from the cube studios in Palo Alto in Boston connecting with thought leaders all around the world this is a cube conversation as we've been reporting the Koba 19 pandemic has created a bifurcated IT spending picture and over the last several weeks we've reported both on the macro and even some come at it from from a vendor and a sector view I mean for example we've reported on some of the companies that have really continued to thrive we look at the NASDAQ and its you know near at all-time highs companies like oh and in CrowdStrike we've reported on snowflake uipath the sectors are PA some of the analytic databases around AI maybe even to a lesser extent cloud but still has a lot of tailwind relative to some of those on-prem infrastructure plays even companies like Cisco bifurcated in and of themselves where you see this Meraki side of the house you know doing quite well the work from home stuff but maybe some of the traditional networking not as much well now what if you flip that to really try to understand what's going on with the shape of the recovery which is the main narrative right now is it a v-shape does it a u-shape what is what's that what do people expect and now you understand that you really have to look at different industries because different industries are going to come back at a different pace with me again is Sagar khadiyah who's the director of research at EGR Sagar you guys are all over this as usual timely information it's great to see you again hope all is well in New York City thanks so much David it's a pleasure to be back on again yeah so where are we in the cycle we give dividend a great job and very timely ETR was the first to really put out data on the koban impact with the survey that ran from mid-march to to mid-april and now everybody's attention sagar is focused on okay we're starting to come back stores are starting to open people are beginning to to go out again and everybody wants to know what the shape of the recovery looks like so where are we actually in that research cycle for you guys yeah no problem so like you said you know in that kind of march/april timeframe we really want to go out there and get an idea of what we're doing the budget impacts you know as it relates to IT because of kovat 19 right so we kind of ended off there around a decline of 5% and coming into the year the consensus was of growth of 4 or 5% right so we saw about a 900,000 basis points wing you know to the negative side and the public covered in March and April were you know which sectors and vendors were going to benefit as a result of work from home and so now as we kind of fast forward to the research cycle as we kind of go more into May and into the summer rather than asking those exact same question to get again because it's just been you know maybe 40 or 50 days we really want Singh on the recovery type as well as kind of more emerging private vendors right we want to understand what's gonna be the impact on on these vendors that typically rely on you know larger conferences more in-person meetings because these are younger technologies there's not a lot of information about them and so last Thursday we launched our biannual emerging technology study it covers roughly 300 private emerging technologies across maybe 60 sectors of technology and in tandem we've launched a co-ed flash poll right what we wanted to do was kind of twofold one really understand from CIOs the recovery type they had in mind as well as if they were seeing any any kind of permanent changes in their IT stacks IT spend because of koban 19 and so if we kind of look at the first chart here and kind of get more into that first question around recovery type what we asked CIOs and this kind of COBIT flash poll again we did it last Thursday was what type of recovery are you expecting is it v-shaped so kind of a brief decline you know maybe one quarter and then you're gonna start seeing growth in 2 to H 20 is it you shaped so two to three quarters of a decline or deceleration revenue and you're kind of forecasting that growth in revenue as an organization to come back in 2021 is it l-shaped right so maybe three four five quarters of a decline or deceleration and then you know very minimal to moderate growth or none of the above you know your organization is actually benefiting from from from koban 19 as you know we've seen some many reports so those are kind of the options that we gave CIOs and you kind of see it on that first chart here interesting and this is a survey a flash service 700 CIOs or approximately and the interesting thing I really want to point out here is this you know the koban pandemic was it didn't suppress you know all companies you know and in the return it's not going to be a rising tide lifts all ships you really got to do your research you have to understand the different sectors really try to peel back the onion skin and understand why there's certain momentum how certain organizations are accommodating the work from home we heard you know several weeks ago how there's a major change in in networking mindsets we're talking about how security is changing we're going to talk about some of the permanence but it's really really important to try to understand these different trends by different industries which you're going to talk about in a minute but if you take a look at this slide I mean obviously most people expect this u-shaped decline I mean a you know a u-shaped recovery rather so it's two or three quarters followed by some growth next year but as we'll see some of these industries are gonna really go deeper with an l-shape recovery and then it's really interesting that a pretty large and