About this Episode
Host Nathan Hunt interviews Liam Eagle, research vice president at 451 Research, part of S&P Global Market Intelligence, to understand how the COVID-19 crisis is changing enterprises and the ways we all work.
The Essential Podcast from S&P Global is dedicated to sharing essential intelligence with those working in and affected by financial markets. Host Nathan Hunt focuses on those issues of immediate importance to global financial markets – macroeconomic trends, the credit cycle, climate risk, energy transition, and global trade – in interviews with subject matter experts from around the world.
Read the research discussed in this episode:
- Read 451 Research's March 2020 "Coronavirus Flash Survey", of which Liam discusses the findings from on this episode.
- "The outbreak’s impact on business will be major. Enterprises are broadly canceling travel and face-to-face meetings while implementing work-from-home policies and other measures. Most organizations surveyed expect a major disruption to their business within six months. As enterprises invest in and implement the technology aspects of these policies (including collaboration software, mobile devices and information security tools), many consider it likely these policies will remain in place over the longer term. The widespread formalization of remote working practices is a likely impact. Among the impacts of this blanket expansion of remote working is increased load on IT systems. Many organizations report increased stress on IT systems, but the vast majority say their systems are equipped to handle the strain as organizations put out fires. Over the longer term, an increased demand on cloud-based resources is likely. During the week this survey was in field, the outbreak saw several major global escalations. Opinions evolved in real time and continue to do so. At this point, the extent of the pandemic’s impact on business will be highly dependent on the extent and the effectiveness of the worldwide public health response," according to the survey report.
- Download the PDF of this report and access 451 Research's additional market insights on how the coronavirus is impacting business here.
- 451 Research, part of S&P Global Market Intelligence, is a global research and advisory firm that generates data-driven insight that empowers technology and service providers, IT leaders, and financial professionals to capitalize on their market opportunity.
Liam Eagle: We recommended that businesses sort of prepare themselves for the new normal. Eventually the outbreak will be over, and we may be left with a world where everybody works from home or nobody goes to conferences anymore. What are the technology demands on that? What does the sales cycle look like when, you know, your clients don't want to meet face to face? This recommendation kind of does apply to all businesses, which is, you know, how do you run a bakery if nobody wants to come in and get bread? Basically, you know, everybody needs to be rethinking what they do and how they do it.
Nathan Hunt: This is the Essential Podcast from S&P Global. My name is Nathan Hunt. Many economists believe that we have already entered a global recession due to the human impact of the COVID-19 virus and by the necessity of shutdowns and social distancing to control the spread. But it may be months before we have a true picture of the impact on the individual companies. 451 Research, a company recently purchased by S&P Global Market Intelligence, published a report on the enterprise-level impact based upon a flash survey comprising 820 completed interviews and 50 hour-long interviews with high-level decision-makers. I'm joined today by Liam Eagle, author of the survey and a research vice president at 451 Research. Liam, thank you for joining me today.
Liam Eagle: Very happy to be here.
Nathan Hunt: Where are you calling in from today?
Liam Eagle: I'm calling from Toronto.
Nathan Hunt: From Toronto. And how are things in Toronto right now?
Liam Eagle: Much like everywhere else. I would say we're not quite at the martial law point yet, but we are all sort of staying in our houses and more or less I'm locked down.
Nathan Hunt: I am actually a native of St. Catharines, Ontario, so we're all family here! Okay. Liam, can you start by telling me a bit about 451 Research? I assume you aren't normally focused on global pandemics.
Liam Eagle: 451 Research, as you mentioned, we're part of S&P Global Market Intelligence, which is the data arm of S&P Global. 451 Research itself is a research organization that's broadly focused on enterprise IT. We focused on a variety of technologies that businesses make use of in doing business. Like anyone else, I guess we're sort of temporarily expanding that to include global pandemics, in the sense of, how does this affect the way that we normally operate or the things that we normally cover? How are those things impacted by the outbreak?
Nathan Hunt: I see. So, tell me about this survey. What were you looking at? How were you able to conduct it so quickly?
