The Tech Industry’s Tectonic Shift

As COVID-19 continues to spread, states and cities across the U.S. have imposed restrictions — from banning large gatherings to lockdowns, with citizens ordered to stay home except for essential jobs and errands or get outdoor exercise.

These steps came as infection numbers mounted, and the World Health Organization (WHO) stated that COVID-19 was a global pandemic. It was the first time such a declaration was made since the H1N1 crisis in 2009, during which more than one-fifth of the world’s population became infected, according to estimates.

Many tech industry conferences and trade shows initially scheduled to take place in the coming weeks have been canceled, including the National Association of Broadcasters (NAB) show set for April in Las Vegas and the ElectronicEntertainment Expo (E3) planned for June.

Of course, more than trade shows have been impacted. The National Basketball Association, Major League Soccer, and the National Hockey League have suspended the rest of the 2019-2020 season. The NCAA also canceled the March Madness basketball tournament.

“Due to concerns related to the coronavirus outbreak, an unprecedented number of events — from athletic competitions to tech conferences –are being postponed or outright canceled,” said Gilbert Michaud, assistant professor of practice in the Voinovich School of Leadership and Public Affairs at Ohio University.

All of this has thrown stock markets worldwide into roller coaster mode, with some record-setting gains in recent weeks alternating with record-setting drops.

There’s no question that the pandemic is hitting the service industry hard.

Forty-seven percent of retailers expected some downside revenue implications, while 44 percent expected production delays due to COVID-19 in a recent Digital Commerce 360 survey.

“There really is a delicate balance between achieving public health and negative economic consequences,” Michaud told the E-Commerce Times.”Immediately and directly, markets will suffer due to uncertainty, panic, and an overall lack of spending. It’s important to understand the multiplier effect at play here.”

The Cost of Canceling

This year’s most prominent technology trade show, CES, took place as scheduled in early January, attracting visitors from around the world, including many from China. Although there are no reports that the show helped spread COVID-19, other trade show organizers opted to cancel outright rather than take risks.

“There are enormous costs from an economic perspective as events and conferences are canceled,” said Michaud.

“There are obviously the direct, short-term implications of cancellation, such as with registration fees, airline and hotel sales, dining, and others — but there are also longer-term threats,” noted.

“The overall uncertainty and desire for caution may cause apprehension for a university to send a professor to a conference presentation or for a company to send an employee to a future trade show,” Michaud pointed out.

Wider Costs Understood

Cancellations are costly — beyond the lost revenue for the direct organizers and local businesses.

“A large event cancellation will cause hardships for those directly employed at, say, a sports stadium, such as in ticket sales or security,” said Michaud.

“Then we also have ancillary implications for vendors and strategic partners who are also losing business — and finally, all of those direct and indirect workers usually spend money in their local economy, such as at restaurants or movie theaters, but with less local spending comes deeper economic fallouts,” he added.

“This last piece is what economists call ‘negative induced effects’ due to a lack of household-to-business economic activity,” said Michaud.

It could also have a broader reach in terms of how business is done.

“We don’t see situations like this very often, where society is forced to make such a dramatic shift in how we live and interact with one another,” said Thomas LeDuc, vice president of marketing at cybersecurity firm Semperis.

“As a marketer, it means that I’ll need to find different ways to reach audiences and serve customers,” he told the E-Commerce Times.

Going Virtual

In recent weeks, shutdowns have impacted schools, bars, restaurants, and almost all other forms of business across the United States.

“The ‘cancel everything’ mentality is devastating but necessary,” said LeDuc.

The Semperis Hybrid Identity Protection cybersecurity conference was postponed, but alternative ways to host the event are now being considered.

“We’ve experienced such remarkable support from the world’s foremost identity leaders to participate in any capacity, even if that means virtual sessions,” LeDuc remarked.

Many trade show and conference organizers are opting to utilize a digital or virtual experience instead — and companies such as Microsoft and Ubisoft have already announced plans to hold online-only events in place of their respective E3 press conferences.

“Many companies, at least in the short term, will be using virtual alternatives to run their operations entirely online to avoid face-to-face interaction,” said Ohio University’s Michaud.

This will not be without some challenges, especially for small companies — especially if employees are working remotely.

“There are potential IT headaches, and managing employees remotely can be a challenge,” said Michaud. “This transition may be easier for the tech industry, but for sectors such as government, healthcare, and legal, which require interaction and typically work off of legacy systems, this is a huge concern.”

Business Disruption

Given that COVID-19 could remain a severe threat for weeks or even months to come, it could take a while before business returns to normal. It has impacted the tech supply chain and how many tech giants operate.

Larger companies could fare better — at least in the short term.

“Some companies do a good job of diversifying their portfolio to stay consistently resilient and to take advantage of synergies,” said Mike Jordan, vice president of research at Shared Assessments.

“Comcast is known for providing Internet, cable TV, and phone service –but they also own a broad entertainment portfolio that includes media production through NBCUniversal and Sky in the UK,” he told the E-Commerce Times, “and live entertainment and sports production, including ownership of the Philadelphia Flyers hockey team and the Philadelphia Fusion eSports team.”

In addition, Comcast owns the stadiums where many of those teams play. As a result, some sectors of the company could weather the storm of a pandemic better than others.

“Broad as this portfolio may seem, Comcast’s live entertainment portfolio will likely take a major hit multiple times as losses at live venues, management services, and ticket sales will exponentially hurt the company’s overall bottom line,” noted Jordan.

“The pandemic will test the holding company’s mettle as the digital, tech, and media services will need to support the declining industries for some time,” he suggested.

However, few tech businesses have that level of diversification.

“Those that rely on a physical presence component without a standalone digital revenue stream may be at a severe disadvantage,” observed Jordan. “For this reason, companies that are already down a ‘digital transformation’ path will also have an advantage over those who haven’t started.”

Can Tech Weather a Recession?

With global stock markets on a roller coaster that has seen more record drops and fewer rocket-like rallies, the world could face a severe economic downturn. The question is whether the tech world is poised to handle it.

“Globally, there is the possibility of an economic downturn or recession because of the loss of business opportunities, the shortage of supplies, the cancellation of events, the inability to meet contracts, and the loss of employees or work time,” suggested Catherine A. Allen, chairman of The Santa Fe Group, a third party risk management firm.

“Everything from travel to hospitality to restaurants to events to sporting and entertainment venues will be impacted, in addition to manufacturing and retailing. If people stay home, it impacts the economy,” she told the E-Commerce Times.

“In the U.S., our economy is so dependent on consumer spending we may see not just a downturn due to supply chain risk, but also a loss to retailing, hospitality, travel, entertainment, food service, and other areas,” Allen added.

The pressing question is how long COVID-19 will remain an issue. The longer it takes for the virus to run its course, the more severe the consequences will be.

“In the short term, clearly the economic losses are going to be significant to what is one of the country’s most vibrant sectors,” said Alan Fyall, Ph.D., associate dean of academic affairs at the Rosen College of Hospitality Management, University of Central Florida.

“However, over the past two decades, the travel, tourism, and hospitality industries have always rebounded from economic shocks and natural or man-made crises, with their capacity for innovation to overcome disruption well respected,” he told the E-Commerce Times.

“The challenge with the coronavirus is in not knowing how long it is going to last, with it being such an unprecedented and hopefully once-in-a-lifetime event,” Fyall said.

“Yes, technological options exist, with many new tech innovations likely to surface to meet new needs and offer new experiences,” he added. “However, one lesson from previous shocks is that the leisure and business traveler still prefers that face-to-face encounter or real-life experience in numbers sufficient to suggest that the future is bright.”