Covid Impact Overstated?

An obvious storyline since March 2020 has been “impact of Covid-19 on X.” The problem with that story is that it might not be accurate. Looking at telecom service provider and infrastructure revenue growth trends, for example, and knowing nothing else, one would not necessarily conclude that anything unusual had happened. 

The reason is simply that, between 2019 and 2020, revenue growth already had been slipping. 

source: TBR

And that trend preexisted 2019. Looking only at telecom service providers in Western Europe between 2008 and 2014, revenue has dipped since about 2011. Covid-19 had nothing to do with those trends. 

source: STL Partners

Similar trends are seen elsewhere, showing low telecom service provider revenue growth rates. STL Partners believes global service provider revenue growth will average less than one percent per year through 2022, for example. 

source: IDATE

The point is that we might attribute too much influence to Covid-19 as a driver of near term trends. The long term influence might be even less meaningful, though that is not the conventional wisdom.

Did Covid-19 Change Martec's Law?

There is wide agreement that the Covid-19 pandemic has caused many technology adoption curves to get a temporary bump up in adoption, with growth then continuing on the curve already in place before the pandemic and its organizational response.  That is illustrated by the impact of the “cataclysmic event” on an underlying rate of organizational change. 

source: chiefmartec

In other words, firms and organizations are said to have experienced “a year’s worth of change in a month.” 

Martec’s Law was coined in 2013 by Scott Brinker, Hubspot VP. Martec’s Law states that technology changes linearly, while technological change is non-linear. That observation has parallels in the notion of the productivity paradox. 

The productivity paradox suggests that information technology or communications investments do not always immediately translate into effective productivity results. Many note that measured productivity has declined since 2000, despite all the technology investments firms have made. 

source: Goldman Sachs

This productivity paradox was apparent for much of the 1980s and 1990s, when one might have struggled to identify clear evidence of productivity gains from a rather massive investment in information technology.

Some would say the uncertainty covers a wider span of time, dating back to the 1970s and including even the “Internet” years from 2000 to the present.

The point is that it has in the past taken as long as 15 years for technology investments to produce measurable gains. 

Computing power in the U.S. economy increased by more than two orders of magnitude between 1970 and 1990, for example, yet productivity, especially in the service sector, stagnated).

And though it seems counter-intuitive, even the Internet has not clearly affected economy-wide productivity. Some might argue that is because we are not measuring properly. It is hard to assign a value to activities that have no incremental cost, such as listening to a streamed song instead of buying a compact disc. It might also be argued that benefits accrue, but only over longer periods of time. 

source: Customer Think

Few, if any, buyers of new technology actually believe the claims of benefit advanced by suppliers, for good reason. Virtually all observers of technology adoption note that organizations benefit from new technology at a rate that is vastly less than the rate of adoption. That’s the essence of Martec’s Law, which holds even if the Covid-19 pandemic caused an unusual step change in behavior. 

"High Tech, High Touch" Patterns Will Return

The prevailing wisdom about business life after Covid-19 often is that “nothing will be the same.” In place of “high touch” face-to-face meetings, businesses are going to substitute “high tech” virtual sales and marketing. That might happen, to a significant and permanent degree. 

At the same time, firms are going to rediscover the value of face-to-face, “high touch” activities, perhaps to the same degree as they shift to virtual “high tech” operations. It has been a 40-year trend. 

Some of us remember a 1982 book called Megatrends by futurist John Naisbitt that popularized the phrase “high tech, high touch” to describe a coming trend: that as we began to use more technology, we would equally appreciate “high touch” human or non-technological interactions. He explored how that had evolved in his follow-on book High Tech, High Touch. 

Here’s the important insight into post-Covid-19 business behavior: High-touch refers to the human and emotional aspects of business interactions, including the establishment of trust. 

Virtual support can be quite effective once a business relationship and trust have been established. But it arguably will be harder to create trust with a new prospect using only “high tech” tools. 

High-touch refers to close relationships with customers, interacting with people, not just machines.  To be sure, that arguably can be done, up to a point, virtually. But high-touch also arguably requires above-average interaction with customers, and that includes face-to-face contact. 

High touch--helping customers on a human level through various stages of the buying process and lifecycle--involves a much higher participation, and usually relies on one individual or team within the company to maintain direct, personal and frequent contact with accounts, says ESG. 