substantial portion see this as a tailwind presumably those with you know strong SAS models some annual recurring revenue models your thoughts if we kind of star on this kind of aggregate chart you know you're looking at about forty four percent of CIOs anticipated u-shaped recovery right that's the largest bucket and then you can see another 15 percent and to say an l-shape recovery 14 on the v-shaped and then 16 percent to your point that are kind of seeing this this tailwind but if we kind of focus on that largest bucket that you shaped you know one of the thing to remember and again when we asked is two CIOs within the within this kind of coded flash poll we also asked can you give us some commentary and so one of the things that or one of the themes that are kind of coming along with this u-shaped recovery is you know CIOs are cautiously optimistic about this u-shaped recovery you know they believe that they can get back on to a growth cycle into 2021 as long as there's a vaccine available we don't go into a second wave of lockdowns economic activity picks up a lot of the government actions you know become effective so there are some kind of let's call it qualifiers with this bucket of CIOs that are anticipating a u-shape recovery what they're saying is that look we are expecting these things to happen we're not expecting that our lock down we are expecting a vaccine and if that takes place then we do expect an uptick in growth or going back to kind of pre coded levels in in 2021 but you know I think it's fair to assume that if one or more of these are apps and and things do get worse as all these states are opening up maybe the recovery cycle gets pushed along so kind of at the aggregate this is where we are right now yeah so as I was saying and you really have to understand the different not only different sectors and all the different vendors but you got to look into the industries and then even within industries so if we pull up the next chart we have the industry to the breakdown and sort of the responses by the industries v-shape you shape or shape I had a conversation with a CIO of a major resort just the other day and even he was saying what was actually I'll tell you it was Windham Resorts public company I mean and obviously that business got a good crush they had their earnings call the other day they talked about how they cut their capex in half but the stock sagar since the March lows is more than doubled yeah and you know that's amazing and now but even there within that sector they're peeling that on you're saying well certain parts are going to come back sooner or certain parts are going to longer depending on you know what type of resort what type of hotel so it really is a complicated situation so take us through what you're seeing by industry sure so let's start with kind of the IT telco retail consumer space Dave to your point there's gonna be a tremendous amount of bifurcation within both of those verticals look if we start on the IT telco side you know you're seeing a very large bucket of individuals right over twenty percent that indicated they're seeing a tail with our additional revenue because of covin 19 and you know Dave we spoke about this all the way back in March right all these work from home vendors you know CIOs were doubling down on cloud and SAS and we've seen how some of these events have reported in April you know with this very good reports all the major cloud vendors right select security vendors and so that's why you're seeing on the kind of telco side definitely more positivity right as it relates to recovery type right some of them are not even going through recovery they're they're seeing an acceleration same thing on the retail consumer side you're seeing another large bucket of people who are indicating what we've benefited and again there's going to be a lot of bifurcation here there's been a lot of retail consumers you just mentioned with the hotel lines that are definitely hurting but you know if you have a good online presence as a retailer and you know you had essential goods or groceries you benefited and and those are the organizations that we're seeing you know really indicate that they saw an acceleration due to Koga 19 so I thought those two those two verticals between kind of the IT and retail side there was a big bucket or you know of people who indicated positivity so I thought that was kind of the first kind of you know I was talking about kind of peeling this onion back you know that was really interesting you know tech continues to power on and I think you know a lot of people try I think that somebody was saying that the record of the time in which we've developed a fit of vaccine previously was like mumps or something and it was I mean it was just like years but now today 2020 we've got a I we've got all this data you've got these great companies all working on this and so you know wow if we can compress that that's going to change the equation a couple other things sagar that jump out at me here in this chart I want to ask you about I mean the education you know colleges are really you know kind of freaking out right now some are coming back I know like for instance my daughter University Arizona they're coming back in the fall evidently others are saying and no you can clearly see the airlines and transportation as the biggest sort of l-shape which is the most negative I'm sure restaurants and hospitality are kind of similar and then you see energy you know which got crushed we had you know oil you know negative people paying it big barrels of oil but now look at that you know expectation of a pretty strong you know you shape recovery