Coronavirus and the business of communications

COVID-19 has brought a substantial increase in internet traffic and increased the demand and dependence of consumers on the mobile internet. Even in the enterprise space, there is unprecedented traffic explosion as error resolution is attempted remotely due to limitations in field work. This will accelerate the remote deployment and virtualization application, accelerate the network transformation of operators, and improve the flexibility and resilience of the network. As more organizations start to work remotely and migrate their apps to the cloud, there will be an increase in the enterprise requirements of connectivity and data center. 

However, the core business of telecoms continues unabated. The buildout of fixed and radio networks continues apace. Like all other industries, telecom equipment providers depend on the manufacturing capabilities of companies in China for supply. However, the longer timelines for CAPEX investments by telecom providers insulates the industry somewhat from events like the COVID-19 virus. Impact on the manufacture and distribution of consumer and enterprise endpoints such as phones, tablets sensors and cameras will certainly be affected, but core components face longer lead times which may lead to delays in project implementation if the virus cannot be contained beyond summer.

The Impact on Communications Spending

At this stage, IDC’s telecom forecast remains unchanged for markets across APeJ. Telecom spend is expected to remain consistent over the remainder of the year, even though budgeted spend may be prioritized to focus more on branch and remote worker support plus accelerated move to cloud based collaboration and conferencing solutions. 

While overall CAGR from 2019-2023 for CAPEX in APeJexGC is declining by 1.6% overall, focus areas such as cellular infrastructure and back end systems transformation continue to show healthy growth. Our current view on China is that CAPEX investment is slowing down in 1Q and 2Q20 but if operations can return to normal the operators will make up for lost time in 2H20 and thus our assessment is that it is too early to estimate a downturn in spending in China in 2020. Although covid-19 will slow down China's 5G construction in the first half of the year, it has no impact on the annual expenditure.

Applying Technology to COVID-19

Mobile technology is being used by the Chinese state and central government to fight the virus outbreak. The government is working with telecom companies to record movement of its people, through their smartphone locations. In some cities, people are not allowed to use public transport as the government puts together a comprehensive database of peoples’ movements allowing it to track movements in case somebody is infected later. This database is powering the state-run platform called Close Contact Detector, allowing people to see if they have been in close contact or vicinity with anybody infected. 

The virus has brought about transformation in implementing IoT solutions that are disrupting traditional business models. Using drones for disinfecting surroundings is becoming more common across cities in China to reduce exposure of medical staff directly to the virus-stricken clusters. Motion detecting sensors within automated entrances are spraying disinfectants onto the visitors within office buildings before they get to work. Contactless delivery is becoming the new normal – real time delivery alerts, robots and closed loop communications for collection and delivery may set the precedent for how supply chains function in the future. 

At an enterprise level, many organizations (IDC included) have taken steps to mandate remote working and replace business travel with video, audio and other collaboration technologies. Collaboration has long been an augmentation for face-to-face working, as the preferred engagement drives demand for the global trotting executive. Outbreaks like SARS, MERS and now COVID-19 impact travel, retail, hospitality, supply chain and financial industries as enterprises pull back from engagements between employees, suppliers and customers. 

What the ongoing coronavirus outbreak has forced is a refocus on the broader notions of enterprise risk management (ERM), which include solutions used by enterprises to establish, analyse, measure, and report risk activities. These include the establishment of governance practices, increased transparency over losses/risks, and greater focus on stress-testing and scenario analyses.

Scenario planning is a key component of business continuity planning (BCP). BCP generally includes all critical components of a business that must be recovered within a specific time after a failure of service, caused by natural disaster, human error, utility breakdown, hardware failure, and even certain business crises such as cyberattacks. At the city level, scenario planning involves moving the R&D hubs, data centres and command centres beyond the high population density cities of China to the greater metropolitan clusters and even set these up outside of the mainland as a contingency planning measure. This will involve significant commitment to building a wireless network that has uninterrupted connectivity, low latency and robust security.

What should enterprises do next?

• Blunt the adverse effects quickly through countercyclical technology investing. The current outbreak will inevitably result in a shifting of priorities for communications products. Carriers are already building capabilities around cloud interconnect, workload portfolio and increasing their emphasis on radio-based communications like Wi-Fi and cellular. Implementation of collaboration, mobile worker and conferencing solutions to support remote working practices is likely to move up the priority list as the wide availability of cloud-based solutions has reduced the investment required in delivery of unified communications capabilities. 
• Harken back to years of crisis past. The best practices for how best to make the right calls on technology spend areas are hopefully still available within carriers as they guided their customers through the systemic crisis of 2003 (SARS) and 2009 (the global financial crisis). 
• Ensure BCP is agile. The nature of COVID-19 and what looks like the unprecedented scale of contagion and strength of impact of a stalled Chinese economy means that BCP plans must be brushed up. The risk management and BCP teams need to take advantage of flexible solutions like SD-WAN and multi-cloud to ensure they have the capability to support migrating workloads from their customer base
• Assess, and then invest. The investment and specific initiatives in BCP should reflect real risks. Enterprises will try not to invest more than the chances of risks happening, but the question is, and always will be, "How do you really measure the chance of it happening?" This is a caution against investing after the worst possible rumours regarding COVID-19. Carriers have a role in assisting their customers in planning for the worst outcome by delivering flexible and agile solutions that can adapt to the changing situations faced by their customers