Tuesday, March 31, 2020

Nokia Argues 4th Industrial Revolution Will Lift Productivity

Nokia argues that the fourth industrial revolution will boost industrial productivity, which Nokia rightly notes has been less than one percent per year since 1980. Nokia argues that industry 4.0 is going to boost productivity, built on “connecting everything” and using the internet of things. 

Private networks using 4G can help firms get a head start, Nokia argues, even before native 5G is available. One would expect Nokia to say that. 

The key issue, though, is whether more information technology--private 5G, private 4G or public 5G, is going to show early productivity results when 40 years of IT investments have failed to move the needle. 

If you have worked on the supplier side of the business, you know buyers almost never believe such claims, in terms of magnitude of benefit. 

Historical data since at least 1971 helps explain that skepticism. Though other forces are at work, it is hard to quantify the benefits of IT deployments, and probably also will be true of other promising “digital business transformation” efforts as well. 

Since 1971, for example, productivity has generally been dropping in developed nations, for example. There are mitigating issues, many will argue.

Cloud Giants, ISPs, IXPs Collaborate for Routing Security

Amazon, Google, Facebook, Microsoft, Akamai, and Netflix and more than 100 Internet service providers and internet exchange points  have joined the Mutually Agreed Norms for Routing Security (MANRS) initiative, designed to reduce the most common routing threats, such as traffic hijacking and spoofing. 

Monday, March 30, 2020

Microsoft Sees 775% Increase in Cloud Services Demand

Microsoft says there has been  a 775 percent increase in demand for its cloud services in regions enforcing social distancing and/or shelter-in place due to the COVID-19 coronavirus. Use of the collaboration tool Teams spiked up to 900 million meeting and calling minutes daily in a single week, for example. Windows Virtual Desktop usage has grown more than three times. .

Government use of public Power BI data visualization software to share COVID-19 dashboards with citizens has surged by 42 percent in a week, Microsoft says. So how are global access networks holding up? 

Despite significant increases in internet access demand caused by stay-at-home policies forced by the Covid-19 pandemic, global internet access performance is holding up. There are some speed reductions, but average speeds arguably are higher than four months ago, in many markets, including Australia.

Speeds are flat in Canada, the United States, Mexico, Japan and Malaysia; slower in India; higher in China. 

Sunday, March 29, 2020

Why IT Buyers Almost Never Believe Seller Claims

Every supplier of an information technology solution argues that deploying those solutions will boost productivity. Sometimes revenue gains are the claim. Perhaps more often operating cost savings are the bait. If you have worked with sales teams, you know that buyers always are skeptical of such claims. 

Historical data since at least 1971 helps explain that skepticism. Though other forces are at work, it is hard to quantify the benefits of IT deployments, and probably also will be true of other promising “digital business transformation” efforts as well. 

Since 1971, for example, productivity has generally been dropping in developed nations, for example. There are mitigating issues, many will argue. 

The hype might have exaggerated real-world impact. Reaping rewards takes longer than we think. Others argue that we cannot measure productivity boosts when it is “quality” that changes (more output from machines that cost the same, or perhaps less, but have higher performance). 

Other forces might counteract the productivity gains, perhaps because more work happens that is essentially overhead, without direct productive effect (tax, regulatory, compliance efforts, for example) or workers might be shifting from high-productivity to sectors of the economy with lower productivity. 

The point is that buyers almost never actually believe the more-spectacular seller claims.

Saturday, March 28, 2020

Will Remote Work Trend Change Dramatically, After Covid?

One of the biggest cautions in investing is to be wary of claims that “it is different this time” when an un-historic or atypical valuation trend happens in equity markets. A good example was the valuation of firms with no revenue in the leadup to the internet bubble around 2000. 

To extend the argument just a bit, we are going to be hearing all sorts of predictions that the Covid-19 pandemic is going to substantially or radically reshape business, government, education and consumer behavior on a permanent basis.

That is perhaps a different argument than saying some underlying trends might get a boost. More bandwidth, diversified supply chains,  more remote work capabilities, more use of collaboration tools, better security, network resilience, use of food or meal delivery services, online shopping and more work from home are examples. 

It is logical to suppose that, having become more acquainted with doing things a different way, there will be a lower threshold to maintaining some of those behaviors, post-pandemic. 

But we might maintain some skepticism about how much behavior will change on a permanent basis. Consider the obvious case of remote work. Some of us have heard about the obvious value of telework or remote work for our entire professional careers. 

And yet the percentage of U.S. employees working at home 50 percent of the time or more in 2020 is estimated at five million, representing 3.6 percent of the workforce, according to Global Workplace Analytics. And that is after 40 years of evangelization that some of us are personally aware of. 

Predictions about the extent of telecommuting have routinely been far in excess of those figures. Definitions are likely an issue. In the past, “telecommuting” has generally been thought of as employees working “at home” sometimes--or full time--instead of at the office, campus or plant. 

But some analysts might consider employees taking work home at the end of the day as “telecommuting.” That probably is not what most people have in mind when they think of remote work on a substantial basis. 

Others say remote work includes any employees routinely working at home one day a week. That is telecommuting, to be sure. But it might not be what many have in mind when they think of remote work: working from home 50 percent to 100 percent of the time. 

Another caveat is that those figures do not include the self-employed. 

Still, it is undeniable that remote work is growing. Regular work-at-home has grown 173 percent since 2005, 11 percent faster than the rest of the workforce, which grew 15 percent, according to  Global Workplace Analytics. 

Remote work also grew almost 47 times faster than the self-employed population, which increased by four percent. 

The point is that remote work trends--aside from people taking some work home from the office--have been in place for some time; were growing before the pandemic and will grow after the pandemic. 

So the relevant issue might be whether the rate of change increases in a non-linear way. At least some believe that will happen. "We believe the COVID-19 pandemic has accelerated society's transition to broadband and digitization by at least a decade,” say analysts at MKM Partners. 

But it is reasonable to expect that the gap between employee desire to work at home and the low percentage doing so has other explanations. 

Global Workplace Analytics argues that 56 percent of employees have a job where at least some of what they do could be done remotely; 62 percent of employees say they could work remotely and desks are vacant 50 percent to 60 percent of the time. At yet only 3.6 percent of employees presently do so. 

That suggests--as often is the case with new technology--that some major retooling of business processes or organizational culture or both are holding back much-higher rates of remote work. Only seven percent of U.S. firms make remote work available to most or all of their employees, Global Workplace Analytics says. 

In makes sense that remote work happens most often when there are clear benefits for employers or employees, when the work tasks are amenable to remote work and when the relative isolation fits the emotional needs of the workers. 

Sales, customer service,marketing, programming, health claims analysis and radiology are use cases where remote work is possible. Not all roles are that amenable.  

But one also has to keep in mind that what most would consider routine “remote work,” happening 50 percent to 100 percent of the time, remains relatively rare. With the caveat that rates of change can hit inflection points, and that the pandemic might trigger an inflection point, remote work is not a technology issue. 

Work processes and work cultures apparently have to change in significant ways before substantial remote work makes sense, and works. 

Beyond that, the assumption that remote work always improves productivity is questionable. The productivity paradox (also the Solow computer paradox) is the counterintuitive observation that, as more investment is made in information technology, worker productivity may go down instead of up. 

The existence of the productivity paradox has been noted since the 1970s. Before investment in information technology became widespread, the expected return on investment in terms of productivity was three percent to four percent.

Instead, we have tended to see improvements that are undetectable to perhaps one percent, in the 1970s to 1990s. Nor is there much evidence that matters in the United States, for example, have changed between 2000 and 2018, either. 

Likewise, in the 20th century, gross domestic product growth was mainly driven by total factor productivity growth. Since the mid-2000s, however, productivity growth has been in decline, according to one analysis by researchers working with the Centre for Economic Policy Research. 

None of that means a dramatic change in remote work is impossible. But it does seem unlikely.

Friday, March 27, 2020

56% of U.S. Cities See No Service Degradation from "Stay at Home" Policies

For the week of March 15 to March 21, 2020, internet access services in 200 U.S. cities are maintaining service levels, though 13.5 percent of cities have seen average speed dips of 20 percent of typical ranges, according to Broadband Now. 

About 44 percent  of the 200 cities have experienced some degree of network degradation over the past week compared to the 10 weeks prior. Fully 56 percent of cities have seen no slowdowns. 

