How the COVID-19 pandemic impacted the IT industry in 2020…

January 11, 2021

Every business and industry has been affected by the pandemic in one way or another. There are some businesses, like tourism that aren’t sure what the future holds for them, and there are other businesses that have managed to successfully adapt to the new reality. In this article we will take a look at the impact the pandemic had on the IT field.

Impacts:

  • We have witnessed active digitalization across various sectors in recent years, and the pandemic has accelerated the progress of digitalization even more. Without COVID-19, digitalization would still continue, but not as fast. This is especially true for group communication systems, 5G, and artificial intelligence. 
  • The year 2020 was a very difficult year for startups. People like to invest in promising technology companies, but in this new era of uncertainty and instability, risky and new projects were not so appealing to investors. On the flip side, the likes of Reface App and Better.com appeared in 2020, and despite all the difficulties, have managed to break into the market triumphantly.
  • Projects related to IT were/are no longer required by some companies. There are sectors within the IT industry whose purpose is to find solutions for other businesses, like tourism, hospitality, car manufacturers, air carriers, and event industries. Given that these areas were impacted greatly by the pandemic the need to stop projects and save money to survive was very important to them. Unlike other industries, these fields cannot shift easily into digitalization, so they had to freeze or cancel many projects that were already in progress. Hence, the IT businesses working with these companies have been hurt by these decisions.
  • IT companies managed to move into remote working mode quickly, painlessly and without suffering too much in the way of productivity. IT specialists turned out to be some of the most prepared people for working remotely. The entire transition process took days or weeks at most for most IT workers, and in a lot of cases, remote work did not affect labor efficiency in any way.
  • Due to projects freezing and the uncertainty of the near future, companies were and still are striving to save money, and to cut costs as much as possible in the IT sector. This means that some businesses have been actively trying to reduce their employee count. Outsourcing is taking the place of large teams, and with all the various recruitment routes you can outsource individual talent quickly. This is particularly true for small and medium-sized businesses. For example, 68% of companies in the United States use outsourcing in one form or another (statistical data).
  • The year 2020 can be considered as the year of strategy revision for a lot of business. Those who were not ready for the digital shift were forced to develop a new strategy in the shortest time possible in order to survive and thrive in the new reality. This opened up new opportunities for growth in the IT sector. Small IT companies actively cooperated with other small businesses to get them into a digital mode, and they got through the difficult times together.
  • During 2020, and like any other year, there would have been a number of IT events around the world. Given that we are no longer supposed to mix in large gatherings, holding events was more difficult. Event cancellations decreased the amount of opportunities businesses had to meet clients and to get contracts for projects. The lack of new projects, and the lack of opportunity for businesses to sell themselves at an event, meant that they haven't necessarily made as much money as they could have done. Although, there have been some successful virtual events held across platforms, so it wasn’t a complete loss. 
  • As mentioned above, a lot of people would usually meet at events but with the Covid-19 pandemic far less client interaction went on around the world. While it makes signing up for new IT contracts hard, it also means that clients that usually worked together pre-pandemic ceased communication. This led to all sorts of trouble, and it was costly for those involved. 
  • The pandemic has sadly closed down a number of businesses around the world, which means there are a lot of people out of work. With so many people out of work, and all of them trying to find a job, you often found that the recruitment process slowed down for a lot of companies. To find the best talent a recruiter would have to go through thousands of applications, instead of the usual amount, just to find the right person. This all took, and will continue to take, a lot of time. 
  • As mentioned above, with all the cash flow and project related issues, IT businesses were and are looking at retaining their top talent. In some cases this means that businesses are not looking to hire new people, and they remain loyal to those in their team. This means that they could miss out on a great opportunity. 
  • Overseas communication and consumption slowed down. With such uncertainty circling around the world, it's perfectly natural for people to be concerned with the more important things in life. This however meant that people did not want to consume material goods as much, and instead they looked at the simple pleasures in life.
  • People delaying purchases. As mentioned earlier, the pandemic brought about huge job losses, which meant that people couldn’t or didn’t want to make purchases without good reason. This is true for people and business, but it did come at a price for IT businesses who were looking at earning money.  
  • Remote work has increased so much in the last year, and this means many new tools are being used by individuals all over the world (for example, video chat apps). This is very good for those who make the tools, but it also means that with so many people using the tools there’ll be increased customer needs to keep up with. A lot of people were/are not used to dealing with the tools being used from home, so they need a lot of guidance, which means for those on the support line there was/is a lot of work to be done. 
  • A number of IT companies often collaborate with other businesses to bring a product to market. The pandemic has caused disruption across loads of areas, so while one business was ready with their side of the product, the second business was not, and therefore there was a major supply chain disruption.
  • Cybersecurity. With so many people working from home, it was/is imperative that the security systems we all use are of the highest quality. This has been great for those working in cybersecurity development because there is a huge demand for this work. But on the flip side, there have been a lot of people who were/are prepared to abuse cybersecurity to cause havoc for people who work from home. 

