Telecom market impact

COVID-19 impacted the telecom industry during 1Q20 on different levels, with telecom operators feeling the initial effects during the quarter. TBR believes telecom vendors were initially shielded from the early effects, but we anticipate a deeper negative impact on both operators and vendors in 2Q20 as the pandemic plays out.

Though company results and the broader ICT market are expected to be challenged further in the short term (over the next year) due to the crisis, TBR believes the near term (two to three years) and long term (three to five years) will be net positive on the ICT industry as the post-COVID era drives enterprises and governments around the world to double down on digitalization and invest in a broad range of technologies to evolve their businesses and increase safety in the new world.

Telecom edge compute

The COVID-19 virus will significantly impact the ICT infrastructure supply chain, and, more broadly, the global economy. This dynamic and evolving situation prompted TBR to revise its telecom edge compute market size in the recently published Telecom Edge Compute Market Landscape.

Though the virus will delay the ultimate build-out of the edge, the cumulative market size during the forecast period is expected to be larger and grow faster than originally anticipated once the dust settles from the virus.

TBR expects the virus to delay edge spend in 2020 and a portion of 2021. By mid-2021 TBR expects the supply chain to be fully operational again, at which time the industry will attempt to catch up to align with pent-up demand.

TBR expects governments and businesses around the world will reassess their disaster response and risk profiles to mitigate future risks to their societies and operations. This will drive investment in surveillance, drones, industrial automation, blockchain, AR/VR and other use cases that require edge resources to operate. As such, TBR increased the cumulative market size for edge infrastructure as it is expected that many governments, not just the U.S. and China, will justify these investments for national security and business resiliency purposes. It is expected that communication service providers (CSPs) will be key beneficiaries of this addressable market to support government and business initiatives in these areas.

Private cellular networks

Despite short-term issues, COVID-19 will ultimately be a net positive driver of the private cellular networks market over the near to long term.

In the early days of the nationwide shutdowns, members of the Accenture Chief Human Resource Officers (CHRO) Forum saw the storm brewing, compelling them to think creatively. With swift action and support from CEOs, HR leaders from Accenture, Lincoln Financial Group, ServiceNow and Verizon mobilized their efforts and capabilities and developed a solution that facilitates continued employment. Accenture stood up People + Work Connect, an analytics-enabled platform, with the goal of helping enterprises sustain business continuity by allowing human resources to move to meet demand.

What it is and what it is not

TBR had a chance to discuss the nuances of the People + Work Connect platform with two of the architects behind it, Accenture Talent & Organization/Human Potential Lead Eva Sage-Gavin and Work & Workforce Lead Nicholas Whittall, to understand their motivations for and expectations of the platform.

With Accenture acting as the technology provider, rather than the mediator between organizations’ supply and demand workforce needs, the company’s role is largely centered on assembling and managing the collation and design, and building and running the platform. A team from Accenture Liquid Studio built a business-to-business, fit-for-purpose platform to help companies match available workers to open jobs based on select criteria including location, experience and number of openings. The platform is currently available for free, and Accenture leaders have said the company “won’t ever charge.”

While TBR recognizes the noble approach Accenture and its partners have taken to develop, manage and offer the platform free of charge, in the long run we believe the company is gaining value from the effort (discussed below). With design principles including “progress over perfection,” Accenture developed the platform in 14 days from pilot to launch, reaching its goal of a “Minimally Loveable Product,” rather than an all-encompassing solution. TBR sees Accenture’s approach here as another example of COVID-19 accelerating change across IT environments and, more broadly, business policies and practices.

At the same time, both Sage-Gavin and Whittall reinforced that the platform’s simplicity and scale appealed to businesses looking for immediate solutions to massive problems. We see the simplicity of the data request — Accenture stayed away from using personally identifiable information when developing the platform — as critical to the platform’s uptake and success, such as when two call center companies — one laying off workers and one looking for experienced call center staff — can use the platform to ensure a minimal number of jobs are lost in particular locations. Additionally, features such as a depository for ideas, questions and advice, called a “Knowledge Exchange” on the platform, can provide insights into best practices on benefits and evolving HR practices.

We see such insights impacting not only the HR role but also the broader organization. As COVID-19 abates, revised HR policies and the lessons learned through using the platform to address challenges during the pandemic will likely influence future staffing and IT needs, thus affecting organizations’ planning and financial cycles. As Accenture maintains an arm’s length distance from how companies handle the recruiting and onboarding processes once the match is made, the company is able to provide data concierge services, identifying which data is most important to future refinements of existing ERP systems and HR platforms.

Early earnings indicators reveal ICT vendor ‘new normal’

The reality of COVID-19’s impact potential is clear. You do not have to be an analyst by trade to understand the pandemic will create new normals in our personal and professional lives, disrupting entire business sectors, including ICT, in the process. What remains unclear in many respects, however, is the quantification of that impact.

As of the publication of this report, approximately half of the vendors that TBR authors dedicated quarterly or semiannual reports on have released their 1Q20 earnings results. While earnings announcements and presentations are still rife with uncertainty, these releases, plus TBR’s ongoing vendor-centric financial modeling, provide some indicators of how to quantify the impacts yet to come.

Beginning with this report and continuing through this quarter’s earnings and benchmarking cycle, we will be aggregating some of our financial modeling data across our upcoming reports to assess the current state impact of COVID-19 on vendor performance and to predict next quarter and full-year outcomes.

TBR’s advice to vendors: Get predictive about benchmarking

These early results suggest the industry will be split on how to best set business performance expectations in the current environment but will increasingly err on the side of caution in terms of predicting the future. Stalwarts yet to release, such as Dell Technologies and Hewlett Packard Enterprise (NYSE: HPE), have already announced that they, too, will suspend financial guidance. Now more than ever, understanding the trajectory of the ICT vendor peer ecosystem and aligning on industry best practices to navigate the effects of COVID-19 is critical for ICT players. Building, maintaining and updating line-of-business financial models on competitors enables vendors to better benchmark performance, predict quarterly and annual outcomes, and deploy tactics to optimize performance. Vendors should look at the context of peers’ earnings announcements for clues — while many are “going dark” in terms of providing revenue guidance, rich discussions are occurring in earnings calls regarding resource utilization, portfolio management, sales and go-to-market alignment that can be tapped for vendor insight to infuse into practices

In addition to this report, we are writing and reporting in depth on the COVID-19 impact in a dedicated special report series, webinars and our regular published analysis as vendors release earnings. Our published content is regularly updated on TBR’s website and can also be accessed through our client portals.