Covid-19 - Why it isn't another .com bubble

Updated: Jul 4, 2020

As more and more businesses lay off staff, this is obviously a very worrying time for the IT sector. Companies of every size are being impacted but this isn't a time for panic, this isn't the .com bubble-burst - it is a time for calm heads but with a medium to long-term outlook.

Yesterday Accenture announced that they were to cut 900 jobs in the UK (out of a total employee count of 11,000 across the country) - that turned some heads as they are a bellweather of the IT community. No doubt they will be followed by a number of other IT vendors in the coming weeks and months. Interestingly, we understand from Accenture that things were a little difficult before the virus outbreak. It seems that the UK division had too many consultants sitting on the bench and the sudden drop in business exacerbated the situation.

There will be some casualities across the IT sector. As the economy grows and contracts, the IT business community rides the wave. In good times they expand and we see new entrants - in bad times jobs are lost and we see businesses being acquired by larger competitors or closing down. Business owners and the Board of Directors will be looking closely at customers reducing support contracts or lowering non-essential spend. They will make tough decisions to reduce unnecessary expenditure and will try to 'right-size' the sales and supporting teams to tackle the immediate future. However, we feel confident that in the longer short-term to medium term, good businesses will bounce back.

One thing that stands out in this Covid-19 crisis is the need for world-class IT systems. As the population change their habits - work from home, shop online, meet friends less, the traditional way of living and operating in a society simply moves online - we take a larger step on the digital highway. With this change it brings new opportunites for IT software, hardware, services - the whole landscape within IT should rise in time. It creates opportunites for new businesses to start-up - and for incumbents to find new opportunities.

The .com bubble burst and the meltdown impacted the IT community almost exclusively. With Covid-19, the virus will certainly leave a mark on businesses across the sector, but we fully expect that it will present an opportunity and a corresponding uptick in sales and jobs.