A Hierarchy of Needs for Post-pandemic Planning

Chris Weston
Chris Weston (Principal, European Client Advisory)
Marc Dowd
Marc Dowd (Principal, European Client Advisory)

As your business picks itself up from the shock of the pandemic there are many methods you can use to start to plan your way through the short- medium- and long-term challenges ahead.  My colleagues Tony Olvet and Megha Kumar from IDC Canada published an interesting approach recently which is based on the well-known psychological theory by Abraham Maslow – the hierarchy of needs.

In Maslow’s terms, this is a motivational theory where the needs at the bottom of the pyramid must be met before the one above becomes a motivator.  This is a nice metaphor for business planning, in that we often find ourselves unable to “step back” and take a considered view of our surroundings while we are dealing with emergencies that require immediate attention.

I can hear lots of former colleagues in my head (especially CFOs!) shouting that the Operational and Financial viability should be at the bottom, since nobody can be made safe if the organisation isn’t functioning, and that’s a reasonable point of view.  However I think we should approach this as we did the pandemic – we made things safe by switching to remote working and then we considered our sustainability, not the other way around.

Approaching safety from a technology mindset, the obvious thing is that we provide the remote working tools so that employees, customers and partners can stay in touch and keep those information flows in place.  We also need to think about the way security is impacted by our changed circumstances so that we can safely manage our employees and clients personal data, for example.

Once we move on to managing the viability of our organisation, the most critical thing in my experience is good data. Measuring the things that matter in your business, from the use of your funding facilities, your sales pipeline, your conversion rates, your live orders, the time from order to invoice through to your ability to collect revenues are all absolutely vital to managing your way through uncertain economic times.  Sometimes hard decisions are necessary but there is nothing worse than cutting the wrong place or cutting too deep – except perhaps not cutting enough resulting in the loss of everyone’s job.  So those data and management information investments are worth their weight in gold as you go through this period, as are flexible and understanding technology partners.

If we can reassure ourselves that we have viability then we can face the future and understand the likely needs of our customers so that we can be sure that we have the right business model to operate successfully. Enhancing or rethinking our existing processes and technology solutions will be the key at this stage, as we focus on the value that we bring to the wider business ecosystem.

Only when we are comfortable that we have a safe business in all ways can we lift our heads to consider the future. This might happen quickly, it may take time, but being aware of where we are in this process is helpful. What happens to our business in a world where all our suppliers and customers have had to review all their processes, not to mention our employees? It would be optimistic in the extreme to think we carry on as before!

There are a thousand articles you can read about strategic planning and transformation, and IDC’s Digital Transformation Frameworks are available with case studies for just about every industry you can think of – so I won’t regurgitate them here, but of course I can help if you would like to know more.  But to get there we need to be sure of our footing in the new economy and your choices around your technology investments will be more critical than ever, as we all attempt to prosper through efficiency rather than cutting to survive.

So in conclusion, if you’re not getting the reaction or engagement that you expect from colleagues as you look to the future and how you might transform your business or service, maybe their motivation is still in the lower sections of the pyramid and you need to help them through those as quickly as possible before they will join you in planning ahead.


Are Labels Useful when Thinking About the Future?

Marc Dowd
Marc Dowd (Principal, European Client Advisory)

It seems that labels are often problematic but humans like to use them. We use labels to classify complex groupings for different reasons. Sometimes as a shorthand. Sometimes knowing the definition is wrong. My favourite in common use is the idea of fish:

There is no such thing as a fish

In other words, there is no definition that defines all fish; there are exceptions to every rule you can think of. For instance not all fish live in water. And yet the term is useful. When we say fish markets we know what we mean and where would the English be without our beloved “Fish and Chips”.

Over the last weeks, I have heard CIO’s and IDC Analysts classifying our current situation in ways that you might find useful. In this fast-moving situation, it is useful to have a shorthand to group things. The first set of labels I noticed referred to the reactions of an organization to the crisis:

  • Survival: Hit a deathblow by circumstances. Operations have stopped, or are running at a skeletal level, and IT is minimal while all the focus is on financial survival.
  • Reduction: the business model of the organization is not affected, but there is a focus on cost reduction.
  • New business direction: The existing business model is not working. IT is being used to digitize to leverage assets in a different way or with a different business model.
  • No change or booming. Yes, there are industries that boom in a crisis such as this with little or no change. The Tobacco and the Gaming industries are examples.

So are theses classifications or labels always complete and mutually exclusive? No. Can they be useful, maybe?

