Every now and then observers are virtually compelled to talk about the potential impact of a recession on information technology revenue. With the global Covid-19 pandemic, some are starting to consider that angle again. Lost revenue is the key variable.
“On average, we expect that the global SMB revenue will decline by six to eight percent in 2020,” say researchers at Analysys Mason. Businesses that are directly affected by lockdowns and social distancing will show negative spending growth.
One would normally expect some spending declines in a recession, and without referring to the textbook definition, when much of any country’s economy is simple shut down for months, that will depress economic activity--temporarily--to levels we would otherwise consider a recession.
If normalcy returns by the end of 2020, total IT spending will decline by 1.2 percent from US$122 billion in 2019 to US$120 billion in 2020 for smaller companies (under 10 employees) and those in the most-highly affected group of verticals (hospitality, retail, transport and various services).
Worst case, spending will decline to US$119 billion in 2020 for this group of companies.
The rest of the market, though, will retain some growth in either scenario.
Much hinges on how fast the world recovers from the worst effects of the virus outbreaks.
In one scenario, the firm assumes the market returns to normal by the fourth quarter of 2020. In the second scenario, the market returns to normal by the second quarter of 2021.
Lodging, food service, airlines, cruise operators, entertainment and recreation firms will likely be most affected. Communications suppliers, media, business services and technology suppliers are likely to be least affected.
All that noted, this is a cyclical dip that will not alter the long-term trend of spending growth.
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