Three cities--Austin, Texas, Winston Salem, North Carolina, and Oxnard, California have experienced significant degradations, falling out of their ten-week range by more than 40 percent.

Roaming Revenue Logically is at Some Risk When Travel is Down

The Covid-19 pandemic could cost communications service providers over $25 billion in lost revenue during the next nine months, mostly from lower roaming revenues, according to Juniper Research.

The research assumes that over half of all roaming revenue for the year will be affected, amounting to $25 billion in lost revenue. The research also highlighted the period between June and August as of particular significance when the demand for international travel is high. It forecast that operators could lose up to $12 billion in roaming revenue alone in these three months.

In terms of the overall impact on operators, it must be noted however that global roaming revenue only accounts for approximately 6% of total operator-billed revenue per year, limiting the hit on the industry.

Consumer Spending on Connectivity Might Surprise You, Even in Recession

It is easy enough to predict that consumer, smaller business and enterprise spending will fall if the world falls into recession in 2020. That would be in line with findings that consumption and consumer spending fell virtually across the board in the Great Recession.  

But that does not directly translate into consumer, small business and enterprise spending on communication services and products. 

Telecom service provider revenues did not change much in the wake of the Great Recession of 2008. In fact, according to some studies, U.S. consumer spending on communications actually grew, overall, in the wake of the Great Recession, for example. 

Some surveys found that device purchases slowed during the Great Recession. But some surveys also found consumers willing to make other tradeoffs to keep their broadband, mobile and video subscription services. There was, in other words,  less willingness to cut high speed access than other services, for example.

In fact, some surveys found consumers would rather abandon their mobile service than give up fixed high speed access. Consumers have indicated they would give up other products as well to keep their broadband access.

If they had to give up one service  (video entertainment, mobile, broadband), U.K. consumers would ditch video (49 percent) or mobile (30 percent) before their fixed network broadband connection (two percent), a survey of  more than 10,000 U.K. consumers found, for example.

The point is that high speed access arguably is highly resilient in a recession, and arguably the most-valued service, perhaps even be more valued than mobility. But mobility likely would rank as among the next most important service.

By some studies, consumer spending on mobile devices increased during the Great Recession of 2008 and spending also increased for communication services. That pattern hasn’t changed.

It does not seem that there was much recession impact on subscription video entertainment spending, though some consumers might have dropped a premium channel in favor of expanded basic service.

So despite fears, it is likely that overall revenue will not change that much in the wake of the expected Covid-19 recessions, either. 

One reason is that consumer spending on communications is relatively fixed. As data gathered by the Organization for Economic Cooperation and Development suggest, developed nation spending by consumers was remarkably consistent in the few years after the 2008 recession. 

Still, operators will be prudent, given growing expectations that the global economy now appears headed for negative growth in 2020 because of the Covid-19 pandemic, according to the Economist Intelligence Unit. 

Three years after the 2008 Great Recession, many still were noting reduced revenue growth in some regions. The caveat is that those areas arguably also had secular revenue issues that might have been masked by the effects of the Great Recession. It is likely that revenue trends were shaped by both consumer and enterprise spending, arguably benign in the former case, but more pronounced in the enterprise customer segment. 

Growth Forecasts, G20 countries in 2020
Real GDP growth
(% in 2020)
Real GDP growth
(% in 2020)
Previous forecast
(before outbreak)
India (2020/21 fiscal year)
South Korea
Saudi Arabia
South Africa
Global (market exchange rates)

The last two big recessions of note happened in 2001 and 2008. The issue now is whether the recession caused by economic shutdown for health reasons because of Covid-19 is going to be better, the same or worse than the great recession of 2008 or the collapse of the internet bubble in 2001, for example. 

The “same as” or “worse than” scenarios would be multi-year, perhaps half-decade long events. 

In a 2014 analysis, EuroMonitor noted that “the speed of the recovery from the 2008 global financial crisis has been unusually slow,” compared to recoveries from previous recessions. In the U.S. market, for example, gross domestic product per person did not recover to 2007 levels until 2012, four years after the 2008 great recession. 

GDP Per Working Age Person in Advanced Economies since 2007

Ultra-Low Latency Use Cases is Where Most New 5G Apps Will Develop

Though capacity matters, the big use case upside for 5G is expected to come in the area of ultra-low latency applications or perhaps ultra-r...