Our world is fast-moving at the moment and I am sure all of us know where our organization fits. One example is the UK high street retailer which looks like they are currently in Survival mode with no route to market at present. The same for airlines.

That said not everyone in a sector has the same label: some reduce while others look for new business opportunities and grow. I have heard stories of wonderful achievements where 6-month projects have been put into operation in weeks.

Why does this matter? I think it will matter when combined with another set of labels. The stages we are going through.
IDC analysts are using the following labels to mark different situations and focus:

  • Covid-19 Crisis: All about business continuity
  • Economic slowdown: A focus on ROI
  • Recession: Operational resiliency
  • Return to growth: Targeted investments
  • Recovery: The Future Enterprise

These are useful. For most of us in IT there short-term work of the crisis is done. Yes, we have to work to normalize the situation. And complete some short term actions but it is mostly done.

For those in the Reduction category, we are either in the process of redefining our portfolios and adjusting budgets to prepare for the deepening Economic Slowdown and prepare for the coming Recession. I will write more about how CIOs are doing this in coming blogs.

For those in the Booming group, the focus is on supply chain and operational resilience. This focus will follow soon for the other groups. With the obvious exceptions of those that don’t survive.

IDC believes that 1H202 will turn out to be about agility. Especially I think for organizations in the New Business Direction grouping.

So what happens after that? One answer is that recent events have shown that digitization gave massive advantages to organizations. In the areas of resilience, cost-saving and business growth. So if you look at the above stage model you may agree that from the second half of 2020 there should be a focus on digital in your organization.

IDC believes that IT is going to be a key part of surviving and thriving through the coming period. It will be fundamental to the Future Enterprise. Early indicators that IT will be the engine of the future in Europe comes from IDC research that shows the disparity that is emerging between the expected decrease in revenue (77%) and the expected cut in IT spending (28%).

So thinking about the future using these labels it may be easier to anticipate what will happen. Yes, we have to plan for and act to survive the slowdown and the recession but don’t forget to position your IT division, and yourself, to lead into the future.

If you agree or disagree we would love to hear your opinion. Please let us know what you think.


What Does COVID-19 Mean for Managed Cloud Service Providers?

Ewa Zborowska
Ewa Zborowska (Research Director, AI Europe)
Riccardo Barrai (Research Analyst, European Services Group)

IT services markets in Europe have been heavily impacted by the COVID-19 pandemic. In IDC’s latest BlackBook update, the European services market is expected to decline overall at 4% in 2020. The hardest hit will be project and business services. While managed services (overall) are expected to decline moderately, managed cloud services (MCS) are a potential bright spot.

IDC’s latest COVID-19 Buyer Pulse Survey results (from April 27, 2020) indicate that despite the current COVID-19 crisis, infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) services are among the few technologies for which IT spending is likely to remain relatively resilient; 58% of European businesses are expected to either maintain or increase their IaaS and PaaS spending, and this will have a knock-on effect for managed cloud services providers.

In addition to seeking feedback from IT buyers in Europe, IDC analysts have also talked to MCS providers to get their perspective on the impact on their business. This blog shares some of our key takeaways from these discussions.

Cloud Services Can Thrive in Times of Uncertainty and Crisis

What stood out in the discussions with major European MCS providers is that most expected their managed cloud services business to remain relatively resilient and, in some cases, to be positively impacted by the current situation. Most expect MCS contract renewals to continue, while anticipating an uptake in cloud migrations and, in some instances, an acceleration in cloud transformation from some of their customers.

Managed cloud services provide business continuity and agility, which are extremely valuable for companies in periods of uncertainty and crisis. Some have been very agile in adapting and launching new managed cloud services to respond to their customers’ needs. A good example is Cloudreach, a multinational managed cloud services provider that has released a set of accelerated business continuity services to help customers operate their business in these unprecedented circumstances. Such services include cloud strategy and remote consultation (particularly focused on areas such as business continuity), cost optimization, and remote working and connectivity — all of which are helping customers to digitally run their business and tackle some of their main challenges.

Nordcloud has adopted a similar proactive approach to help its customers; the company offers short-term solutions such as remote working and infrastructure setup, and mid-term solutions to increase overall business resiliency, such as recommended best practice guides and policies.

These are just two examples of managed cloud service providers that have taken a proactive and customer-centric approach to their customers, and this has been mirrored in many discussions with managed service providers in Europe.

