Coronavirus is a human tragedy and its biggest impact has been in the form of thousands of lives that have been lost. COVID-19 has also affected industries across the world with air travel, hospitality and luxury all facing disaster scenarios. Inevitably, the tech industry has also seen a massive disruption due to the ongoing pandemic.
With the initial outbreak in China, the broken supply chains slowed down business for many tech firms. Companies that produced laptops, smartphones and other electronic devices all suffered significant losses. However, now that most of life on the planet has come to a halt, not even software developers are safe from the fallout.
Impact of Lockdowns and Social Distancing on IT Industry
Economic devastation caused by coronavirus lockdowns has been a subject of great debate. While everyone believes they help in saving lives, some maintain that mass unemployment will devastate communities more than the disease itself.
In any case, government-imposed lockdowns coupled with social distancing measures have affected the IT sector in multiple ways.
Disruption in the Supply Chain
With the virus originating in China, the entire Hubei province was put under a series of lockdowns. This meant many plants across this region that produced goods for prominent tech companies were partially or fully shut down. Apple’s primary manufacturer Foxconn had to close its plant in China, leaving the tech giant with a grave shortage of products.
The company did try to shift its production elsewhere but by then, the virus had spread all over the world. It became hard for Apple to find a place that wasn’t hit by the deadly pandemic. More so, it was hard to replicate the resources that Chinese plants usually possess which is a result of the country’s billions of dollars of investment in the manufacturing sector.
Likewise, when the virus spread through South Korea, Samsung shifted a big portion of its manufacturing to Vietnam. However, not many companies have a similar option as now as the COVID-19 has spread throughout the globes, closing many factories in the process.
Lack of In-Person Interactions
“Due to the coronavirus pandemic, work has been shifted to home” says Alex Reynolds of EMUCoupon. This is happening because governments across the globe have recommended social distancing and are encouraging companies to manage their operation without calling in the employees to the office.
This has created a bit of a dilemma. It goes without saying but there’s no substitute for person to person contact. Of course, software such as Zoom and Skype serve as a vital alternative. But it’s hard to recreate the office environment with the workforce operating from home.
On paper it should be easier for IT firms to organize their employees from remote locations. However, tech companies face similar issues with home working as any other business (internet connectivity, employee distractions).
Tech Conferences Getting Cancelled
Tech conferences are a godsend for startups that are looking for potential investors. They allow innovators from across the industry to gather under one roof and share insights. Unfortunately, the coronavirus pandemic caused 12 of such events to be cancelled.
Mobile World Congress (MWC), which was set to take place on 24th February was perhaps the most notable of them all. This event involves the announcement of new gadgets and smartphones. Interestingly, 5G connectivity which is a hot topic in tech circles these days was suppose to be the highlight of this conference.
Along with MWC, Facebook canceled its Global Marketing Summit and Google shifted the Cloud Next conference online. Many conferences were turned into digital events but just like the “work for home” situation, they did not prove to be as fruitful as they would have in a “non-coronavirus” environment. Regardless, the cancellation of these events caused $1 billion in direct economic losses.
Potential Decrease on Tech Spending
In the latest forecast of tech growth —Andrew Bartels, the VP and Principal Analyst at Forrester, puts the odds of tech spending going down by 50%. While we are to see major layoffs by tech firms, the accumulated spending on tech going down may spell trouble for many IT firms.
Some of the key insights of Forrester’s report are as such:
- If the US economy declines in the first half and recovers in the second half, the tech market’s growth will slow by 2%.
- In the case of a recession, global tech markets will decline by 2% or more.
- Consulting and system integration services could decrease by 5% if firms halt new projects.
- Computer and communication equipment purchases will decline by 5% to 10% no matter if there’s a continued recession or recovery.
- Software spending will grow by 2% to 4% in the best case scenario and stall in a recession.
The forecast gives an idea of how the current situation could impact the IT industry. But it’s impossible to accurately predict how the IT sector would fare in an economy devastated by a global pandemic.
Increase in the Demand of Specialized Software and Services
The same report that predicts fall in tech spending estimates a growth in demand for cloud infrastructure services and several specialized software. Already, the social distancing protocols have increased the demand for video conferencing programs like Zoom, Google Hangouts and Microsoft Hangouts.
This demand will continue to grow as online classes and working from home has now become a norm. More people are also discussing the potential of 5G technology as it delivers faster communication which is not possible through the conventional wired connections.
Virtual Reality (VR) is another tool that has gained importance due to the current unfortunate circumstance. Companies can train their employees while maintaining social distance through VR and it could also uplift office meetings by easing how employees share prototype design.
Conclusion
In many ways, the IT sector has been luckier than most industries during the on-going pandemic. Even though the manufacturing of electronic equipment is on hold, there haven’t been any mass layoffs. Due to the nature of the disease, the software industry in particular hasn’t been drastically impacted. However, all this could change in the time to come. While telecommunication programs might gain from this tragedy, other segments of IT could suffer huge losses.
Also Read: 7 Ways How Digital Technology Is Helping To Fight The COVID-19 Crisis