Carla Arend
Carla Arend (Lead analyst European Cloud Research)
Archana Venkatraman (Senior Research Manager European Cloud Data Management)

As Covid-19 fundamentally shakes up how we live, learn, socialize and work, the governments across Europe are taking drastic measures to keep citizens safe and healthy. No doubt, the impact of the current situation will be massive on the economy, market sentiments, and uncertainty in spend, including IT spend.

While there is a significant impact on the European cloud market, it is potentially positive! Now is the time to shine for cloud providers and to demonstrate that cloud services are the perfect fit for uncertain times, when the ability to scale up AND scale down really comes to the fore.

The flexibility and agility of cloud solutions, the ease of provisioning and scaling new resources, but also to shut down what is not needed and only pay for what is used, is a perfect fit for the current uncertainty. Cloud solutions are sought after in these uncertain times, where we are changing our working patterns to remote working where possible, and where many interactions are moved to digital channels rather than physical channels to avoid or at least slow down the spread of the virus.

If we look at the different layers of the cloud stack, a picture is emerging:

Software as a Service (SaaS)

As many employees are transitioning to remote working, there is a sudden surge in demand for collaboration solutions. The share prices of collaboration tools providers have been soaring, and Microsoft announced that it now has 44 million users of the Teams platform globally, due to the high demand for collaboration solutions. Other areas of the broad SaaS market might be negatively impacted, as organizations stop their business activities for some time and scale down their SaaS user licenses, if they can. Some customers will be bound by multiyear subscription contracts, which only allow scaling down to a certain extent, which hold a hand under the SaaS market, but defies the point of pay-per-use, which is one of the great advantages of cloud.

Infrastructure as a Service (IaaS)

Demand for online shopping, and video streaming, is surging as Europeans are self-isolating in their homes either as a precaution or on government command. This is driving an increase in spending on IaaS, as retailers, broadcasters, and government gateways offering stimulus packages for the businesses and professionals, are scaling up their e-commerce and front-end platforms to deal with demand. But e-commerce is not the only workloads that sees increased demand. Also hot are SaaS solutions especially around collaboration and productivity. They are seeing huge spikes in demand and need IaaS capacity to scale. In addition, financial applications like e-banking and mobile banking will see a surge in demand, as well as data hungry AI and ML applications to solve the Covid-19 problem.

Platform as a Service (PaaS)

At the PaaS layer, the impact is not so clear. Some developers are being sent on leave, as development projects are stalled in favour of remote working projects or until businesses can begin to operate normally again. At the same time, there are many students and developers at home with time to spend on developing new applications and solutions to problems relating to the Covid-19 crisis. The Estonian and German governments are inviting all interested developers to hackathons to find solutions to Covid-19 related challenges. Consequently, as these applications start being adopted and potentially reach a wide audience quickly, they will consume IaaS and PaaS capacity. PaaS investments are likely to be more in healthcare, pharmaceutical, and academic sector and those organizations that are part of the “Covid response” needs and less in other industries such as automotive, hospitality, part of the manufacturing and retail sectors, as well as professional services, because these are non-essential at this point. The need to digitally transform has never been greater, as digital has become the only channel to interact with employees, customers and partners. Many organisations have their digital to-do lists written for them, as weak links become apparent in this sudden shift to digital and remote working. But projects will only be picked up when we return to the new normal.

Demonstrate #coronakindness

There is dawning realization that cloud services are not just a modernization strategy but actually are a good fit for such unprecedented uncertainties and ensure business continuity amidst physical lockdown. It can scale up and down based on demand, and especially hyperscalers are able to add capacity in an automated fashion, with very little dependence on actual people. They can also move workloads to other European countries to cope with spikes in demand, which is trickier for regional providers.

Overall, the Covid-19 crisis might have the positive side effect for cloud providers to educate subtly about the benefits of a cloud-based infrastructure, to respond in an agile fashion to new challenges every day, to scale up and down as needed, and to enable developers to launch new  applications quickly. It is also their chance to exert #coronakindness with their customers and the communities they operate it. IDC believes that how organizations treat their customers now will define their brand for the next 20 years. Any signs of profiteering from this situation will have a long-lasting negative effect on their brand.

One word of caution: Despite urgency, organizations mustn’t abandon their due diligence or compliance requirements and the onus is on both cloud providers and users. We have all risen to the challenge of overnight transformation on a personal front, so we can ensure practical and successful cloud strategy at the professional front too.

Please, contact Carla Arend or Archana Venkatraman for more information or to share your views with us.

If you want to know more about how COVID-19 will affect the IT Market, read it here: