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Summary
The COVID-19 outbreak has caused 90% or more of IT services workforces to work from home, and we anticipate IT services vendors’ revenue to be hit, with some vertical businesses suffering severe declines in the short term. However, there is a silver lining at the end of this catastrophe, and well-prepared vendors will be able to benefit in the long run.

Business as usual is severely challenged
With cities, states and entire countries announcing weeks’ long lockdowns to contain the exponential spread of the virus, business continuity plans kicked into high gear. But business continuity plans across industries were not prepared for a pandemic of this kind that would force practically entire industries to virtually shut down. Systems integrators (SIs) such as TCS, Atos, Capgemini, and Infosys currently face multiple challenges as their global delivery networks are being disrupted. With 70─80% of IT workforces (except skeleton crews manning mission critical systems) forced to work from home for an indefinite period of time, service providers and their customers alike are scrambling to put in place the requisite security and access protocols to enable employees to continue supporting business applications and infrastructure from home.

Omdia anticipates delays, postponements, and cancellations of IT projects planned for 2020 as businesses struggle to survive and stay solvent with little or no revenue coming in. IT services sales pipelines will be severely diminished in 1H20 as enterprises put IT investments on hold, putting further pressure on SIs. Restriction on staff movement is also impacting the ability of SIs and IT services providers to transfer offshore expertise onshore, maintain regular customer contact, and chase large deals that require in-person interaction. The threat of a global economic slowdown is also getting real as loss of revenue and the current state of the stock and commodities markets are bound to have longer lasting effects on the economy that will be felt towards 2H20 and well into 2021.

The dark clouds of COVID-19 do hide a silver lining
Despite a number of short-term challenges, we anticipate areas such as managed services, infrastructure, and application support to continue at a steady pace as these are essential to keep businesses running. Transformation programs that are well underway will likely experience a brief hiccup before work resumes. There could, however, be some budget cuts in these programs, especially around discretionary expenses such as consulting and some new technology implementations.

We expect contract activity to witness a short-lived decline in 2H20. If anything, the pandemic is only going to accelerate the adoption of digital technologies – especially cloud, workspace and collaboration, and cybersecurity – in the enterprise. Social distancing restrictions are forcing consumers and employees to adapt their behaviors such as accelerating the shift to online and mobile, “contactless” channels for commerce, relying more heavily on collaboration tools, increased use of digital banking and other apps, and self-service channels, etc. and these preferences will likely become ingrained even after the pandemic resolves. Enterprises will reevaluate their strategies to account for this behavioral change and will hasten investments in digital channels and technologies such as automation, cybersecurity, collaboration tools, e-commerce, and digital payments to name a few. IT services vendors who proactively build out toolkits to help clients rapidly adopt digital technologies and adapt to the uncertainties of the current environment stand to benefit when these customers emerge out of the trough.


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