as people start driving again and the economy picks up so maybe you could give us some thoughts on on some of those sort of outliers yeah so I kind of bucket you know the the next two outliers as from an l-shaped in a u-shaped so on the l-shaped side like like you said education airlines transportation and probably to a little bit lesser extent industrials materials manufacturing services consulting these verticals are indicating the highest percentages from an l-shaped recovery right so three plus orders of revenue declines and deceleration followed by kind of you know minimal to moderate growth and look there's no surprise here those are the verticals that have been impacted the most by less demand from consumers and and businesses and then as you mentioned on the energy utility side and then I would probably bucket maybe healthcare Pharma those have some of the largest percentages of u-shaped recovery and it's funny like I read a lot of commentary from some of the energy in the healthcare CIOs and they were said they were very optimistic about a u-shaped type of recovery and so it kind of you know maybe with those two issues then you could even kind of lump them into you know probably to a lesser extent but you could probably open into the prior one with the airlines and the education and services consulting and IMM where you know these are definitely the verticals that are going to see the longest longest recoveries it's probably a little bit more uniform versus what we've kind of talked about a few minutes ago with you know IT and and retail consumer where it's definitely very bifurcated you know there's definitely winners and losers there yeah and again it's a very complicated situation a lot of people that I've talked to are saying look you know we really don't have a clear picture that's why all these companies have are not giving guidance many people however are optimistic not only for a vet a vaccine but but but also they're thinking as young people with disposable income they're gonna kind of say dorm damn the torpedoes I'm not really going to be exposed and you know they can come back much stronger you know there seems to be pent up demand for some of the things like elective surgery or even the weather is sort of more important health care needs so that obviously could be a snap back so you know obviously we're really closely looking at this one thing though is is certain is that people are expecting a permanent change and you've got data that really shows that on the on the next chart that's right so one of the one of the last questions that we asked on this you know quick coded flash poll was do you anticipate permanent changes to your kind of IT stack IT spend based on the last few months you know as everyone has been working remotely and you know rarely do you see results point this much in one direction but 92% of CIOs and and kind of IT you know high level ITN users indicated yes there are going to be permanent changes and you know one of the things we talked about in March and look we were really the first ones you know you know in our discussion where we were talking about work from home spend kind of negating or balancing out all these declines right we were saying look yes we are seeing a lot of budgets come down but surprisingly we're seeing 2030 percent of organizations accelerate spent and even the ones that are spending less they even then you know some of their some of their budgets are kind of being negated by this work from home spend right when you think about collaboration tool is an additional VPN and networking bandwidth in laptops and then security all that stuff CIOs now continue to spend on because what what CIO is now understand as productivity has remained at very high levels right in March CIOs were very with the catastrophe and productivity that has not come true so on the margin CIOs and organizations are probably much more positive on that front and so now because there is no vaccine where you know CIOs and just in general the population we don't know when one is coming and so remote work seems to be the new norm moving forward especially that productivity you know levels are are pretty good with people working from home so from that perspective everything that looked like it was maybe going to be temporary just for the next few months as people work from home that's how organizations are now moving forward well and we saw Twitter basically said we're gonna make work from home permanent that's probably cuz their CEO wants to you know live in Africa Google I think is going to the end of the year I think many companies are going to look at a hybrid and give employees a choice say look if you want to work from home and you can be productive you get your stuff done you know we're cool with that I think the other point is you know everybody talks about these digital transformations you know leading into Kovan and I got to tell you I think a lot of companies were sort of complacent they talked the talk but they weren't walking the walk meaning they really weren't becoming digital businesses they really weren't putting data at the core and I think now it's really becoming an imperative there's no question that that what we've been talking about and forecasting has been pulled forward and you you're either going to have to step up your digital game or you're going to be in big trouble and the other thing that's I'm really interested in is will companies sub optimize profitability in the near term in order to put better business resiliency in place and better flexibility will they make those investments and I think if they do you know longer term they're going to be in better shape you know if they don't they could maybe be okay in the near term but I'm gonna put a caution sign a little longer term no look I think everything that's been done in the last few months you know in terms of having those continuation plans because you know do two pandemics all that stuff that is now it look you got to have that in your playbook right and so to your point you know this is where CIOs are going and if you're not transforming yourself or you didn't or you know lesson learned because now you're probably having to move twice as fast to support all your employees so I think you know this pandemic really kind of sped up you know digital transformation initiatives which is why you know you're seeing some companies desks and cloud related companies with very good earnings reports that are guiding well and then you're seeing other companies that are pulling their guidance because of uncertainty but it's it's likely more on the side of they're just not seeing the same levels of spend because if they haven't oriented themselves on that digital transformation side so I think you know events like this they typically you know Showcase winners and losers then you know when when things are going well and you know everything is kind of going up well I think that - there's a big you know discussion around is the ESPY overvalued right now I won't make that call but I will say this then there's a lot of data out there there's data and earnings reports there's data about this pandemic which change continues to change maybe not so much daily but you're getting new information multiple times a week so you got to look to that data you got to make your call pick your spot so you talk about a stock pickers market I think it's very much true here there are some some gonna be really strong companies emerging out of this you know don't gamble but do your research and I think you'll you'll find some you know some Dems out there you know maybe Warren Buffett can't find them okay but the guys at Main Street I think you know the I am I'm optimistic I wonder how you feel about about the recovery I I think we may be tainted by tech you know I'm very much concerned about certain industries but I think the tech industry which is our business is gonna come out of this pretty strong yeah we look at the one thing we we should we should have stated this earlier the majority of organizations are not expecting a v-shaped recovery and yet I still think there's part of the consensus is expecting a v-shaped recovery you can see as we demonstrate in some of the earlier charts the you know almost the majority of organizations are expecting a u-shaped recovery and even then as we mentioned right that you shape there is some cautious up around there and I have it you probably have it where yes if everything goes well it looks like 2021 we can really get back on track but there's so much unknown and so yes that does give I think everyone pause when it comes from an investment perspective and even just bringing on technologies and into your organization right which ones are gonna work which ones are it so I'm definitely on the boat of this is a more u-shaped in a v-shaped recovery I think the data backs that up I think you know when it comes to cloud and SAS players those areas and I think you've seen this on the investment side a lot of money has come out of all these other sectors that we mentioned that are having these l-shaped recoveries a lot of it has gone into the tech space I imagine that will continue and so that might be kind of you know it's tough to sometimes balance what's going on on the investor in the stock market side with you know how organizations are recovering I think people are really looking out in two to three quarters and saying look you know to your point where you set up earlier is there a lot of that pent up demand are things gonna get right back to normal because I think you know a lot of people are anticipating that and if we don't see that I think you know the next time we do some of these kind of coded flash bolts you know I'm interested to see whether or not you know maybe towards the end of the summer these recovery cycles are actually longer because maybe we didn't see some of that stuff so there's still a lot of unknowns but what we do know right now is it's not a v-shaped recovery agree especially on the unknowns there's monetary policy there's fiscal policy there's an election coming up there's a third there's escalating tensions with China there's your thoughts on the efficacy of the vaccine what about therapeutics you know do people who have this yet immunity how many people actually have it what about testing so the point I'm making here is it's very very important that you update your forecast regularly that's why it's so great that I have this partnership with you guys because we you know you're constantly updating the numbers it's not just a one-shot deal so suck it you know thanks so much for coming on looking forward to having you on in in the coming weeks really appreciate it absolutely yeah well I will really start kind of digging into how a lot of these emerging technologies are faring because of kovat 19 so that's I'm actually interested to start thinking through the data myself so yeah well we'll do some reporting in the coming weeks about that as well well thanks everybody for watching this episode of the cube insights powered by ETR I'm Dave Volante for sauger kuraki check out ETR dot plus that's where all the ETR data lives i published weekly on wiki bon calm and silicon angle calm and reach me at evil on Tay we'll see you next time [Music]