“Humans crave the kind of interaction that only other humans can provide,” and likely cannot always be provided by conferencing tools. 

It’s one that places the priority on human interaction and human relationships, not on efficiency or speed. That is why travel services emphasize both touch and tech. 

“In a high tech world, people are longing for balance,” notes EHL Insights. As important as technology has become for customer experience and support, “authenticity” and “emotion” also are emphasized. There is an analogy for business-to-business sales as well. 

This “reversion to mean” happens quite often. Right now, professionals now rely on videoconferencing to supplant face-to-face meetings because nothing else is possible. But after the pandemic ends, prior trends will reassert themselves.

That has proven to be true for industries and economies in recoveries from major economic disruptions in the recent past. 

If evidence from three past global recessions--but not the Great Recession of 2008 and the Great Cessation of 2020--provide any useful insight, the recovery might take between three and 4.5 years, perhaps three years for public companies, perhaps 4.5 years for the overall economy. 

Some 17 percent of public  firms will not survive. That is the percentage of public firms that went bankrupt, were acquired, or became private, in the aftermath of the Great Recession. 

About 80 percent of the survivors had not yet regained their pre-recession growth rates for sales and profits three years after a recession. 

About 40 percent of the firms had not returned to their absolute pre-recession sales and profits levels after three years. 

Ranjay Gulati, Harvard Business School professor and Nitin Nohria, Harvard Business School dean, conducted a study in 2010 of corporate performance during three global recessions: the 1980 crisis (which lasted from 1980 to 1982), the 1990 slowdown (1990 to 1991), and the 2000 bust (2000 to 2002). 

Obviously, the two big events missing from the study, because of the timing, were the Great Recession of 2008 and the current “Great Cessation” of 2020. Still, their findings are useful for charting the likely path of recovery after the Covid-19 pandemic recedes into history.

They studied 4,700 public companies, breaking down the data into three periods: the three years before a recession, the three years after, and the recession years themselves. 

At a macroeconomic level, the U.S. economy had not recovered its pre-2008 levels by 2011, three years after the Great Great Recession of 2008. 

source: Bureau of Economic Analysis

U.S. growth rates returned to 2007 levels about 4.5 years after the Great Recession. Latin America and some Asian countries bounced back really fast, in about 1.5 years.

So if the recovery from the Great Cessation follows the Great Recession pattern, it will take about four years for gross national product to return to 2019 levels. 

The impact on household wealth was starker, as median household net worth still had not reached 2007 levels by 2018, 10 years after the Great Recession. Job levels in the United States had returned to 2007 levels by 2014 (about six years after the Great Recession). 

Still, prior trends reasserted themselves. That is likely to happen with face-to-face “high touch” sales in the business-to-business markets as well. It might take some time, but it is almost certainly going to happen. 

Short, Shallow Dip in Service Provider Revenue Because of Covid-19?

Though it might seem counter-intuitive, connectivity service provider revenue might not change all that much because of the Covid-19 pandemic, and a revenue rebound might be quite swift, in some markets.Some product lines and some geographies might not fare that well, but there are historical reasons to believe any dip will be shallow and short lived.

By way of comparison, that is what happened to telecom service provider revenue in the wake of the global Great Recession of 2008.

To be sure, some believe global telecom revenue will fall by 3.4 percent in 2020 compared to 2019, before returning to growth (0.8 percent) in 2021, according to Analysys Mason. Analysys Mason had previously forecast growth of 0.7 percent in 2020 and 0.8 percent in 2021. 

International Data Corp., on the other hand, predicts that global telecommunications and subscription TV services revenue will dip less than one percent in 2020. Most observers might agree that a dip of some size will happen. What is likely more contentious is the size of such a dip, or its duration. 

With all the talk about a new normal caused by the Covid-19 pandemic, where life in many ways will be permanently altered, it is worth keeping in mind that past traumatic events such as the Great Recession of 2008 can be very hard to detect in time series data where it is possible to track trends over time. 

So even if it seems too optimistic, the IDC prediction is well within historical expectations. The Great Recession of 2008 caused a momentary flattening of revenue growth, with the prior pattern asserting itself quickly afterwards. A modest dip would not be without precedent, even if we fear greater damage. 

