The Tech Industry’s Tectonic Shift

As COVID-19 continues to spread, states and cities across the U.S. have imposed restrictions — from banning large gatherings to lockdowns, with citizens ordered to stay home except for essential jobs and errands, or get outdoor exercise.

These steps came as infection numbers mounted, and the World Health Organization (WHO) stated that COVID-19 was in fact a global pandemic. It was the first time such a declaration was made since the H1N1 crisis in 2009, during which more than one fifth of the world’s population became infected, according to estimates.

A great many tech industry conferences and trade shows originally scheduled to take place in the coming weeks have been canceled, including the NationalAssociation of Broadcasters (NAB) show set for April in Las Vegas, and the ElectronicEntertainment Expo (E3) planned for June.

Of course, more than trade shows have been impacted. TheNational Basketball Association (NBA), Major League Soccer and the National Hockey League (NHL) have suspended the rest of the 2019-2020 season. The NCAA also canceled the March Madness basketball tournament.

“Due to concerns related to the coronavirus outbreak, an unprecedentednumber of events — from athletic competitions to tech conferences –are being postponed or outright canceled,” said Gilbert Michaud,assistant professor of practice in the Voinovich School of Leadership and Public Affairs at Ohio University.

All of this has thrown stock markets around the world into roller coastermode, with some record-setting gains in recent weeks alternating with record-setting drops.

There’s no question that the pandemic is hitting the service industry hard.

Forty-seven percent of retailers expected some downside revenue implications, while 44 percent expected production delays due to COVID-19, in a recent Digital Commerce 360 survey.

“There really is a delicate balance between achieving public healthand negative economic consequences,” Michaud told the E-Commerce Times.”Immediately and directly, markets will suffer due to uncertainty,panic, and an overall lack of spending. It’s important to understandthe multiplier effect at play here.”

The Cost of Canceling

This year’s biggest technology trade show, CES, took place as scheduledin early January, attracting visitors from around the world, includingmany from China. Although there are no reports that the show helped spreadCOVID-19, other trade show organizers opted to outright cancel rather than take the risks.

“There are enormous costs from an economic perspective as events andconferences are canceled,” said Michaud.

“There are obviously the direct, short-term implications of acancellation, such as with registration fees, airline and hotel sales,dining, and others — but there are also longer-term threats,” henoted.

“The overall uncertainty and desire for caution may cause apprehensionfor a university to send a professor to a conference presentation, orfor a company to send an employee to a future trade show,” Michaudpointed out.

Wider Costs Understood

Cancellations are costly — beyond the lost revenue for the directorganizers and local businesses.

“A large event cancellation will cause hardships for those directlyemployed at say, a sports stadium, such as in ticket sales orsecurity,” said Michaud.

“Then we also have ancillary implications for vendors and strategicpartners who are also losing business — and finally, all of thosedirect and indirect workers usually spend money in their localeconomy, such as at restaurants or movie theaters, but with less localspending comes deeper economic fallouts,” he added.

“This last piece is what economists call ‘negative induced effects’ dueto a lack of household-to-business economic activity,” said Michaud.

It could have a wider reach in terms of how business is done as well.

“We don’t see situations like this very often, where society is forcedto make such a dramatic shift in how we live and interact with oneanother,” said Thomas LeDuc, vice president of marketing atcybersecurity firm Semperis.

“As a marketer, it means that I’ll need to find different ways toreach audiences and serve customers,” he told the E-Commerce Times.

Going Virtual

In recent weeks, shutdowns have impacted schools, bars, restaurants andalmost all other forms of business across the United States.

“The ‘cancel everything’ mentality is devastating but necessary,” said LeDuc.

The Semperis Hybrid Identity Protection cybersecurity conference waspostponed, but alternative ways to host the event are now beingconsidered.

“We’ve experienced such remarkable support from the world’s foremostidentity leaders to participate in any capacity, even if that meansvirtual sessions,” LeDuc remarked.

Many trade show and conference organizers are opting to utilize adigital or virtual experience instead — and companies such asMicrosoft and Ubisoft already have announced plans to hold online-onlyevents in place of their respective E3 press conferences.

