Published: April 23, 2020

Introduction

As the world is gripped by the COVID-19 crisis, questions have arisen about what this means for providers of digital services, including cloud infrastructure, communications and higher-level software platform services. Most digital providers report a spike in usage, attributable to the now-widespread social-distancing guidelines putting people at home instead of in offices, and ISPs have seen unprecedented spikes in capacity consumption across internet and mobile communications, as have service providers like Netflix. Online meeting platform Zoom has emerged as a dark-horse hit as the work-from-home platform of choice. The company reports that its user base has grown by almost 10x – a bit of a mixed blessing as Zoom has been grappling with the sudden consequences of going from a business meeting alternative to a household name. But it and other providers have ably coped with the load.

Hyperscale cloud providers like AWS and Microsoft Azure have acknowledge the crisis but have not to date suffered any strains on service levels. Microsoft took care to alert users that it would, if necessary, prioritize services and Azure consumption that served first responders and government operations around the crisis, but no reports of customers being turned away have emerged (or are likely to). Similarly, within the enterprise, survey respondents to 451 Research's COVID-19 flash survey reported that they expect additional strain on their IT resources, but a large majority say they will be able to meet that challenge.

The 451 Take

If there's one thing to be unperturbed about in these times, it's that the technological ground is firm beneath our feet; ISPs and cloud infrastructure providers are meeting with relative ease the unprecedented demands placed on them. This confirms a trend that has shown itself in other recent natural disasters, such as Hurricane Sandy, where Manhattan Island and the Eastern Seaboard were devastated by weather events, but cellular communications, internet and data services went largely uninterrupted. Such is the case with this massive upswing in home internet consumption and distance working; growing pains notwithstanding, the infrastructure we rely on has proved itself. Open questions remain as to the levels to which this spike will subside, and how much it will spur enterprises on with digital and cloud transformation efforts, which were already underway at a majority of them before the pandemic. The degree of the economic disarray that will ensue is also unknown. But as in 2009, this global event will spur more, not less, consumption of low-risk, fungible distributed infrastructure and services – in short, a confirmation for and boost to the cloud computing market generally. Barring major disruptions to the supply chain, service providers have nothing to fear outside of handling the upswing in business and planning for a gradual renormalization to a place where they are more important than ever.

Generalities on Action

Generally speaking, this is a good time for providers to focus on two things: the resiliency and capability of their services under tremendous stress, and what their customers are going through. Regarding the former, this means looking out for staff at every level, from providing sanitization supplies on-site to taking appropriate measures in the workplace and preparing for staff outages. Datacenter and infrastructure operators should have a complete understanding of their facilities, procedures and protocols, and how infection risk can affect them. Providers that primarily operate 'in the cloud' need to do the same on the IT hardware and software upkeep, which has exposed weaknesses for online service providers unprepared for a surge. This is a golden opportunity to fix these weaknesses for good and incorporate lessons learned into resiliency. Ideally, by the end of this crisis, every operator and service provider will be prepared for the next one.

The most important part of any business is its customers, so it is critical to actively gather intelligence on how they are doing and what, if any, plans they have. Providers should use whatever techniques suit their business best, including external market and user survey data, to reach out and interact with users. Understanding their position is going to be key to keeping as many customers as possible. For example, hospitality businesses have been shuttering by the handful, which is going to be an unavoidable blow to point-of-sale vendors and payment processors. As the next wave of businesses feel the effects, it will affect verticals in different ways, but all of them consume technology services, so it's best to understand who's going to be left standing and what that means to the overall business outlook.


The Good

On the infrastructure front, the tech sector – and service providers in particular – have proved robust, but just as importantly, the demand created overnight has shown something else: consumers both at home and in the enterprise are more than ready to make a transition from social closeness to social distancing, meaning there has been no widespread disarray in most functional parts of society. Of course, this excludes huge swathes of the economy like travel and hospitality, which are decimated, and healthcare, which is being subject to unforeseen strain. None of that is a technology problem, and in fact, service providers and platforms like food delivery services (e.g., DoorDash, GrubHub) have ramped up admirably to cushion some of the blow. The near-ubiquitous small-business payment processor Square helps restaurants and takeout shops integrate with digital delivery, and many other examples abound. In part, this is because of the maturity and sense of comfort and reliability of cloud platforms and services like Uber, Square and other distributed digital business-enablement platforms out there, and because thanks to FaceTime and Skype (and now Zoom), videoconferencing has gone from an enterprise business practice to an everyday convenience within reach of almost everyone.