And though it is reasonable to expect a dip in business customer spending (with economies shut down and significant bankruptcies expected), consumer spending on telecom services might well increase, as it did in the United States in the aftermath of the 2008 Great Recession. 

source: Statista

IDC estimates global service provider revenue at nearly $1.6 trillion in 2020, a decrease of 0.8 percent compared to 2019. IDC expects the decline to continue in 2021, but at a somewhat lower degree. 

The mobile segment, the largest segment of the market, will post a slight decline in 2020 due to lower revenues from roaming charges, less mobile data overages due to the stay-at-home situation, and slower net additions, especially in the consumer segment, IDC argues.

Fixed data services spending will increase by 2.9 percent in 2020. Spending on fixed voice services will continue to decline.

Subscription video services will be boosted by the lockdown, but also affected by the economic downturn, so the spending in this category is expected to decline slightly, says IDC.

The Americas market will see a tiny decline of 0.04 percent. Europe, the Middle East, and Africa (EMEA) and Asia/Pacific (including Japan) will dip more. Growth is not expected in EMEA or Asia/Pacific before 2022 as the users in emerging markets are expected to remain cautious about spending for some time, IDC estimates. 

source: IDC

Work-From-Home at a Massive Level Might Reduce Productivity, Early Evidence Suggests

The massive shift to work-at-home caused by policies related to the Covid-19 pandemic have inadvertently provided a remote-work statistical base we will be analyzing for years, especially regarding the productivity impact of massive work-from-home changes. 

Most past studies of work-at-home productivity arguably involved smaller sets of workers in functions that arguably are best suited to remote work (sales, coding, marketing, accounting, legal work and so forth). 

What the global pandemic stay-at-home orders have done is push the bulk of enterprise workforces to either work at home or not work. The early data from the change is not encouraging for productivity impact, suggesting that the tools we have are not so much the problem as human ability to adjust to remote work environments and use the tools fully. 

If it is the case that only a third of jobs can be done remotely, forcing everyone to do so will not be universally productive. say professors  Jonathan Dingel and Brent Neiman of the University of Chicago Booth School of Business, who conducted a recent study on the subject.

The study suggests 34 percent of U.S. jobs can plausibly be performed at home. Assuming all occupations involve the same hours of work, these jobs account for 44 percent of all wages. The converse is that 66 percent of jobs cannot plausibly be shifted to “at home” mode. 

As you might guess, some jobs and some areas are more amenable to remote work. The top five U.S. metro areas feature many jobs in government or technology that could be done from home. On the other hand, some areas involve manufacturing, agriculture, raw materials extraction of other major industries that are not amenable to remote work. 

source: Dingel and Neiman

“More than 40 percent of jobs in San Francisco, San Jose, and Washington, DC could be performed at home, whereas this is the case for fewer than 30 percent of jobs in Fort Myers, Grand Rapids, or Las Vegas,” they say. 

Professional, scientific and technical services, management jobs, education, finance, insurance and information jobs are easiest to shift to remote work. Transportation, warehouse operations, construction, retail, agriculture, food services and lodging are among the hardest to shift to remote work. 

The new conventional wisdom is that more remote work is coming, as a permanent change after all the stay-at-home rules put into place to deal with the Covid-19 pandemic. But there is some debate about whether remote work is less productive or not. And if remote work turns out to be less productive or more productive than face-to-face work, there will be consequences for its extension and use. 

Looking only at the impact of the massive stay-at-home orders to counter the Covid-19 pandemic, there is at least some evidence that productivity has suffered, in some countries, because of remote work from home. 

Aternity, for example,  has aggregated from millions of employee devices from over 500 Global 2000 companies, reveals that the United States has become less productive due to remote work because of the pandemic. The metric is hours of work, captured because Aternity hosts a cloud-based analytics application that captures work-related application usage. 

At the end of March, 77 percent of work has been moved to be performed remotely in North America, the largest amount of any continent. The North America trends were bifurcated. U.S. enterprise worker productivity actually dropped 7.2 percent, Aternity reports, though Canadian productivity increased about 23 percent. 

“Overall productivity (as measured by hours of work computing time) in Europe declined by 8.2 percent,” according to Aternity. 

source: Aternity

Another study of worker attitudes suggests that about half of workers 18 to 24 believe their productivity is lower when working from home, according to a study by National Research Group. Half also believe they are distracted at home. That does not necessarily mean productivity is lower, but the workers feel their productivity is lower. 