Liam Eagle: At 451 Research, I manage something called couple the voice of the enterprise team, which is sort of a set of syndicated surveys that we are constantly running and publishing results from throughout the year. One of the cool instruments that we have available to us within that group is that we run the surveys against a curated panel of tens of thousands of respondents who understand the subject matter, and that we have been, you know, cultivating and managing for years. We have a proprietary panel. One of the benefits of having that panel is it enables us to get into fields with a survey, you know, really quickly. And so for a topic that is really timely like this, it allows us to produce results really quickly. This survey was kind of designed to examine how the virus outbreak was impacting businesses with a particular emphasis on how they use an operating technology. And it was actually designed with some interesting and excellent input from folks in a few different parts of S&P Global Market Intelligence organization.
Nathan Hunt: Okay. Who are the respondents for this survey? I mean, what role do they typically play in the enterprise?
Liam Eagle: As you mentioned, it was 820 respondents, and they represent a sort of a range of company sizes and vertical markets, geographies, et cetera. So it's a pretty diverse panel. They're also from a range of rules within those organizations. We broadly bucket those into, you know, IT roles and no-IT roles. And so the non-IT roles might include things like senior management, other types of things like that. One of the qualifying factors for this panel, so for being a participant in this panel, is that they're all involved in making it positions for the organization. So that's kind of the qualifier.
Nathan Hunt: I want to dig in a little bit now on the findings. What were the businesses telling you about disruption due to the COVID-19 virus? I mean, are they already seeing disruption? Do they see disruption happening in the future?
Liam Eagle: I guess in talking about the results, I just want to be really clear about the fact that this is a survey that was in the field from March 10th to March 19th which, you know, a little less than I guess, two weeks later. I mean, that feels like an eternity ago in terms of this escalating situation. Right. So just to put that in context, if you want to use confirmed U.S. infections as kind of your metric for escalation, when the survey went into field there were about a thousand confirmed COVID- 19 cases in the U.S. When we took it out of the field on the 19th, there were about 10,000, so you know, these results are a snapshot of a point in time and that point in time was very early in the crisis. And we actually saw some pretty significant shifts in certain responses, even during the time that we were in the field. So if you compare the response to people who took the survey on Monday versus the people who took the survey on Friday, you know, we see a pretty distinct change in some of the responses. So results like this, they're perishable. And what we can do with them is to kind of extrapolate some of the changes that we're seeing, right? And to use that to inform some of our estimates around other things. And also we can keep surveying. To answer your specific question, which was, do businesses expect disruption? We did ask a question about that. Precisely we asked what organizations expected a major disruption to their business, and we kind of defined that as a major disruption being you can't meet your debt obligations, or you can't deliver your services as expected. Are you losing major clients? That level of impact. And about 15% told us that they were already experiencing that level of disruption or they expected it to within a month. And more than half of businesses said they expected it to happen within six months. So about a quarter told us that they could go on indefinitely without facing that kind of disruption. But that's one of those things that we saw change pretty significantly while we were in field. So that went from about 40% among the first group of people who took the survey to about 20% among the last group of people who took the survey. So I think it's safe to say that the timelines for that have compressed as things have changed, probably since we came out of the field with this survey, things have escalated quite a bit. So probably at this point only a very small portion of businesses would say that this is sort of something they can sustain indefinitely.
Nathan Hunt: So in general, given the trend, we should anticipate that the point in time results of the survey are probably actually more optimistic than those companies would be today.
Liam Eagle: Yeah. I think they hadn't been sort of exposed to the full scope of what this was going to look like. You know, we went into the field before it was declared global pandemic, before it was declared a state of emergency in the U.S., before the sort of aid packages and stimulus packages were created. This situation has changed tremendously.
Nathan Hunt: You know, businesses love to generate strategic plans around new hires, new products, new hardware and software. What did the enterprises, or the IT professionals who participated in the survey, what did they tell you about impact on their strategic plans?
Liam Eagle: We asked about interruptions or delays to a bunch of different individual categories of strategic initiatives and sort of asking which of those were being delayed or being sort of halted in response to the situation, and the ones that we saw being impacted most significantly and by most significantly I mean the largest portion of the respondents, said, yes, we have delayed or halted that were things like hiring. About a third of organizations said that they've, you know, delayed or put a stop to hiring. And new product launches, about a quarter of businesses told us that they had either delayed or put a stop to new product rollouts or new product launches. Some other things that were maybe a little bit further down the list, but still sort of moved the needle a little bit where things like building out or refreshing IT infrastructure or software. And so those were a little bit more like 15% but still notable portions of businesses. Like we're not refreshing hardware, we're not building things right now.
