Diversified Technology Services How will the COVID-19 disruption shape enterprise usage of software & services?

How will enterprise usage of software & services change post COVID-19? 14 analysts study 850+ respondents and 1,100 transcripts of 180 companies for the answer

28 Oct 2020

COVID-19 impacts sets in motion several key trends for enterprises

Source: UBS

This chart shows how COVID-19 impact sets in motion several key trends for enterprises

Future Reimagined: Cloud nine and the four forces of digitalisation

The  seminal  UBS  report  on  the  world  beyond  COVID-19  (Q-Series  Future  Reimagined:  Propelled  to  The  Thinking  Economy)  identified  six  megatrends,  the  acceleration  away  from  a  material  and  towards  an  'intellectual'  economy  foremost  among  them.  We  believe  the  COVID-19  pandemic  is  significantly  changing  the  way  enterprises  use  technology.  We  identify  four  key  themes  in  this  trend  of  accelerating  digitalisation—cloud  adoption,  remote  working,  DevOps,  and  insourcing.  Fourteen  UBS  internet,  software  and  services  analysts  mapped  the  impact  on  subsegments  and  identified  the  key  beneficiaries.  Hyperscale  cloud  emerges  as  the  key  beneficiary.

Zeroing in on key beneficiaries across different software/services segments

The fifth annual cloud survey by UBS Evidence Lab shows 44% of the 850+  respondents  expect  accelerated  cloud  adoption  post-COVID-19.  Internet  data  centre  (IDC)  capex  trends  show  China  would  be  a  particular  beneficiary.  Greater  acceptance  of  remote  working  was  validated  by  UBS  Evidence  Lab’s  Deep  Theme  Explorer. We expect 24m remote workers in tech by 2024, with over 32m in our upside scenario.  This  should  encourage  cloud  adoption  and  drive  acceleration  in  DevOps.  We  expect DevOps embedded contracts of over US$70bn annually until 2024, with upside of  US$100bn.  This  should  lead  to  faster  growth  for  collaboration  tools,  cybersecurity  and SaaS (software as a service) providers.

Which segments are unlikely to benefit from the changes?

Legacy  data-centre  and  app  support  are  likely  to  be  the  subsegments  negatively  impacted. We expect insourced spend at US$720bn in our base case, a CAGR of 3.8% over  2019-24,  which  could  also  put  pressure  on  third-party  service  providers  with  greater  exposure  to  legacy  tech  (including  data-centre  and  offshore  providers;  we  are  particularly off-consensus in our negative view on offshore services), increasing pressure on them to invest more in domain-knowledge and higher value-added services that are not typically insourced (such as consulting, AI, and user experience).

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