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Infrastructure Software
Scott Goering  |  March 31, 2020
COVID-19 and Corporate-IT Spending: Updates from the Field

We are living through a global crisis of unprecedented scale. In the U.S., last week’s unemployment numbers were literally the worst in history. And yet some knowledge workers are quickly settling into what feels like a new normal—working from home, spending hours on video conferencing and Slack, and at least attempting to carry out their usual duties.

Nobody knows how this crisis will play out over the next year, including companies that sell B2B technology into large corporations (my focus at Battery Ventures). But in order to get as clear a sense as possible of how corporations are reacting to the crisis, Battery reached out to a number of large enterprises and asked about the current state of the market. We spoke to companies in the financial services, retail, insurance, pharmaceutical, cable/telecommunications, and tech sectors. Most were Fortune 100 companies, but our survey included some companies with market caps under $5 billion. We promised our contacts anonymity in exchange for their candor.

Here are five major takeaways from our conversations:

1. It’s too soon to tell the full impact on budgets and priorities.

For now, enterprise-IT and tech projects that were already underway are continuing to completion. But new projects will face heightened scrutiny, and it’s likely that only projects considered critical will move forward. Big renewals in enterprise IT budgets typically come in Q4, so watch for what happens later this year—many things about the shape of this crisis and the speed of the recovery will be clearer by then.

2. This crisis is accelerating the adoption of modern remote-working tools.

In most industries, this crisis is a catalyst forcing the rapid adoption of teleworking, virtual collaboration, and the associated digital tools–no surprise there. What is surprising is that this extends beyond the class of knowledge workers to customer service and other departments, too. In retail, we’re seeing firms look for ways to get hourly associates engaged digitally. Customer engagement is also rapidly shifting to remote work—so rapidly that companies are no longer looking to build custom tools but are buying off the shelf SaaS tools to get people back to work. Expect some serious postmortem reviews for legacy products.

3. There’s one big exception to that trend: financial services.

Many industries, including pharmaceuticals, spoke of the lack of modern collaboration tools for knowledge workers as a big risk to their business. It’s (very) early to make predictions, but we do expect this to be a permanent shift in perspective for many companies. Remote collaboration capability and the shift to the cloud will be seen as a way to increase resiliency as much as to reduce costs.

At financial-services companies we spoke to, however, modern collaboration tools were seen as introducing risk, rather than mitigating it. Several banks called out the lack of enterprise-level security in SaaS tools, describing them as “basically consumer grade.” These companies are experiencing a level of cyber-attacks that they haven’t seen in years—security will be a big concern for them going forward. Other financial service firms we spoke with expressed concern about these tools’ lack of auditing – a necessity in their highly regulated industry.

4. Data and analytics are still important, but not yet viewed as core to the business.

In talking with corporate IT execs regarding post-COVID priorities, data/analytics has not come up in a single conversation. This is in stark contrast to pre-COVID, when the data/analytics space was the hottest topic on executives’ minds.

As one pharmaceutical executive put it to me: Companies have been on a journey with data. As an industry, pharma (and many others) are somewhat immature in this regard. Executive teams have not fully realized the power of a mature data/analytics stack. Differently stated, none of the predictive data/analytics work done in this company is embedded in operations. That makes data “out of sight, out of mind” during this .

Data literacy at large corporates is low and not accelerating. The vast majority of data being leveraged is for reporting – for instance BI dashboards. Very few companies (excluding digitally native ones) leverage data for forward-looking activities like strategy and planning. The models and capabilities exist, but literacy is so low outside of the data org that data teams don’t yet have their own seat at the table.

5. Near term, for a project to get funding, it must either a) increase digital engagement with customers; b) cut costs compared to the legacy tech stack; or c) enable remote collaboration.

Some industries, including insurance, are already talking about cutting non-core projects; others are delaying new spending. This is a huge shift from just a month ago, when we conducted another informal survey of enterprise contacts and found that they were interested in innovative, cross-industry collaboration, even in core business functions. Today, it’s all about meeting the needs of a suddenly all-remote workforce—and all-remote customer engagement. That means companies with short implementation times are well-positioned to sell into corporate IT buyers in this environment. For software and platforms selling in the core IT-systems market, the future is about optimizing the stack through low cost delivery models such as open source.

Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients.  For more information about Battery Ventures’ potential financing capabilities for prospective portfolio companies, please refer to our website.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. This post was prepared as of the respective date indicated and, given the rapidly changing landscape of issues related to the pandemic, may soon become outdated. We have no duty to update this post.

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