Nathan Hunt: Got it. So, obviously, you're speaking specifically to IT professionals. I think all of us have had the experience, you know, of IT infrastructure becoming critically important to the way that we're doing business at this point in time. When you were talking to these people, did they see permanent changes coming in their modes of working, in terms of technology?
Liam Eagle: One of the things that we asked about as well was, what kinds of policies have you put in place or are you going to put in place in response to this? And then, do you expect any of those policies to kind of remain in place over the longer term or become permanent even beyond, you know, the immediate situation? Again, to go back to sort of the point of time of the survey before some of these things were being mandated by government-- you must work from home or you must send your employees home--the vast majority of respondents to the survey told us they were putting things in place like travel bans, universal work from home policies, that they were canceling events, that they were not attending events, that they were limiting in-person meetings, that they were not meeting face to face with clients. And some of this stuff in the light of the last two weeks is sort of obvious, but these were all things that businesses said they were doing before it was being mandated. Among those, the ones that we saw the most significant response to around 'will this stay in place longer term or will this become a permanent policy?' first of all, was the work from home policy, so expanded and universal work from home policies. 40% of the respondents said this is likely to stay in place longer term, and then about a quarter also said that they expected to sort of continue with limitations on travel. I think, you know, the expectation here is that this will lead to more work from home in the future.
Nathan Hunt: Did they say they were investing in hardware or software in order to accommodate this sort of work from home approach?
Liam Eagle: The way we approached that was we kind of asked about where they were making new technology investments. And the most common among those were two things, like communication and collaboration tools to mobile devices on laptops to network capacity and to security tools, things like VPNs. All of those are things that you might look at as necessary to get people set up to kind of operationally enable the working from home policies that these organizations are putting in place. We didn't explicitly connect those dots for them, but I think it's pretty easy to do that after the fact.
Nathan Hunt: Because this was point in time and because this survey was a couple of weeks ago now and so much has changed, this may be a hard question to answer, but were companies seeing their IT services getting overwhelmed by these new work from home requirements?
Liam Eagle: This is one of those questions where you know, the results from the survey might be the most predictive or it might be the most sustainable in the long term just because, you know, if we ask about what's the impact to your business of, you know, the outbreak and then the outbreak increases significantly, that's a huge difference, but if we say what's the impact to your business of sending everybody home, and two weeks later they still sent everyone home, that's actually not that big of a difference in terms of the IT loads. So what we did ask was, are you experiencing increased strain on your internal IT resources? And more than half of those said, either they were or they were expecting to within three months, but I think it was 40, 41 or 42% said we already are, and then a much smaller percentage said we're going to within three months. So an increased IT load is kind of already here or was always here when we were in the field with the survey. And then we also asked if they were spending more or less on IT resources, and about a third said they were spending more on IT resources already. Now I would expect both of those things probably continued to escalate as the situation progressed. We also asked how well-equipped they felt their IT systems were to handle the increased stream that's being created by these policies or these practices that they're putting in place. And to that question, about 90% of respondents said their operating systems were equipped to handle the increased load. So there is new demand on IT resources and we're seeing increased strain on IT resources, and will probably likely continue to see growing strain on IT resources, but very few organizations expect that to overwhelm their systems. And actually that number we saw change slightly while the survey was in the field, but it was a very small decrease from something like 90% to about 80%.
Nathan Hunt: Okay. Interesting. You included some recommendations at the end of the report. Can you take me through some of those?
