Digital transformation projects face mixed fate in pandemic

The COVID-19 pandemic and near-nationwide shutdown is causing organizations to reprioritize their IT projects, industry watchers said; more channel news from the week.

IT project work, including some digital transformation initiatives, will take a hit in the economic contraction stemming from the coronavirus pandemic, but pockets of the IT services market will fare better than others.

Forrester Research, a market research firm based in Cambridge, Mass., this week predicted technology consulting and systems integration services would see a 10.5% drop in spending in 2020. That's the best-case economic scenario, in which Forrester envisions an IT spending decline in 2020 followed by a recovery in 2021.

Andrew Bartels, vice president and principal analyst at Forrester, said one of the first things a CIO does when company revenue declines, or looks uncertain, is review the project portfolio. The CIO assesses which projects are "nice to do" versus critical, then decides which ones to delay or cut back, Bartels noted. Consultancies and integrators, which offer advice and software implementation services tethered to projects, become vulnerable when cutbacks occur.

"If you cut back, you don't need consultants to do the projects," Bartels said.

Some projects, however, will have greater survival prospects than others. Among digital transformation initiatives, projects geared toward immediate expense reduction are more likely to endure than those with a longer payback horizon.

"If projects have a heavy emphasis on cost cutting and making things more efficient, those will probably go ahead," Bartels said.

Security, compliance and risk management projects may also carry on, while initiatives focused on digital marketing may suffer, he observed. "There will be some winners and losers."

Matt Stoyka, chief solutions officer at Rackspace, a managed cloud services company based in San Antonio, also noted the potential for a mixed fate among IT projects. "Clients are putting longer-term initiatives on hold right now," he said, adding customers are still pursuing projects with immediate value.

Digital transformation projects that put remote collaboration tools in the hands of employees or strengthen an organization's e-commerce position are in demand. "I think companies that weren't yet executing a digital transformation strategy are actually turning to us now," Stoyka said.

In addition, customers are exploring how to protect themselves against future crises, sparking inquiries around security and business resiliency. "We are seeing customers ask a lot of those kinds of questions," he said.

Another question surrounds the length of the current financial crisis. The International Monetary Fund (IMF) this week said it anticipates the "worst economic downturn since the Great Depression." IMF forecasts the global economy to contract 3% this year, projecting a partial recovery in 2021.

Bartels said he is concerned about the potential for "cascading effects" -- a relaxation of pandemic control efforts and a resurgence of the coronavirus, for example. Another variable: corporate debt. Companies operating with little cash on the balance sheet and heavy debt loads will need to halt spending to meet their obligations, he noted.

Overall, the possible economic outcomes of the pandemic include a short recession that has the greatest effect on hard-hit industries such as leisure and retail, and a longer recession that "spreads to all industries and becomes a more pervasive downturn," Bartels said.

"Right now, it is a little uncertain."

Other news

  • Cisco Capital's $2.5 billion Business Resiliency Program will benefit partners, according to Cisco's top channel executive. In a blog post, Oliver Tuszik, senior vice president of Cisco's Global Partner Organization, said the financing program will "accelerate [partners'] sales cycles," reduce financial risk and help customers manage cash flow. In addition to financing, the resiliency program offers a 90-day payment holiday, which lets customers defer 95% of a new product's cost until 2021.
  • Microsoft pointed to a new specialization and playbook in a partner program update. Gavriella Schuster, corporate vice president of One Commercial Partner at Microsoft, cited the Adoption and Change Management Advanced Specialization, which focuses on adoption of Microsoft Teams, SharePoint and Yammer. Microsoft partners last year reported an uptick in Teams-related project planning and change management The specialization debuted April 7. Schuster, in a blog post, also singled out the Teams Practice Development Playbook, which launched April 6 and aims to help partners understand the Teams growth opportunity.
  • A new report from tech research and advisory firm ISG predicts the global managed services market to decline 17% in the second quarter. ISG said it attributes the drop-off to the economic impact of the coronavirus pandemic, leading companies to shift spending from managed services to cloud and as-a-service offerings. ISG's report forecasts managed services to pick up again in the second half of 2020.
  • Unitrends, a Kaseya-owned backup and continuity company, issued offers for supporting partners and customers during the COVID-19 pandemic. Unitrends said it is providing free backup hardware to lessen out-of-pocket expenses, 50% off direct-to-cloud backup and 50% off Office 365 backups with built-in dark web monitoring.
  • Quantum Corp., a storage vendor based in San Jose, Calif., appointed James Mundle global channel chief. He will oversee Quantum's partner strategy, programs and execution, according to the company. Prior to joining Quantum, Mundle was vice president of worldwide channel programs at Veeam.
  • SkyKick, a cloud management software provider targeting IT solution partners, has promoted Kathryn Saducas to global vice president, MSP sales. She was previously European general manager. In her new role, Saducas will direct sales and account management teams focusing on the MSP segment.
  • Cyber protection vendor Acronis named Amy Luby as its channel chief evangelist. Luby's new role includes engaging the MSP community, Acronis said.
  • Tech Data, a distributor based in Clearwater, Fla., has rolled out Tech Data Coaches, an online mentoring platform. The company said the service is designed to help resellers develop competencies and best practices. Tech Data Coaches is available to the distributor's partners in the U.S. and Canada.

Market Share is a news roundup published every Friday.

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