Multiyear bull market in public sector IT spend faces an abrupt end in 2020 as COVID-19 upends global governments

“The COVID-19 outbreak represents a significant threat to public sector IT investment that has trended steadily upward for the last several years,” says Senior Analyst John Caucis in TBR’s recently published Public Sector IT Services Benchmark. “The full impact, however, may not manifest in public sector vendor fiscal performance until 2H20.”

Caucis, Analyst Brian Baker, and Principal Analyst and Practice Manager Patrick Heffernan delved into the coronavirus impact on U.S. federal IT services vendors, such as Raytheon, Booz Allen Hamilton and Accenture, in a recent TBR Talks COVID-19, available on our YouTube page. In addition to speaking to near-term earnings releases, Caucis reminded listeners that much of the impacts for these vendors will be delayed until the next fiscal year. Baker speculated on how the M&A trends of the last few years could be upended by the pandemic, and Heffernan added context by contrasting commercial sector-focused IT services vendors with those in the U.S. federal space.   

Additional reports recently published by TBR’s analyst teams

1Q20 Tata Consultancy Services Initial Response

Previous investments in its operating model have prepared Tata Consultancy Services (TCS) to execute during the COVID-19 pandemic, but TCS’ biggest hurdles in 2020 will be maintaining its install base and top-line growth.

4Q19 Public Cloud Benchmark

Microsoft is improving its competitive position against Amazon Web Services (AWS) through partnerships, notably its direct data center connections with Oracle. Although only a limited number of regions support these direct connections currently, the Microsoft-Oracle partnership is expanding with new direct connections in Canada. However, AWS holds significant IaaS market share and remains the leading IaaS provider as of 4Q19.

1Q20 Accenture Cloud: Partners and cloud- and cyber-skilled talent enable growth

As Accenture strives to maintain a strong brand for multicloud management opportunities through its certified cloud delivery bench and the launch of myNav, the global coronavirus pandemic will test its ability to succeed.

1Q20 Wipro IT Services Initial Response

Wipro maintained growth in FY4Q20, but cited losses associated with COVID-19 at the tail end of the quarter. Moving through 2020, a reliance on automation to control costs and the ability to offer cloud migration services will be mission-critical capabilities for Wipro and its IT service provider peers in absorbing the shock of COVID-19.

4Q19 Devices and Platforms Benchmark

The device market continued to grow in 4Q19, backed by higher smartphone, PC and smart device sales. However, COVID-19’s effect on the global economy will begin to appear in 1Q20 results, with a more severe impact on midyear performance.

4Q19 Telecom Infrastructure Services

The telecom infrastructure services market finished 2019 on a strong note as CSPs deployed 5G RAN and new optical technology in 4Q19, but rollouts will face delays in 2020 amid COVID-19-induced supply chain issues, human resource challenges and spectrum allocation delays.

4Q19 IT Services Vendor Benchmark

While IT services providers will have growth challenges during 2020, the integral role technology is playing in everyone’s work and personal lives due to the COVID-19 virus provides growth opportunities for vendors that are agile and quick to adapt to the changing market dynamics.

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