Amid the Covid-19 triggered economic disruption, only some segments of the tech sector, such as cloud computing, have made gains, while others, including IT services, are set to experience a slowdown. This is the conclusion of a new GlobalData report, which shows that companies engaged in IT services are not likely to move to a position of strength at least for the next year.
GlobalData, a firm providing data and analytics, further stated that for the IT services industry, the best case scenario would be that the negative fallout only lasts for one to two quarters. In other words, the sector should be prepared to face a dismal 2020, even if the overall situation rapidly improves.
David Bicknell, the principal analyst at GlobalData, said that information technology vendors are engaged in delivering tech services that are vital to the digital transformation of the economy. However, as clients are focusing on cutting costs, the demand for this type of work is likely to wane.
Bicknell said that the work in this area aimed at supporting IT projects for this year are likely to get sidelined. A number of vendors are already recognizing that providing future revenue guidance may not be possible at the moment as the Covid-19 situation continues to develop.
According to Bicknell, IT firms are going to experience at least short-term pain because clients are cancelling or postponing major IT projects until they are able to see a clearer picture of how far the Covid-19 pandemic impacts their business.
A silver lining in the current scenario could be the increasing work-from-home trend across various industries. That would require IT support for a growing number of businesses who are in the process of making this transition. However, as of now, the opportunities are still only emerging in trickles.
It is notable that while some tech companies are going to gain from this shift to remote working, the same trend is going to hurt other providers. The problem is that most of these companies are not geared up to deliver services with their employees working from home.
The challenges are even greater for outsourcing contact centers, whose agents are unable to handle the same volume of calls from home as they could from a contact center. They are likely to face difficulties in communicating with co-workers in the new set-up.
With the passage of time, the outsourcing service providers will develop ways to enable their teams to operate remotely. As of now, their best way out is to create a balance between remote working and physical offices in order to manage their service operations.