hello everyone and welcome to this week's wiki Bond cube insights powered by ETR in this breaking analysis we're going to share fresh data from etrs latest spending survey in particular ETR added a drill down question on the impact of coronavirus now yesterday I had the pleasure of hosting ETRS director of research Sagar khadiyah who took us through the details of that survey and we're gonna bring his comments in to this discussion so today I want to accomplish three things first I want to summarize the macro where are we at this point on the second day of spring in Massachusetts second I want to assess the impact from Co vid 19 on i.t spend for 2020 and the third thing I want to do is drill down into the findings from ET ARS latest survey after we do this I'll summarize and talk about what the outlook it looks like so where are we today you know we've gone from the fear of missing out in the stock market to basically fall out fear now as you well know the economic impact is not pretty I gotta say this is the first time I've ever seen a government imposed recession rightly so to save lives but I've also never seen such an escrow the board doubled downward shift in both supply and demand this creates uncertainty and ambiguity in pricing which makes forecasting anything really really difficult the liquidity shock and the credit risks are really of primary concern right now the price of oil is a huge issue why it's because energy companies account for a very sizable portion of the high-yield credit market over 10% so as prices fall it's going to be harder for oil companies to repay loans this creates default risk so this is the markets freaked out and functioning very very poorly now a poorly functioning market signals that we are not at the bottom everybody wants to know where the bottom is I'm not a stock picker and I'm not a market technician but I've seen a lot of downturns I'll share a quick story when I was at IDC we had an exclusive deal with Goldman Sachs two of the Goldman analysts were embedded into our Framingham offices now in 1987 on Black Monday and the following weeks I would stand at their real-time terminal there was no internet back then kids nobody had access to real-time trades but I did and I would watch the market in freefall and I would see it bounce back and then I would see it freefall again what I will tell you is this bottoms are impossible to protect everybody says that why because bottoms are not technical their psychological their emotional and in 1987 and then after the dot-com bust and after the financial crisis each time you saw the S&P with rally sometimes it would rally as high as 10% it would suck people back into the market and then pull back and that's going to happen here the markets not just gonna be fine any day now now if you're looking for some positives there is some silver linings that the canals in Venice are running clear which is amazing to see nitrous oxide levels over China are way way down okay let's shift and take a look at what this all means for IT spending what are the industries that are being most affected right now now as I show here there are some obvious sectors like energy and transportation retail etc but let's listen to Sagar from ETR what he told me yesterday now pay particular attention to what he says about supply chains roll the clip yeah industrials materials manufacturing retail consumer you know the healthcare pharma they you know those are the verticals from a supply chain perspective that are in you know elevated levels of broken supply chains and what's actually interesting is we in this survey we actually asked not only whether your supply chains were broken today but do you anticipate or do you continue or do and just they continue getting experiencing broken supply chains in three months from now and those percentages were up and I think that really tells us that this is not a one or two month type of recovery we're gonna see supply chains and demand continuing to be broken continuing to come down over the next three four months that I think is probably one of the biggest takeaways from the drill-down study so you see in the EGR survey it really underscores that we are not likely to see a quick snap back it's not a 1 or a two-month fix now in my own research I go out to the field I talked to people on the cube within our network I can add some excuse me some comments and some color here what we see is that healthcare right now is so swamped that they're not buying anything I mean they just they just are how many cycles most customers are taking they're skunkworks put anyone hold they're narrowing the capital spend and really focusing only on mission-critical items banks even though banks are down they have capital and they're still buying they got cash thanks they're smart and they're negotiating very hard for big discounts the other thing is a lot of customers have no choice but to buy many are on an AR are in your recurring revenue or annual current contract and have compliance edicts like we got to send out monthly statements if they don't renew they can't use their software to do that it's different but somewhat similar with maintenance contracts so you're seeing that sales teams are clearly bringing down their forecasts but they're not cutting them in half mmm not yet anyway all right but here's what's somewhat counterintuitive and you really you can really only quantify this with data some companies actually believe it or not they're spending more why because they try to preserve productivity would their work from home solutions they need infrastructure to do that so they're pivoting their budget to work from home they also have to secure that