Liam Eagle: You know, those recommendations would have been written with a buy-in toward technology suppliers and technology service provider type organizations and their strategies. So not necessarily, you know, here's 'how to operate your business during a pandemic.' One of those recommendations was related to kind of what we're talking about a moment ago, which is, you know, a lot of companies are kind of working to address the situation right now from an IT perspective. And that may involve, you know, shifting their attention from the big IT projects that they would have been working on otherwise like those IT refresh or those IT build-out plans that we were mentioning earlier. Many of those plans are kind of the basis for the relationships with these service providers. And so for the service providers, and they're kind of recommending that they also shift gears to focusing on, you know, how can they help businesses stay operational right now, and sort of maybe set aside the big picture IT products for the future. The second recommendation was basically to say, look, the supply chain impact of this isn't being felt yet. You know, the businesses aren't necessarily sure yet what effect this is going to have on their access to capital. These things might totally upend the way that they think about consuming IT services and consuming IT resources. The recommendation there was that, you know, suppliers also need to be ready to adapt to that maybe permanently to whatever their sort of new modes for adopting these things are, new modes for consuming these things are going to become. Finally, we recommended that businesses sort of prepare themselves for the new normal. So eventually the outbreak will be over and we may be left with a world where everybody works from home or nobody goes to conferences anymore. So what are the technology demands of that? What does the sales cycle look like when your clients don't want to meet face to face? This recommendation kind of does apply to all businesses, which is, you know, how do you run a bakery if nobody wants to come in and get bread? Basically, you know, everybody needs to be rethinking what they do and how they do it.
Nathan Hunt: I want to dig in a little bit to the new normal, which you've referenced, you know, moving beyond the sort of immediate results of the survey. I'd love to get your thoughts on how much you think this new way of working will become permanent. Here we are: we're not in our recording studio at S&P Global. We're calling each other over the phone. I have my daughters doing their remote schoolwork in the next room. I know you have a two-year-old at home. How much is this going to become the way we work going forward?
Liam Eagle: Well, I'm extremely hopeful that having a two year old at home, this has become the new normal for working, but the circumstances--the changing circumstance--have included a lot of mandated work from home and companies are having to make the investments to put the tools in place to enable their employees to work, given the circumstances. While the survey within the field, we saw big increases in the portion that were spending more on IT users and the portion that were spending more on information security, for instance. So I think we'll see that continue to resolve itself in the sense that we'll see this going from a process of putting out fires and rushing to get the basic tools in place to a more formal implementation of some of these things. And that may require more security tools and practices that may lead to more use of cloud infrastructure and things like that. You know, I think one of the things that we asked in the survey was we asked the businesses if they were closing offices. And many of them were, and again, this was before some of this was being mandated, but very few of them at that point said they expected office closures to become permanent, even as they were saying we expect these expanded work home policies to become permanent. So I think that's an interesting combination. Two things, and it kind of implies this hybrid situation where everybody is kind of enabled to work from home or better and able to work from home in the future, but that's not necessarily the default way of working, right. I don't think we saw a lot of businesses, or my reading of the response wasn't that businesses expect everyone to stay home forever. You know what I'm describing is not a totally revolutionary idea. Obviously, I have worked from home 100% of the time over the last seven years, and many of my colleagues do as well. So I think that more people being better and able to do so it's probably the new normal. We'll all have become pretty good at being productive.
Nathan Hunt: You are obviously conducting all of these surveys with IT professionals. I can imagine in the scenario that you're describing, IT infrastructure and technology investment actually becomes a more important in the future. Where do you see technology investment in IT infrastructure going if this is a new normal?
Liam Eagle: I think technology is becoming more fundamental to how we communicate and that is true kind of independent of this outbreak and the circumstances surrounding the virus. But like I said, that was kind of already in place. You know, technology is a pretty broad term, but from a business standpoint, I think this situation is sort of an interesting, call it a catalyst or proof of concept, for a shift in processing. That was kind of already underway, right? A lot of businesses were investing in enabling working from home or remote working or alternative modes of working. They were changing the way their offices were set up. They were doing more sort of fluid arrangements of office space. So I think we'll see now that the circumstances is kind of forcing additional attention to that. I think we'll see that come into place a lot more strongly through this situation. And then, you know, from a personal standpoint, I think it's really familiarizing people with a lot of the tools. I have a lot of friends who are sort of using video conferencing tools to, you know, set up play dates with their kids' friends and things like that. All of us are kind of getting a crash course in the technology aspect of this right now. And we're working out some of the kinks, and I think we're going to learn what some of the dangers are as well.
Nathan Hunt: Liam, thank you so much. Hopefully we will meet in person back in the homeland one this is all over.
Liam Eagle: Yeah, my pleasure. Thanks very much.
Nathan Hunt: Thanks for listening to The Essential Podcast from S&P Global. You'll find links in the show notes for the articles we've discussed today, as well as a link to 451 Research. To read all of our coverage of the coronavirus outbreak and markets, visit SPglobal.com/coronavirus.
The Essential Podcast is edited and produced by Molly Mintz.