The good, the bad, and the ugly of 2020
Phew! We’ve almost reached the end of 2020. If you’re anything like me, you’ve already started to refer to this year in the past tense – a clear sign that we’ve subconsciously put this somewhat eventful (read: traumatic) year behind us and are focusing on what can only be a more positive year in 2021.
However, as we approach the end of the year, it’s always a good opportunity to sit back and take stock of what we’ve seen, experienced, and achieved. So, let’s make ourselves comfortable and take a look back at what happened in 2020.
The global pandemic winners and losers
It’s fair to say that life in almost every aspect was challenged. As a civilization, we were all challenged to change our lifestyles, our ways of thinking and of course how we conduct business. With lockdowns enforced around the world and lengthy periods of closures for many different types of business, the clear focus for 2020 was on reducing social interaction to the absolute minimum to avoid unwittingly spreading the virus further. So, with those radical changes, who were the winners and losers?
Let’s start with the winners:
- Logistics companies – With no one being able to get out, everything needed had to get in, so logistics and delivery companies have seen a massive uptick in business this year.
- Online shopping – For the same reason, online shops have seen demand increase tremendously. Any companies who were not yet online have struggled or rushed to release some form of ecommerce.
- Supermarkets – As one of the only types of business allowed to keep trading during lockdowns, supermarkets have seen their revenues soar while restaurants and bars have been put on hold and customers have been forced to start using their own kitchens again.
- Fitness and exercise equipment manufacturers – Common sense dictates that a healthy lifestyle helps to steer clear from infections. Couple that with people having to remain at home and there has been a huge increase in demand for fitness related devices like bicycles, home trainers, etc.
Unfortunately, as with anything, where there are winners there are also losers. In this case, most negatively impacted industries were:
- Travel & tourism – With work-from-home policies and the closing of borders, the travel industry took a massive hit in 2020. Air travel was most impacted by strings of redundancies, groundings and profit warnings, however other travel companies such as public transport, taxis and many others have also suffered significantly.
- Hospitality – Restaurants and hotels were forced to close during lockdowns, but even since reopening they have struggled to get enough guests due to people being less willing to travel. They also faced increased internal costs due to new hygiene regulations and expectations.
- Oil and gas – Due to the massive reduction in travel, oil and gas producers have seen demand shrivel up quickly resulting in over-capacity and expensive extraction facilities lying still. In April, US oil prices went negative for the first time in history!
- Leisure facilities – These are some of the first businesses to be deemed non-critical and as such see the first forced closures. Even after reopening, many people do not want to be in close proximity to others and so visitor numbers are significantly down. Couple that with some inconvenient hygiene regulations (wearing a mask while running on a treadmill is not the most comfortable feeling) and it spells disaster for many business such as theatres, museums, and gyms.
Impact on IT consulting companies and SAP customers: projects coming to a standstill
So, what does all this mean for our industry (transformation projects and data management)?
In 2020, companies around the world reeled from previously unimaginable restrictions on global business. The stock markets plummeted, workers were furloughed or laid off, and governments were forced to announce enormous rescue packages for various industries and individuals impacted by the restrictions.
As a result, we noticed a reluctance to pursue expensive projects or deals as companies took stock of the situation and cautiously waited to see what would unfold. Most projects which had not yet started were shelved, either temporarily or permanently, while corporate priorities were reassessed and liquidity was prioritized in the uncertain environment. Luckily, most companies chose to continue ongoing projects to avoid additional costs, but with almost everything managed remotely.
Most companies decided to resume their SAP projects
On the whole, companies resumed their project pipelines and resurrected their budgets once they felt safe that they would not be too heavily impacted. Of course, industries that were hit the hardest are still focusing on their core business at the expense of non-critical projects, so the overall addressable market is somewhat smaller. Had SAP not already announced the extension of the maintenance periods for ECC and BW in 2019, we can be fairly sure they would have done halfway through 2020 as so many of their customers would struggle to start, let alone complete, such transformation projects in time.
Sales moved out to digital channels
One aspect of business, however, has not yet managed to recover, and that is face-to-face meetings and events. This has made it significantly harder for companies to position their products, and as a result there has been an increase in spending on social media presence, webinars or digital events to try to find other ways to reach potential customers. We were no exception, with our various Datalicious Tour stops combining studio recorded interviews with live interactive demos and Q&A sessions we managed to keep our network and visibility alive.
Due to the restrictions, most project work is now needed to be performed remotely. In that respect, both Datavard and the technology industry as a whole is lucky since remote access and video conferencing technology is extremely prevalent, allowing most companies in the industry to switch to a home-working mode relatively smoothly.
2021 will see a rise in mergers and divestitures
What does this all mean for 2021 then? With the introduction of a reliable vaccine, there is high optimism that current restrictions will be lifted and most seriously impacted industries will get a chance to rebuild their businesses. However, a complete recovery will not happen overnight.
Many industries will take years to regain the momentum they had prior to 2020. The airline industry for example is expecting passenger numbers not to return to 2019 levels for at least 2 – 3 years.
Once the dust settles, we will see which businesses have managed to weather the storm and which have not. This will invariably result in an increase in mergers and acquisitions as well as divestitures as the stronger and more profitable businesses buy up those that struggled more. Where business transformation takes place, technology transformation is not far behind. We are likely to see the demand for SAP transformation projects increase in the next couple of years, along with the budgets to complete them properly.
Increasing demand for cloud services and cloud-related technologies
With the significant increase in remote working, companies realized that cloud-based services are far more scalable and affordable than their on-premise counterparts. . It would be surprising not to find an increase in investment in could-based services and storage, which would in turn increase the pressure to remove costly on-premise data centers in favor of a cloud-only approach. This will translate into the need for data management products that embrace cloud storage and make the critical data in the SAP environment available to data lakes and various other cloud-based platforms. Thankfully, there are many companies, including Datavard, who are highly experienced at moving infrastructure to the cloud in the most seamless and transparent way possible.
As we approach the end of this turbulent year, let’s take a moment to appreciate the things we do have and look to a more positive 2021. Happy holidays to everyone and stay healthy!