Because COVID-19 has forced companies across Europe to shut down offices, it has encouraged businesses to embrace technology for remote working — and cloud services can play an important role in ensuring business continuity.

Also, with cloud in general and IaaS in particular operating in an opex and/or consumption model, this helps customers to more flexibly adjust to demand; it’s also extremely valuable in times, like these, when cash preservation is key and customers can’t allocate significant budgets up front. The relative flexibility of cloud contracts enables companies to scale up and down to adjust to current business needs. As the main business priority for companies now is cashflow management to survive and stay in business, the crisis could accelerate cloud transformation for many organizations seeking more efficient ways to manage their IT resources.

Managed cloud services could be a bright spot for the IT services industry. Many markets in Europe have been fairly conservative toward cloud adoption, but the current situation could accelerate wider cloud adoption.

Recommendations for Cloud Service Providers

From our recent discussions with both end users and cloud service providers, one powerful message has emerged for cloud service providers: Just be there!

  • Be there for your customers. Managed cloud service providers have realized that it’s critical to reach out to their clients and take care of them, that they have access to all the resources they need, that they are able to regroup their cloud platforms to support quickly changing business needs, and that they use cloud in the most cost-efficient way. Customer-centricity is more important now than ever before. They should look to offer new services offerings to support their clients during these uncertain times — and, in some cases, offer them free of charge. MCS providers need to sustain their own businesses, of course, but additional and more flexible support for clients will help build long-term relationships that will stand them in good stead in the future.
  • Be there for your employees. Managed cloud services companies have already provided their services remotely and communicated with their customers and partners via various digital channels, so most providers have had no problems shifting their employees to remote working. It’s not enough, however, to just offer your employees high-speed internet and access to all the applications they need to use. To maintain their business, companies need to make sure their employees feel safe and comfortable. That’s why it’s crucial to offer flexible working hours, when and where possible, especially for employees that also have to home-school their children or take care of older family members. Also, it’s worth remembering that working from home is not just a to-do list — it’s also about keeping corporate communication, connection, and collaboration alive. Companies have already reached out to apps and platforms offering more informal ways of working and communicating. Your employees also may need extra support to maintain their mental and emotional well-being, so look to work with partners to provide this if needed.
  • Be there for your company. MCS providers are not immune to the current uncertainty and business risk. Cashflow and business continuity remain important. Look to put crisis teams in place to keep your finger on the pulse, adopting an outside-in and inside-out approach to respond to new requirements and new measures quickly. Sales, marketing, customer care, and operations departments have had to adjust quickly. You need to adjust contract terms and launch new services to support customer needs, stay up to date with changing government guidelines aimed at helping companies during the post-pandemic economic slowdown, and rethink recruitment processes now. Your experts’ bench-time can be devoted to learning new skills, performing pro bono projects associated with the COVID-19 response, or enhancing competences to support future growth and development. It’s worth noting that most managed cloud service providers were continuing to recruit in the first quarter, albeit more cautiously. In the second quarter, IDC expects more cautious hiring, but the talent war in cloud means that some providers may continue to recruit for top talent.
  • Be there for your community. Offering support for a common good is what counts in times like these. MCS providers can support companies and public and healthcare institutions fighting COVID-19 directly by offering technology platforms for operations continuity or data analysis. OVH, for example, launched the Open Solidarity initiative to offer technology platforms and support for businesses in the healthcare, education, and remote working sectors, offering its solutions and services free of charge, on a commitment-free basis. Many MCS providers have engaged in new projects aimed at creating tools for COVID-19 case tracking or therapy development. Support for remote communication and collaboration for the education sector is invaluable. Many are also offering softer help — providing help for the elderly in care homes, for example. Every form of material or financial aid is needed at a time like this, when cooperation and social solidarity are vital.

Managed cloud service providers are more resilient to the current economic situation than many others, and should use their position wisely to become heroes to their customers in their time of need.

To learn more, please contact Riccardo Barrai or Ewa Zborowska.


impact-covid-19-smbs-in-europe

The Impact of COVID-19 on SMBs in Europe

SMBs are the foundation of the European economy, representing 99.8% of companies in Western Europe and employing two out of every three full-time employees. The COVID-19 crisis has already had a profound impact on the way businesses operate. The shock to supply and demand for small businesses means that a crisis of this magnitude could lead to the demise of many. Some industries and verticals have been more severely impacted than others. For all businesses, the safety of their employees is key, as is cash preservation. The smaller the business, the more severe the impact could be.