infrastructure so that means the cyber cyber security is seeing a little bit of momentum now let's take a look at the EGR data this is from more than a thousand CIOs and IT buyers it's fresh data right from March 40% of the survey said they see no current impact on their IT budget that is surprisingly high and look at all the green to the right-hand side you know most are showing five to ten percent increase but more than 20% of the respondents are actually expecting to increase budget in 2020 for things like work from home infrastructure let's take a listen to saga kadia who explains this further roll the clip yeah I think that's I think the the positive spent or the no change in spend I think that is what a lot of the market right now is missing and I haven't seen a lot of research on that because no one else has really been able to quantify how budgets are changing and so as you noted we're actually seeing people accelerate spend because of Kovan 19 and the reason is you know they're trying to avoid a catastrophe in productivity they are ramping up all this work from home infrastructure right not just collaboration tools virtualization infrastructure increasing VPN networking bandwidth mobile devices laptops security desktop support right you're a fortune 500 organization and you have 40 50 60 thousand employees working from home all the sudden you have to be able to support those employees and as a result you're actually seeing a large number of organizations accelerating spend and even the ones that are being hurt by the broken supply chains the demand coming down you're seeing some of their spendy seller ation being offset by spending a little bit more kind of what we're calling this kind of work from home infrastructure so sada went on to explain that consensus consensus expectations for global IT spend they were roughly at four percent before coronavirus and the pullback takes us now to flat or zero percent but what's not been reported is really the offset to the declines particularly from the work from home infrastructure now obviously this could all change in a likely will but this next chart really underscores that uncertainty and really the dynamic nature of the risk here what this track charts is the daily impact of the expected retraction so earlier this month in the et our survey you saw about a two percent retraction and exceed by March seventeenth it's down to flat so as we heard from Sagar the et our thesis is currently at 0% IT spend for growth in 2020 because of some of the offset now if the news continues to worsen the outlook is going to follow alright I want to wrap up by summarizing and and talking about what what's next and what you can expect so the current call as I said is for flat IT spend in 2020 it would be worse if not for the uptick in work from home and corollaries security infrastructure now it's not just collaboration and video tools it's virtualization solutions it's VPNs network upgrades mobile devices laptops and and the software to to secure all this stuff and make it work now despite the work from home offset we fully expect this picture or worsen over the next three months you got a watch for the duration of the the remote work at home mandates the travel bans the the no meeting policies there's a little doubt that productivity is going to be heard as we discussed yesterday with Sagar you can't just flick a switch and scale remote worker productivity you know that's a real challenge now having said that the expectation from CIOs is that this spending decline is going to be temporary what's unclear is the shape of the recovery is it going to be a v-shaped or a slow slog you can see the distant rim on the other side of the canyon it's there we just don't know how far away it is and we don't know how deep the canyon really is now there will be changes in our opinion that are going to be permanent as we said on a last braking analysis over the next several months organizations they're going to learn new things and that is going to shape their thinking in the future I personally expect accelerated digital transformations and a sustained viability of the work from home options you're gonna see new capabilities from distant learning with all the college shutdowns you're also going to see new risk mitigation paradigms you know the list goes on and on and on in terms of what we're going to see here as I said earlier there seemed to be some environmental benefits you know if you're looking for some positives here I think this next generation is much more in tune with that and you have my word and my promise and our team's promise that the cube and ETR is going to be here to keep you up to date et our survey data keeps rolling in you can check that out at ETR dot plus they are vigilant on this issue as are we from our remote studios look this is the new normal our skeleton crews are in studio and we're keeping the content flowing as many folks on our team they're working from home and they're on the grid currently our Palo Alto studio is fully operational four days a week each week and we're capturing remote guests on camera and Boston is open as well so get in touch if you need anything we are here to help and we're here to serve you okay this is Dave Villante for wiki bones cube insights powered by ETR thanks for watching this breaking analysis remember these episodes they're available on podcasts wherever you listen please connect with me emails David Galante at Silicon angle dot-com comment on my LinkedIn post I always appreciate that from the community thanks for watching everybody wishing good health and safety for you and your families we'll see you next time [Music]