As business leaders around the world come to grips with the far reaching consequences of coronavirus lockdown around the globe, technology analysts are beginning to forecast a particularly bleak picture for IT services companies and application software vendors.
REUTERS/Brian Snyder
An article in Wall Street Journal highlights how Businesses are set to cut IT budgets, spelling lean times for the industry (ref: Tech Service Providers Face Bleak Post-Coronavirus Future). The author, Angus Loten quotes several industry analysts and explains “Some of the biggest players in the market are International Business Machines Corp., Accenture PLC and Infosys Ltd. Most are paid through fixed-price contracts, while some negotiate fees based on outcomes, such as a portion of added revenue earned by a business from a specific project.”:
- Forrester Research Inc. expects spending by U.S. companies on tech consulting and systems integration services, two core areas of the IT services market, to drop as much as 4% this year, depending on the length and severity of the economic downturn sparked by the outbreak.
- The article quotes Stuart Ravens, chief analyst at consulting firm GlobalData PLC “Short-term pain will be replaced by long-term pain.”
- The need for IT-services vendors to shift their own employees to remote work will also create operational challenges, said Andrew Bartels, a vice president and principal analyst at Forrester.
- John-David Lovelock, vice president of research at Gartner Inc., said many companies will push back new IT-services projects or postpone contracts.
In another article in UK’s Register, Lindsay Clark argues “the impact will be deep, immediate, and long-lasting” (ref: IT services sector faces armageddon as COVID-19 lockdown forces project cancellations – analysts)
- Researchers at Global Data argue that, in the IT economy at least, the economic strain resulting from COVID-19 and government measures to prevent the spread will hit IT services companies harder than any other sector of industry as they try to fulfil contracts and prospective projects get cancelled.
- “After the dust settles and the world’s economy moves back onto a business-as-usual footing, the immediate objective will be to cut costs. Major IT projects will be cancelled or put on hold, leaving very little new business for the services sector.
- The effect of COVID-19 on business IT projects will also hit application vendors, although not as severely as services companies, or so Global Data reckons.
- “Consequently, application software will be at the mercy of the global economy. If China is a bellwether for the rest of the world, then economies will significantly slow for a quarter, before a long slog back to normality.
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