“Many companies, at least in the short term, will be using virtualalternatives to run their operations entirely online to avoidface-to-face interaction,” said Ohio University’s Michaud.

This will not be without some challenges, especially for smallercompanies — especially if employees also are working remotely.

“There are potential IT headaches, and managing employees remotely canbe a challenge,” said Michaud. “This transition may be easier for thetech industry, but for sectors such as government, healthcare andlegal, which require interaction and typically work off of legacysystems, this is a huge concern.”

Business Disruption

Given the fact that COVID-19 could remain a serious threat for weeksor even months to come, it could take a while before business is backto normal. It has impacted the tech supply chain as well as the way many tech giants operate.

Larger companies could fare better — at least in the short term.

“Some companies do a good job of diversifying their portfolio to stayconsistently resilient and to take advantage of synergies,” said MikeJordan, vice president of research at Shared Assessments.

“Comcast is known for providing Internet, cable TV and phone service –but they also own a broad entertainment portfolio that includes mediaproduction through NBCUniversal, and Sky in the UK,” he told the E-Commerce Times, “and live entertainment and sports production, including ownership of thePhiladelphia Flyers hockey team and the Philadelphia Fusion eSportsteam.”

In addition, Comcast owns the stadiums where many ofthose teams play. As a result, some sectors of the company couldweather the storm of a pandemic better than others.

“Broad as this portfolio may seem, Comcast’s live entertainmentportfolio will likely take a major hit multiple times as losses atlive venues, management services and ticket sales will exponentiallyhurt the company’s overall bottom line,” noted Jordan.

“The pandemic will test the holding company’s mettle as the digital,tech and media services will need to support the declining industriesfor some time,” he suggested.

However, few tech businesses have that level of diversification.

“Those that rely on a physical presence component without a standalonedigital revenue stream may be at a severe disadvantage,” observedJordan. “For this reason, companies that are already down a ‘digitaltransformation’ path will also have an advantage over those whohaven’t started.”

Can Tech Weather a Recession?

With global stock markets on a roller coaster that has seen more record drops and fewer rocket-like rallies, the world very well could face a serious economic downturn. The question is whether the tech world is poised to handle it.

“Globally, there is the possibility of an economic downturn orrecession because of the loss of business opportunities, the shortageof supplies, the cancellation of events, the inability to meetcontracts, and the loss of employees or work time,” suggested CatherineA. Allen, chairman of The Santa Fe Group, a third party risk management firm.

“Everything from travel to hospitality to restaurants to events tosporting and entertainment venues will be impacted, in addition tomanufacturing and retailing. If people stay home, it impacts theeconomy,” she told the E-Commerce Times.

“In the U.S., our economy is so dependent on consumer spending we maysee not just a downturn due to supply chain risk, but also loss toretailing, hospitality, travel, entertainment, food service and otherareas,” Allen added.

The pressing question is how long COVID-19 will remain an issue. Thelonger it takes for the virus to run its course, the more severe the consequences will be.

“In the short term, clearly the economic losses are going to besignificant to what is one of the country’s most vibrant sectors,”said Alan Fyall, Ph.D., associate dean of academic affairs at the Rosen College of Hospitality Management, University of Central Florida.

“However, over the past two decades the travel, tourism andhospitality industries have always rebounded from economic shocks andnatural or man-made crises, with their capacity for innovation toovercome disruption well respected,” he told the E-Commerce Times.

“The challenge with the coronavirus is in not knowing how long it isgoing to last, with it being such an unprecedented and hopefullyonce-in-a-lifetime event,” Fyall said.

“Yes, technological optionsexist, with many new tech innovations likely to surface to meet newneeds and offer new experiences,” he added. “However, one lesson from previousshocks is that the leisure and business traveler still prefers thatface-to-face encounter or real-life experience in numbers sufficientto suggest that the future is bright.”

Peter Suciu has been an ECT News Network reporter since 2012. His areas of focus include cybersecurity, mobile phones, displays, streaming media, pay TV and autonomous vehicles. He has written and edited for numerous publications and websites, including Newsweek, Wired and FoxNews.com.Email Peter.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Related Stories
More by Peter Suciu
More in Business

LinuxInsider Channels