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No end to economic woes in sight for struggling IT vendors - report

22 Jun 2020

Traditional IT vendors and startups have struggled with layoffs, pay cuts and furloughs as COVID-19 hammers tech companies not associated with pandemic cash cows like cloud and remote collaboration – and more pain is on the horizon, says GlobalData.

New research from the data and analytics company has found that the number of active jobs in the technology and telecommunications field was down 36.2% in May 2020, compared to the prior-year period.

“Times are tough for enterprise IT vendors. The economic downturn as a result of the COVID-19 pandemic has hit them hard,” says GlobalData principal analyst Steven Schuchart.

“Some IT vendors, particularly the ones involved in cloud or collaboration, have seen great increases in business, but the traditional vendors and startups are taking a beating.”

While the news may be grim for many vendors, the gradual relaxation of COVID-19 restrictions has bolstered the wider tech industry’s stock standings – the industry equity index has been recovering since its lowest point in April.

The equity index year-to-date is down by 1.4%, but up 4.7% month-over-month, according to GlobalData.

“Pandemics typically have a second wave and there are more challenges from COVID-19, which may include more shutdowns and further economic damage,” says Schuchart. 

While bailouts, government stimulus packages and savings have kept many traditional vendors afloat so far, skyrocketing unemployment and plummeting consumer confidence will continue to test them. 

As a result, some IT vendors have been engaging in furloughs, pay reductions and layoffs. The same has been happening at their partner organisations, the VARs that in most cases deal with customers.

“Job losses represent not only a loss of institutional knowledge at vendors and partner organisations, but also a loss of capability and capacity,” says Schuchart.

“Sales and productivity will suffer more than it already has as adjustments are made, work redistributed or discontinued entirely.”

GlobalData’s report is just one of many insights into how the technology industry is coping with the pandemic. Several organisations have created resources and tools to help struggling tech companies.

In April, CompTIA launched the COVID-19 Resources Forum, which allows users to share information, resources, and best practices related to how they are managing their businesses amidst the worldwide impacts of the virus.

Users can submit their information about how the technology industry is responding to the public health crisis, details of philanthropic and community service efforts, as well as tips and tricks to improve remote working. 

There are also international resources, a listing of virtual industry events, and sections to ask questions of other users and industry experts.

“Our members and the technology industry are doing incredible work in communities around the world and we want to make sure they have a platform to share best practices, success stories and valuable resources,” says CompTIA executive vice president for industry relations Nancy Hammervik.

“The technology industry has stepped up and answered the call on so many levels and we want to empower professionals and companies to continue to serve their customers and the public.”