This summer, Softline commissioned several studies to look at the business impacts of the COVID-19 pandemic on the business environment, the related trends, and align the approach to our strategy, management and investment. We interviewed leading entrepreneurs and sales executives plus customer and partner surveys. Our findings were enriched with information from summer reports by leading Professional Services firms as well as materials from vendor conferences.
It is somewhat obvious that the epidemic required companies to become more agile, for example a large share of Softline employees were transferred to remote work. All the measures taken in the spring remain as relevant today, with restrictions and precautions remaining in place due to the ongoing challenges that exist in the various regions of the world.
How do companies respond to the situation?
Businesses had and continue to require rapid actions to defend themselves today and tomorrow. How is this achieved?
Organizations have put employee and customer safety first with many setting up "war rooms" for top managers to quickly tackle challenges, develop strategies, and model scenarios more "aggressive" or accelerated than previously imagined.
Clearly maintaining or improving profits has been essential, reducing costs and the scope of non-core activities (or potentially abandoning projects or activities entirely). Clear procedures for cash flow and operating expense management have been and remain key. Also, increased focus on ensuring business continuity and stability, both short term reactive ways and longer term refresh and review of future crisis management.
To stay viable and retain sales level, businesses have analysed forecast demand by geography, sales channels, segmentation, developed flexible operational, organizational and financial plans to capture any pent-up demand (or adjust for over-served demand). To mitigate future risks, companies have looked to build resilience into operations, improve business continuity approaches and through systematic cost structure and balance sheet hydraulics to meet the present-day requirements.
We witnessed many organisations and customers master new tools: leveraging digitalisation and partnerships to improve business sustainability, scalability, and agility, rethinking strategic priorities, and investing in or acquiring key capabilities to stay ahead of the competition and remain accessible to customers.
Nine months of the pandemic have passed, and now businesses are making more prudent plans and predictions. Focus has shifted to longer term sustainability strategies but also ones that capitalize on the benefits and the trends created by the pandemic. One of the main conclusions of this year is that automation and digital transformation through technology can drive business forward in the new reality.
Retain your customer
Companies say they are trying to identify the real needs of customer’s relative to the demand and creating new future-proof lines of business. Regardless of their industry, most have intensified their focus on retaining existing customers and winning their loyalty with discounts and options such as preferential payment terms.
The impact of the pandemic varies by industry with the B2C sector experiencing turnover declines of between 20% to 40%. The B2B sector is estimated to suffer only a 10% decline in H2 2020. Capital intense infrastructure solutions experienced delays in the short-term while remote work enablement accelerated.
The crisis impacted many supply chains, especially for global businesses that work with many suppliers and by nature have complex supply routes where there are critical interdependencies due to the globalisation of many supply routes and components.
History shows that technology companies are often the most resilient in times of economic challenge and recent history indicates that many have managed to maintain profitability and some stability throughout this difficult period. Solutions for remote work have become a new priority for IT companies. Digital marketing has been receiving more investment and e-commerce channels have been a life line to some industries.
Costs and long-term transformation
We have seen evidence of many companies developing not only a short term, crisis driven focus on cost management but a long term view to their cost base and operating model involving systematic rethinking of their structure utilizing technology driven transformation. Part of this is driven by business resilience and anticipation together with experience of new ways of doing business driven through the necessity of this last period.
Accelerated innovation and automation
We asked companies how they had accelerated automation projects to improve labor productivity. It turned out that 50% of companies were already accelerating their focus on automation with the Technology and Financial Sector the most advanced. It is also clear that technological innovation is driving the proliferation of data and the continued development and acceleration of cloud computing, a service that continues to change the technology landscape. Often hyped technologies such as AI, RPA, machine learning and big data solutions are seeing more widespread consideration and adoption as a result.
Where will companies invest?
Priority areas witnessed include services and solutions for remote work, including desktop virtualization, technical support for remote work and service management, as well as applications for analyzing and improving end-user productivity. Another clear trend is augmentation of cloud solutions (multi cloud) together with the scaling of customer demands for performance and support through scalable delivery solutions. It is clear that security remains paramount with preservation of budgets and investments in both proactive and responsive security solutions, threat prevention, and monitoring. Key drivers in all cases included cost efficiencies, automation, security, business continuity together with some specific, industry related needs for “pandemic-related” solutions such as digital queuing, contactless payment and healthcare applications.
Remote work is expected to reduce costs, but it was noted that companies and their leaders do have concerns about productivity; nevertheless, 92% of respondents have already transferred staff to home offices. Depending on the sector, 25 to 75% of these employees work from home permanently with 46% of companies not yet decided whether to transfer more employees in the future. Finance, accounting, IT, HR functions were noted to have the highest share of remote workers with customer service employees still working mostly from offices.
Companies have become more willing to provide services in remote format. The short-term priority of most organizations interviewed highlighted the first focus, to maximise the return on existing investments through competent implementation and change management. Innovative solutions are often mentioned as a medium to long-term priority. At the same time, many commented that budgets were frozen with some companies postponing large projects and decrease the priority for less urgent cases, such as infrastructure upgrades and license purchases.
Business leaders were concerned about the safety and productivity of remote employees and it was noted that the initial stage of transition to remote work required a technological leap, and more long-term solutions are now needed.
- Desire to reduce costs and deliver efficiency
- Clear focus on technology and solutions that support remote work, security, desktop virtualization and e-commerce
- Growing pace and interest in process automation, RPA, AI and machine learning, as well as the adoption of digital technology to switch to "contactless" processes
- Increased activity for ready now Cloud companies plus accelerated Cloud migration as companies change operating cost models
- Prudent approaches to investment to protect cash flows until the end of the financial year