As you can see there have been negative impacts and some positive impacts in the IT industry. The IT industry has worked extremely fast to ensure that global digitalization is present for all. Digitalization was one of the most important factors of 2020, and it has allowed all kinds of businesses to survive and thrive. 

What's been going on in the different IT sectors?

Now let's take a closer look at what’s been happening across specific IT sectors:

  1. Hardware. It’s worth noting that the hardware market has not demonstrated outstanding growth in recent years. Actually, sales were sagging, and in 2020 the situation only worsened due to the pandemic, typically because of broken supply chains, the closure of borders and low cargo transportation. The hardware sector has suffered more than the software sector and this applies to desktops, laptops, tablets, and smartphones.
  2. Games and entertainment. Many have felt very stressed and trapped during the pandemic, and so they have looked towards the virtual world of games as a way to escape the harsh realities of life. Of course, there are people who just love gaming too, and have made the most of their time at home by gaming the hours away. The IT sector in 2020 did not see a decrease in its growth despite the decline in game developments, and in general, it remained much the same as 2019. Additionally, the sales of devices (gaming consoles) decreased, and the sales of applications increased (IDS data).
  3. Cloud Services and software. While the physical devices’ market shows a steady decline, Cloud Services grew, and continues to grow, it seems that even the pandemic cannot stop it. Even with an 3.8% growth rate (compared to 8.8% in 2019) it remains successful against the backdrop of decline in other sectors. The use of Cloud Services continues to grow amid the overall digitalization too.
  4. Telecommunications. According to IDC forecasts, the telecommunications market will fall by only 0.8% in the coming years. This drop occurs because there has been a decrease in movement activity (because of the lockdown people are traveling less and do not use roaming), but at the same time, the IP telephony sector is growing against the background of a massive transition to remote work. The situation here is almost unchanged. 

Here are the growth rates of the different sectors in the IT industry for the current and previous year:

IT sector Growth rate in 2019 (%) Growth rate in 2020 (%)
Hardware +0.9 -12.4
Software +8.8 - 2.6
Cloud Services +10 +3.8
Other services +5 -5.1

(IDS)

What’s going to happen now? 

Everyone around the world has tried and will continue to try their best to adapt to the new reality that 2020 brought. Some sectors and people are far more successful than others, of course. And many businesses will adapt to the changing economy in the next few months, and plenty more people will try their hand at digitizing their businesses - which is great. 

Yet, despite the apparent success of the healthcare system in developing a vaccine, it’s still too early to talk about the end of the pandemic. Even under a favorable scenario, it would take a while to spread a vaccine across the entire population, and only after this collective immunity would the world begin to return to its usual rhythm of life. 

All the impacts we have discussed above will likely remain in place throughout 2021, and businesses will have no choice but to adapt to the new reality under this pandemic. We must stay strong and work together.


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