Educational institutions that have already invested in digital learning software can make it span from home to school at every level, from elementary through higher education. Telehealth, until recently an interesting novelty to many, has suddenly become an outright necessity – but medical offices and hospital systems have largely already digitized records and doctor/patient interactions, so moving to online experience sharing has been possible, if not always practical. Supermarkets and other retailers that are allowed to operate likewise have digital ERP systems and distributors, so aside from panic runs on various essential goods, this pandemic has not driven meaningful scarcity. Contrast that with historical pandemics, such as the 1918 influenza crisis, where food shortages were a primary concern thanks to depleted stocks and fragile supply lines. Largely because of distributed digital communication and online service providers, we're in good shape on these basic needs.

The Bad

The real harm to the economy is ongoing in areas vulnerable to the effects of mitigating the COVID-19 virus. Service providers that have proved more than capable of keeping operations shipshape may see drop-offs in areas where their own clients are at a standstill, or worse, and specialized providers that target sectors like hospitality and tourism, for example, may be among the immediate losers in this scenario. It will already be obvious which providers and sectors are affected materially – it won't be AWS, Microsoft or IBM per se; it will be their ecosystem partners and software providers using that infrastructure.

The best outlook for these firms might be to hunker down and concentrate on ameliorating the impacts on their customers to whatever extent they can while preparing for the eventual return to normal course of business. This may mean helping customers deploy again, or it may mean preparing to trim down operations and focus on rebuilding their businesses. Now is not the time for bold moves in any direction as a service provider badly affected by this, but instead for regrouping and preparing for a free hand again at some point. Balancing the material effects on specialized providers and the increased utilization, the outcome for 'the cloud' will likely be a modest overall gain.

The Ugly

This sudden shift to 'online everything' has exposed the weaknesses of some of the online services we may have previously enjoyed as conveniences and now regard as staples. For example, Zoom, as noted, saw a historic rise in users in short order, but this also spawned a wave of innovative problems caused by bad actors – anonymous trolls 'Zoombombing' meetings by plucking invitational codes out of public or semi-public notices. Questions about encryption and security (Zoom requires interfaces with POTS and other legacy telecom networks and can't guarantee full encryption for every meeting) were the focus of controversy despite the company's transparency and acknowledgement of the issues, which already existed and don't change a functional security posture for most organizations.

Likewise, the fears of workers (for platforms like Lyft and DoorDash) about contagion and a lack of company readiness with protective supplies gave rise to waves of new fear, uncertainty and doubt that were more threatening than any technical or operations goof. That's the ugly part; service providers are now, more than ever, the record holders of responsibility for the outcomes of their customers, their employees (gig or otherwise) and the networks they have built. Everything is working, but nothing is for certain.
Carl Brooks
Analyst, Cloud Transformation

Carl Brooks is an Analyst for 451 Research's Cloud Transformation Channel, covering service providers, cloud platforms and supply chain/channel for cloud. Previously, he spent several years researching and reporting on the emerging cloud market for TechTarget.

James Sanders
Analyst

James Sanders is an Analyst with the Cloud Transformation team at 451 Research. Prior to joining 451 Research, James worked as a technology journalist at CBS Interactive, covering cloud computing, open source software and hardware, programming trends, quantum computing, as well as mobile and satellite communication. James received a Bachelor of Arts from Wichita State University.
William Fellows
Founder & Research Vice President

William Fellows is a cofounder of The 451 Group and VP of Research for the Cloud Transformation Channel at 451 Research. The Channel provides a point of intellectual convergence for 451 Research around cloud computing, in much the same way that the industry is converging on cloud from all points. In addition to keeping tabs on players entering the cloud and IT services space with disruptive business models, new technology and innovations in service delivery, William has also created 451 Research's Digital Economics unit.

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