Some believe remote work, in some cases, is wildly less productive. A study by Scikey MindMatch that estimates only 0.2 percent of the Indian IT workforce actually is capable of working from home at high levels of productivity.

That finding might run counter to what many observers would expect for remote work productivity, but Scikey describes itself as a firm supporting firm efforts to attract personnel that drive “high-performing teams.” 

Since talent, skills, intelligence and ability to perform work at a high level remotely  are bell-shaped curves (a normal distribution), people who might be described as “high performing” would be expected to be a minority of all workers. 

The Scikey study seems to be operating out at three standard deviations, which would represent 0.3 percent of people. 

source: Researchgate

Reports about the study indicate that  99.8 percent of the workforce in the information technology sector is incapable of working from home, at least with very-high productivity arguably matching what happens at the workplace, the study claims. 

The reason so many are “incapable” of working from home is that they lack at least one quality deemed essential for success, including resistance to learning and exploring (95 percent), lack in practical communication skills (65 percent) and lack in planning and execution (71 percent).

Some 17 percent of the employees are instruction-driven and therefore they need clear and direct instructions to work their best. about 12.7 percent of the employees are very much dependent on their social interactions, and working from home comes as a real challenge for them. Work is not difficult for them, but social interactions are necessary for them to function, Scikey suggests. 

What the study likely indicates is simply that the human characteristics Mind Match associates with the highest-performing individuals in a remote work setting are three standards deviations from the mean. 

You can make your own assessment of whether that is a functionally valid test of worker suitability for remote work. 

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. 

source: Ookla

How Much Work from Home is Permanent? What is Productivity Impact?

Virtually everyone seems to believe that work patterns will be more varied, once the Covid-19 pandemic has passed. What is somewhat unclear is how much the patterns will change, on a permanent basis. Complicating matters, it is not clear how remote work affects productivity. 

Some 15 percent of executives surveyed by McKinsey believe at least one-tenth of their employees could work remotely two or more days a week going forward, almost double the eight percent of respondents who expressed that intention before COVID-19. 

That includes 20 percent of executives surveyed in the United Kingdom and Germany. But only only four percent of respondents in China thought that would be the case. Only seven percent of respondents believed at least one-tenth of their employees could work three or more days a week remotely, McKinsey reports. 

Also, potential for remote work is highly concentrated in a handful of sectors, such as information and technology, finance, insurance and management, McKinsey notes. Some 34 percent of respondents from the information and technology sector said they expect to have at least 10 percent of their employees working remotely for at least two days a week after COVID-19, compared with 22 percent of executives from that sector surveyed before the pandemic, for example. 

There is some debate about whether remote work is less productive or not. Nor is it easy to figure out what and how to measure. Output is the logical metric, but output is a fuzzy concept for most information workers. That leaves us with input measures, which may or may not be relevant to output. 

Still, the long-term trend towards more flexible work patterns is likely to get a tangible and mostly sustainable boost from pandemic work-from-home experiences. That said, there are substantial differences between casual work from home, telecommuting and routine work from home, either full-time or part-time. 

Subjective employee impressions about their own productivity when working from home have to be taken cautiously. People might believe they are “more productive” when working from home, but that does not mean they actually are, even if we can agree on how to measure office worker or knowledge worker productivity. 

So far, results seem inconclusive. Aternity reports that "workers are getting less productive the longer the remote work shift continues." 

GitLab reports that many workers feel more productive working from home. "Employees find themselves to be overall more productive (52 per cent) and efficient (48 per cent)," GitLab says.

No "New Normal" for 5G Searches

One frequently hears these days that a “new normal” has been created by the Covid-19 pandemic; that “nothing will be the same” afterwards. That is not to deny either a “temporary” change in behavior nor a step change in many aspects of life and business, where it comes to underlying trends. 

We incontestably are behaving in different ways, partly the result of government mandates which are expected to be temporary. What happens after the pandemic is the issue. We should certainly expect a reversion to mean. Whatever trends were in place before the pandemic will reassert themselves, albeit from a higher level in many cases.

But that might not mean the rate of change changes very much. In fact, one might argue we already have seen this. This is a graph of Google searches for “5G.” Note the spike. That happened in March 2020 as many U.S. locations went into work-from-home and stay-home-from-school rules. 