What Does SMBs Stand For?

In Europe, IDC defines small and medium-sized businesses (SMBs) as companies with fewer than 500 employees. The segment includes established SMBs as well as many digital-native start-ups and scale-ups.

Challenges Faced by Small Businesses

SMBs face unprecedented challenges to the entire value chain of their business. The economic precariousness brought on by the pandemic has lessened the demand for products and services produced by SMBs in some industries, with the OECD identifying transport, manufacturing, construction, wholesale, retail, air transport, accommodation, food services, real estate, and professional services as the worst affected.

This challenge is further intensified by the disruption of business networks and supply chains across Europe, which can be particularly damaging for small businesses more likely to rely on a limited number of suppliers. Cash is the most pressing issue for SMBs, which are making increasingly difficult decisions around staff redundancies, furloughing of staff, or closing their businesses until the crisis subsides. Remote work has become the norm for those of us not on the front line and though enterprise has in-built basic structures for teleworking, this is not always the case for SMBs. Companies have had to establish technical infrastructure in haste while upholding security best practice as best they can.

IT Spending Behavior and Customer Sentiment

IDC is running a buyer sentiment survey every two weeks to capture IT spending behavior and customer sentiment during and in the aftermath of the COVID-19 pandemic. When asked as part of the Wave 3 Survey (run from April 20 to 27), 84% of European SMBs said they expect their company revenue to decrease in 2020.

There is, however, some resiliency in terms of IT spend, with only 38% of SMB respondents believing they will be spending less on IT compared with their previously allocated budget pre-COVID-19 and 22% expecting to increase IT spend.

For many SMBs, digital transformation is no longer a matter of choice — it is an existential necessity. 

The race to innovate has intensified and SMBs that use this time to transform their business models, engendering trust with their customers and elevating their presence digitally, will come out of the crisis stronger. Over the past couple of years, many SMBs were on the path to becoming what IDC terms “future SMBs” — data-driven, customer-centric, and highly automated. The economic ramifications of COVID-19 will only expedite this process for many SMBs that may come out of this stronger.

Financial Support for SMBs During the Coronavirus Crisis

There has been a wealth of SMB governmental support across Europe: an indication of the importance of this segment for the economic recovery post-crisis. Support has included temporary layoffs and sick leave, direct lending, deferral tax, affordable loans, and furlough schemes. Germany, for example, has set up a state fund (Wirtschaftstabilisierungsfonds) worth €400 billion to guarantee bonds, loan notes, and liabilities of companies. Similarly, France has set up a Solidarity Fund with financial aid of €1,500 to business owners who make less than €1 million in turnover and are forced to close or have experienced a loss of more than 70% in March 2020 compared with March 2019. Twenty-six countries in Europe are offering wage subsidies. On May 4, the U.K. announced “bounce back” loans of up to £50,000 to help small businesses with fewer than 10 employees and sole traders after the Coronavirus Business Interruption Loan Scheme (CBILS) did not do enough for small companies in need.

Immediate relief by compensating SMBs for loss of revenue has so far been the main aim, but structural measures are needed to fuel innovation and enhance entrepreneurship for SMBs in the wake of the crisis. So far, support schemes focus on short-term immediate relief, but there is a pressing need to establish plans to ensure that the SMBs that survive the crisis can thrive in the new normal. There are a few examples of this so far. Slovenia is offering aid for internationalization and measures to diversify export and import markets, and France, Slovenia, and Spain are offering support to SMBs adopting teleworking.

Vendors and Partners Have a Part to Play

SMBs will continue to struggle after the crisis subsides and vendors have a significant role to play in lifting small businesses up. The same survey reveals that 39% of SMB respondents believe they have received no support from vendors during this time. Some SMBs have received free subscriptions, free support, and flexibility with existing contracts. We need to see vendors understanding that the way they treat SMB customers during this time will be greatly rewarded in the future. Helping small businesses become future SMBs through marketing, cloud credits, and remote support will elevate a loyal base of SMB customers after government support runs out. Partners play an important role here too, as most vendors support this segment through partners, many of which are SMBs themselves. While most vendors are offering immediate support packages to their partners, it’s important to ensure partners are in a position to support their SMB customers’ transformation efforts in the longer term.

SMBs have been forced to adapt to the future of work and digitally transform at a rate that would not have seemed possible before the crisis. Once lockdowns loosen and government support runs out, the SMBs that survived the crisis will have transformed the way they operate on a permanent basis.