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COVID-19’s Impact on the Technology and Software Sector

 

The economic effects of COVID-19 will likely be long-lasting, and many industries will undergo significant change, with Technology being the key enabler. Not immune to disruption is the Technology and Software sector itself, which has seen and will see a number of companies thrive during the crisis while many others will likely struggle. On May 11, I hosted a virtual panel with several experts on the impact the novel coronavirus will have on the Technology and Software landscape.

Panelists included Adam Woodyer, lead software analyst with Gartner; Keith Bachman, software and IT analyst at BMO Capital Markets; Ken Librot, U.S. Chief Technology and Operations Officer and Chief Information and Operations Officer at BMO Capital Markets; and Larry Zelvin, Head, Financial Crimes at BMO Financial Group. The discussion was wide-ranging, with the panelists sharing their thoughts on how the Technology and Software sector is changing the game for enterprises amidst COVID-19 , what types of software are likely to succeed more than others, how large enterprises like BMO are adapting to the change, and the implications of remote working on critical capabilities like security software.

Success depends on the four phases of recovery

Woodyer began by explaining that company success will be determined by what stage of the pandemic we’re in. In the first phase, which has already happened, it was the businesses that made it easier for people to work from home that thrived. Operations in the collaboration software, video conferencing, endpoint security and network utilization spaces all saw demand for their services increase. Enterprise resource planning (ERP) and customer relationship management (CRM) companies also did well during the first phase, as it’s hard to put a stop to software implementation that’s already in progress.

The second phase, which is happening now, benefits infrastructure software vendors that can help companies optimize their costs. “Companies have to keep the lights on, but they’re also looking for efficiency gains,” he said. “We’ll see select areas of spending on things like automation or analytics, where the time to ROI is much quicker.” The larger ERP and CRM operations could be set back, as costly projects often get scaled down during a financial crisis.

The third phase, where businesses start operating in a more meaningful way, “is where it gets interesting,” explained Woodyer. It’s here where companies will invest in capabilities they now realize they didn’t have, but need. He expects to see investments in digital transformation projects, like digital commerce, marketing and customer service, and continued spending on analytics. CRM vendors, he said, will be big beneficiaries during this phase.

The last stage is the economic recovery, where companies invest in more large-scale growth projects again. Throughout these phases – and it could be a while before we get through them all – both small and large companies will benefit. “The large-scale platform vendors are best positioned today, but a number of smaller players also have tools and capabilities that will experience an increase in demand over these phases,” he noted.

Supporting remote workers

For Bachman, software companies that can help businesses successfully transition to a more permanent at-home workforce will succeed going forward. “Working from home will be commonplace in the U.S., Canada and Western Europe,” he said.

There are three types of technologies that will benefit from more people staying home, he noted. The first is workflow software, such as Microsoft Teams or ServiceNow, and application performance management programs, like Dynatrace, that can help remote workers operate more efficiently. “You can’t have application performance be poor,” he said. “It’s just not going to work.”

The second is security software, which will need to be more robust if more people are working remotely. You can’t have everyone doing their work through a VPN – the connection will be too slow – so the proper architecture must be put in place to allow employees to do all kinds of activities remotely and safely. Bachman is bullish on access management software, such as Okta, which is used to control and monitor network access through authentication and authorization. He also highlighted Zscaler, a cloud-based information security company that can help decongest VPN traffic.

Finally, he thinks an increasing number of companies are going to move their workloads into the cloud, which will benefit businesses like Amazon Web Services, Google and Microsoft. “You’re not going to have your own data centres on premises when you can’t get anybody to show up to work,” he noted. “So why not just move more workloads to the cloud?”

Banks will become more flexible

When it comes to the financial industry, Librot said that companies will need to support people’s personal preferences toward work. To do that, banks will have to provide “even more robust remote access to blend a home and office arrangement and provide the flexibility and resiliency that we have to have.”

That means helping employees create the right at-home office experience, from ensuring they have the proper monitors and laptops to providing real-time collaboration tools. Companies may even have to work with internet service providers to make sure their staff have robust network connectivity – you don’t want a trader losing connection because their kids are watching Netflix.

Success in a work-from-anywhere world will require banks, more than ever, to focus on the digital employee experience.  Situations where your processes have not been fully digitized and are still somewhat manual become roadblocks when you have people trying to work from home.

While many banks have begun focusing on cloud, artificial intelligence and machine learning, these technologies are that much more important with a distributed workforce, he added.

More trustworthy security

Zelvin, who is focused on cyber security, has seen some disturbing trends since the crisis began. Since March, criminal fraud activity has increased by up to 800%, he said, with a number of attacks taking place against pharmaceutical operations, hospitals, and even the World Health Organization. Ransomware is the preferred method of attack, as hackers know that these organizations will pay. He’s also seen an increase in fraud against individuals and small businesses.

As more people work from home, most companies will need to upgrade their security and then continually review what they have in place. For instance, behavioural analytics will play a key part in security in the future, but it’s still an underdeveloped technology.

Companies will also only spend money on security solutions they trust. While businesses have always had to have confidence in their security vendors, as breaches with some video conferencing companies have shown, if a company makes a security mistake, consumers will go elsewhere. “As you work across this new remote environment, there’s little to no resilience in the system if remote access becomes corrupted or untrustworthy,” said Zelvin.

In the financial sector, security upgrades will be made as a result of increased regulatory pressures, he added. As of now, regulators are “really making sure that companies are well prepared if they have a bad day, particularly around data backup and network segmentation,” he explained.

Naturally, we won’t know the full effects of COVID-19 on the technology and software sector for a while, but with more people working from home and new demands being placed on companies in all industries, you can be sure that we’ll see more innovative tech solutions come to market in the months and years ahead. 

Recording dial-in: 

Toll-free dial-in number: 1-800-408-3053

International: https://www.confsolutions.ca/ILT?oss=4P45R8004083053

Conference Passcode: 2531115#


Yogesh Amle, CFA is a Managing Director in the BMO Capital Markets Technology and Business Services Group where he leads software Investment banking. Based in San Francisco, he has more than 20 years of corporate finance and enterprise software & systems experience advising large corporates and high-growth technology companies. Yogesh.Amle@bmo.com

BMO COVID-19 Insights podcast is live on all major channels including AppleGoogle and Spotify.

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Yogesh Amle, CFA Managing Director, Technology & Business Services



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