We have to guess at why the surge in searches happened, then so quickly receded, but a reasonable guess is that people were looking for remote work support solutions. But the spike only lasted from the end of March to mid-April. Then interest backed off to levels higher than before, but on the prior trend line. 

As hard as it might be to envision, that is likely to happen with many business, economic and personal trends, post-pandemic, and after a few years. Consider “remote work.”

In the midst of the Covid-19 pandemic, statistics on remote work are impressive enough to convince many observers that a fundamental and permanent shift has been made. We will know in five years whether that is an accurate assessment, but we also have to remember that “remote work” includes many disparate activities, many of which do not substantially affect the amount of time people actually spend at work places. 

Work from home statistics often include actions such as “taking home some work from the office” (ranging from reading documents to correspondence management), working while traveling on business, unscheduled and episodic work from home, routine and planned work from home as well as permanent, full-time remote office or at-home workspaces.

Long-term trends in office space requirements, for example, typically depend on the amount of full-time, permanent basing at home locations, as well as permanent work-at-home for days per week or month. 

One issue is how many jobs theoretically could be done entirely from home. “We estimate that 56 percent of the U.S. workforce holds a job that is compatible (at least partially) with remote work,” say researchers at Global Workplace Analytics. That noted, pre-Covid-19, “only 3.6 percent of the employee workforce works at home half-time or more, the firm notes. 

Using every definition of work from home, including casual “take work home with you,” Gallup data from 2016 shows that 43 percent of the workforce works at home at least some of the time. So much hinges on the shift of the workforce to work from home at least 50 percent of the time.

 source: Global Workplace Analytics

"Covid" Does Not Drive as Many Big Changes as Argued

Public company executives often have convenient explanations for why revenue targets were missed. “Bad weather” is a common reference for retailers, for example. “Bad weather” kept consumers from shopping. Bad weather depressed demand for spring clothing.. 

But “Covid” provides a rationale for revenue misses as well as expectations for revenue growth. That is not misplaced. But all Covid effects are “at the margin.”

Covid is argued to have pushed forward some information technology spending that otherwise would have taken longer. That is expressed in the phrase “a year’s change in a few months.” 

“Covid-19 has proved a catalyst for investment in technologies that will help them navigate the post pandemic world, with a ramp in spending evident on cloud computing, DaaS Device-as-a-Service) and IoT, as well as investment in 5G and Wi-Fi6,” say researchers at Strategy Analytics. 

But many of the changes do not necessarily seem related to long-term transformation. About 33 percent of U.S. survey respondents said they would increase communications spending between one percent and five percent over the next couple of years. 

But that might be true most years: though most spend roughly the same amount, sizable percentages spend less or more. Also, less spending in 2020 might be expected to rebound in “more normal” years to follow. Mobile roaming charges, for example, were far lower in 2020 than in a “normal” year, as fewer people were traveling. A change between one percent and five percent would, in many cases, simply reflect a reversion to mean. 

With or without Covid-driven conditions, that is a reasonable belief. In the U.S. market, mobility spending alone grows about three percent a year. 

About 20 percent of respondents guessed that their IT spending would grow by more than 10 percent over the next two years. Again, that might be typical in any “normal” year. Gartner, for example, predicts global IT spending will grow nine percent in 2021 alone. Spending also increased about the same amount in 2020.

It is hopes for “digital transformation” that drive that investment, however, not Covid response. Global IT spending has grown since 2005, for example.  And Gartner has predicted four percent growth of IT spending in 2021, for example.  

Yes, some changes in spending were driven by Covid. But the fundamental longer-term changes, as shown by the Strategy Analytics survey, do not require Covid as an explanation. 

Covid had an effect, to be sure. With more remote work happening, demand for home broadband connections appears to have increased. But other changes, such as a shift to cloud computing; hardware as a service and internet of things adoption, are harder to analyze.

source: Strategy Analytics

Such transformations take time, and the sudden work-from-home demand would not have allowed enough time for executives to make many fundamental changes. The same goes with other investments in technology such as blockchain, artificial intelligence, virtual or augmented reality or edge computing. 

Those changes require many other shifts of architecture and business processes that simply cannot be turned quickly, in a couple of months. 

In fact, many IT teams arguably found themselves shifting spending towards buying of personal computers and remote work software licenses rather than anything else related to computing or communications architecture.