COVID IS CHANGING MANY TECHNOLOGY MARKETS FOREVER

The response to COVID didn’t suddenly invent Amazon or Zoom, but it has certainly accelerated their adoption. At the time of writing, in the U.S. we are 8 months into the pandemic. Vaccines are eventually coming to the rescue, and sooner or later we will be more or less back to normal.  When the dust settles, what markets will be permanently changed? 

The good news is that it appears several vaccines with a high rate of effectiveness are coming soon. The World Health Organization estimates that in order to achieve herd immunity, 65-70% of the population must be vaccinated. Recent estimates state that most Americans should start getting access to vaccines by April and through the summer. That means that by this time next year, there is a good chance we can look forward to pre-pandemic normalcy. By that time, the pandemic will have run for almost 2 years, so many of the changes to the way we use technology are going to stick. 

In parallel, another generational technology shift is happening at the same time, the rollout of 5G. 5G promises significantly higher bandwidth and lower latency. Without turning this into a 5G blog, it promises benefits to manufacturing, robotics, autonomous driving, supply chain management, AR/VR and video analytics, just to name a few. 5G will enable some of the technology changes that we are seeing accelerated by COVID.

1. The Obvious Ones: Online Shopping and Remote Work

Some technology-enabled markets like e-commerce and video conferencing weren’t invented to respond to COVID, but COVID accelerated them and they are here to stay.

Online Shopping

I don’t know about you, but even though I can go to my grocery store in person, I have continued placing my grocery orders online because it’s convenient. Once people start buying online, they tend to keep buying those things online. Case in point – vitamin retailer General Nutrition Centers. (Note I was a GNC franchise owner in the ‘00s) GNC, long battered by online competition, in June 2020 filed for bankruptcy and commenced closing many of its retail stores. In September 2020, it was subsequently acquired by China-based Harbin Pharmaceutical Group. One could conclude that COVID certainly didn’t cause GNC’s demise, as that probably started at the dawn of the dot-com era, but COVID certainly accelerated it. I’ve always said that you can’t buy a sandwich online, but you certainly can buy your protein powder online. And actually, now you can buy your sandwich online and get it delivered, but I digress.

Remote Work. While many workers will eventually go back to (gasp) physical offices, businesses have learned that workers can be just as productive remotely, and a lot of people like working from home. Many workers have fled San Francisco and New York to work remotely in areas with lower cost of living and less traffic, and a lot of them aren’t coming back. Some companies like Google aren’t planning to have workers come back into offices well into 2021, and when they do, they won’t come in every day. That means online collaboration tools are here to stay. 

Those are some of the obvious technology impacts of COVID. Here are some others:

2. Smart Buildings – Facility Wellness. This one is a bit counter-intuitive. If nobody is going into the office, and after COVID still a reduced number of people will go to the office, wouldn’t that reduce incentive to innovate? Surprisingly, no. The short-term need to save costs and make buildings safer will pave the way for more buildings to offer smart building features permanently. Harvard wrote a good article about Healthy Buildings that you can read here. 

In the shorter term, as limited numbers of workers return to offices, landlords are optimizing their building operations for reduced capacity and improved cost savings. That means remotely managing and controlling energy usage, climate, lighting and access control. More facilities are being fitted with Building Management Systems which previously catered only to larger buildings. 

More buildings are also leveraging an all-in-one access architecture like Secure Access Service Edge (SASE), which rolls an SD-WAN and security into a service that makes it easier for property managers to manage many properties all from one place. SASE cuts down on costs of truck rolls for maintenance, while improving security when managing a bunch of disparate systems across properties. 

Offices and retail locations are increasingly being equipped with advanced IoT and video analytics solutions, accelerated by the COVID environment. Sensors can monitor room occupancy relative to capacity, flow of people, thermal imaging and even perform contact tracing. Initially many of these systems were developed to power smart-lighting and room-reservation systems, but have been thrust into service as COVID safety measures. 

Smart buildings can also leverage video analytics for more than just security. In July 2020 Cisco’s Meraki division acquired MOD.CAM (my current firm advised the seller).

MOD.CAM offers an edge-AI based computer vision solution that visualizes and quantifies the flow of people. An example would be a retailer tracking customer flow and engagement in its stores. This gives insight into ideal store layout, merchandise placements, and effectiveness of promotions. 

In the longer term as more people eventually return to the office and to retail stores, tenants will have a much stronger interest in health measures like clean air and water, parking management, noise monitoring and tracking of automated cleaning. Landlords will leverage these as competitive advantage to win new business and recover losses from prior vacancies. More than just a COVID response, “Facility Wellness” aka “Building Health” is a selling point to attract tentants. 

3. Internet of Things (IoT)

I’ve spent a lot of time in the IoT market for the past several years as it has developed, and it’s going to accelerate for two reasons. First, since more people will work remotely, (see Smart Buildings, above) in order to remotely monitor and manage something like a factory or an oil rig, you need smart sensors that can report actionable data and make decisions at the edge. Hence, more remote work = more sensors = more IoT. The second reason is that IoT becomes more useful with 5G. When you can process more data more quickly and do more processing at the edge, it enables the factory, autonomous vehicle or refinery to do more powerful things like run AI-powered applications locally. AI can make decisions without waiting to send large amounts of data to the cloud or be subject to network disruptions or security events. The drive towards managing more things remotely + 5G rollout = good for IoT solutions.   

There are many other important technology markets that will have lasting impacts from COVID. They include sectors like Healthcare (Telehealth, Medical Imaging, Remote Health Monitoring) and Online Education. I hope to cover more of these in a subsequent blog.

Brent is a Technology M&A investment banker, trained as an electrical engineer and in chip and software sales and marketing. Prior to being a banker, he worked in large companies like Texas Instruments, VC-funded startups, and once owned a retail franchise business as a side hustle. He advises tech companies doing cool cutting-edge things that are ready to exit, often that have raised venture capital, and usually run by engineers. When not selling companies, he can be found at the gym, helping his kids with STEM and math, doing Brazilian Jiu Jitsu, or watching his Kansas City Chiefs. He might quietly admit to playing Call of Duty once in a while and looks forward to getting his hands on a PS5. Brent believes that CES 2022 will be epic and we should all go, after being vaccinated of course.  

#IoT #COVID #M&A #Smart Buildings #Healthy Buildings #5G #SASE #AI #ML