What a difference a couple of months can make.

2020 was originally forecast to be a good year for technology spend.

Many categories took a hit in 2019 and the consensus for growth in 2020 was pegged at a healthy three to four per cent.

That growth is now under threat from the COVID-19 virus, which, by early March, had spread to every continent, bar Antarctica.

With the situation changing daily, it’s hard to take a firm view on how it will impact broader economic growth, as well as technology spending.

Much will depend on the ability of countries to control the spread of the virus, along with the fiscal stimulus packages of governments around the globe.

Amidst the uncertainty, it’s worth noting the feedback we’re receiving from tech buyers, vendors and economists.

Anecdotal yes, but it’s likely to be indicative of broader trends.

Slowing Spend

Businesses around the world are putting the brakes on spending across the board.

We are seeing projects delayed and, in some cases, cancelled.

The IMF and OECD as well as several central banks, including those in Thailand and Singapore, have lowered their growth forecasts.

At the same time, we’ve seen ratings agencies and economists reduce their growth forecasts for heavily impacted economies.

The US is avoiding much of the slowdown even though the Nasdaq High Tech Index has dropped sharply and may fall further.

Current ICT projects are losing momentum, as stakeholders struggle to compensate for the face-to-face contact that drives progress, even in the digital era.

Slipped deadlines are the likely result and that, too, will have an effect on future spending – after all, why begin something new when there are projects yet to be completed?

Cash flow crunches

Little surprise that small and medium enterprises (SMEs) are already feeling the pinch from a cash flow perspective.

This represents a significant threat to spending in the tech sector, given SMEs account for up to 50 per cent of economic activity.

SMEs tend to partner with other SMEs and it’s these minnows that may struggle to survive if COVID-19 is not contained.

We also understand some businesses that are directly impacted by the virus (such as those in the travel sector) have informed suppliers bills won’t be settled until mid-year.

That’s a time lag that could put many a small tech provider under.

Tim Sheedy, Ecosystm

Cancelled customer events

Customer events represent a key sales opportunity for ICT vendors but dozens of global players have decided that – for now – they’re not worth the risk.

Pulling the pin on gatherings which bring customers together with industry experts, product evangelists and their peers will inevitably mean fewer conversions and no spike in sales in the subsequent months.

These events are also where product and solution innovations are showcased and will have an impact on the uptake of tech innovations.

Supply chain challenges

COVID-19 is also impacting the technology supply chain.

Many components and products are manufactured in China and it’s hard to know how long shutdowns will last, how long it will take manufacturers to get back to capacity, and whether disruptions to the supply chain will delay the dispatch of goods.

Major vendors including Apple and Microsoft have flagged the issue and they’re far from alone.

Some vendors may review their supply chains as a result and it’s possible that it will lead to opening for manufacturers in competitive, low-cost jurisdictions such as Vietnam and India.

Measurable impact

What’s the damage?

We believe COVID-19 will wipe up to 1.5 per cent off global tech spending in 2020, paring growth back to somewhere between 1.5 and 2 per cent.

Some sectors will witness growth or are already doing so – think telecoms providers, collaboration software and tool vendors, remote and online education providers, cloud providers and health-tech firms.

Digital spending will increase, as face-to-face opportunities plummet, and this will drive opportunities for advertisers, digital agencies and developers.

Now is the time to make or activate your Plan B.

Vendors must get better at digital marketing and selling and simpler implementation.

Tech buyers and implementers need to put in place best practices for remote working, and some may experience an increase in productivity when they get it right.

Bottom line: this unforeseen global health crisis brings both opportunities and challenges to tech sector suppliers and customers.

Collaboration, contingency planning and a healthy dose of courage will serve us all well in the weeks and months to come.

Tim Sheedy is Principal Advisor at research consultancy Ecosystm.