwhile, has profited from a boom in home-based leisure due to its gaming offerings, profiting from increases in the sale of gaming laptops and a 50% surge in gaming hours on its GeForce platform.

Modest losses: Oracle, Cisco and Alphabet

While Oracle, Cisco and Google parent company Alphabet have all seen successes in some sectors, these have been offset by losses in others. Both Oracle and Cisco have been hit by the delay or cancellation of many IT projects, although in Cisco’s case this has been balanced by successes in its security and collaboration-related products. Alphabet, meanwhile, saw a dramatic drop in advertising spend, its core revenue source, which has soured successes in its cloud and collaboration tools.

Completed technology deals in 2020

Across hardware, software and services, the rate of mergers and acquisitions worldwide has not changed dramatically as a result of the coronavirus pandemic, compared to 2019.

Completed hardware technology M&As: 2020 versus 2019

Source: GlobalData

2020 actually saw an increase in M&As in the hardware space compared to 2019, with little impact from the pandemic.

Completed software technology M&As: 2020 versus 2019

Source: GlobalData

M&A deals in the software space saw a modest decrease as lockdown hit, although appear to be recovering quickly.

Completed services technology M&As: 2020 versus 2019

Source: GlobalData

Technology services also saw a dip in M&A deals as lockdown hit, although the rise in September suggest that many deals were simply delayed rather than called off.

Future response

GlobalData expects enterprise technology to be characterised by a move away from moonshots and other disruptive innovation over the next three to five years, with the focus instead shifting to pragmatic, problem-solving technologies.

There will also be a greater focus on digital transformation and automation in business continuity planning, in part to build greater resiliency in the event of future disruption.

However, while research and development is expected to be somewhat muted for the next three years, it is thought that is will see renewed enthusiasm within the next half-decade, as businesses look to the horizon for post-Covid success.