In the New is a personal update series from InsightaaS analyst Michael O’Neil.
Outdoors, March has been sunny so far – but every screen I’ve seen has been clouded by the enormous shadow of coronavirus.
Covid-19 through different lenses
Apologies for turning this edition of In the New into another in the long train of Covid-19 focused analyses, but it is truly the elephant in the room at this point, dominating health, political and economic discussions. All three perspectives are important to understanding what coronavirus means to future options and opportunities.
Each new day brings two different kinds of health information: numbers and locations chronicling the spread of the infection, and an evolving, often self-contradictory narrative on prevention, treatment.
As I write this (March 9), Worldometers reports a total of 111,784 coronavirus cases worldwide (up from 90,443 one week ago), and 3,893 deaths, indicating a case fatality rate (CFR) of 3.48%. The number of cases will certainly rise rapidly, as a consequence of virality but also – mostly? – as a result of increased testing; South Korea, which has had the most pervasive program, had (as of March 2nd) tested more than 100,000 citizens/residents and had, as of that date, 4,335 known cases. To date, South Korea has identified 7,478 total cases: 53 deaths (.71% CFR), 36 (.48%) seriously or critically ill, 166 (2.22%) recovered, and 7,223 (96.59%) considered to be in mild condition. South Korea’s approach appears to be working, with new cases dropping; data from China, which is often seen as less trustworthy than data from South Korea, is even more encouraging, with essentially no new cases in the past week.
All of these figures help to support different calculations on the likelihood and/or severity of infection. The most important story that is emerging, though, is the need to delay the spread so that healthcare facilities aren’t overwhelmed; many of the fatalities are ascribed to an inability to provide effective treatment, due to more new patients requiring care at the same time than the healthcare system can accommodate. Self-isolation is the most efficient way of doing this, assuming that it’s possible for someone to stay at least two meters from other people for two weeks. In practice, though, it is difficult to lay in two weeks worth of food (and toilet paper, apparently) before experiencing symptoms or coming into contact with someone who may be infected.
The Covid-19 threat to the global economy (and to the IT industry) is potentially as bad as, or worse than, the health impact. A global workforce that can’t collaborate effectively can’t deliver products that rely on timely supply of components from far-flung suppliers, and can’t create and implement complex solutions.
Many years ago, my former manager, Philippe de Marcillac, authored a report called “Trouble Anywhere is Trouble Everywhere.” Prompted by earthquakes in Taiwan, the analysis noted that all supply chains that are dependent on components from specific locations can be halted by a disruption a a single point of failure. I wrote to Philippe last week to ask about this, and he added a couple of important insights. One is that in the case of a natural disaster like an earthquake, people tend to pull together, while in a pandemic situation, people tend to pull apart and isolate; this makes recovery much more difficult. The second was that his thesis dealt with a disruption affecting a single link in a longer chain, and that coronavirus affects every link in the chain; he observed that today, it might be better to say that “Trouble Everywhere is Trouble Anywhere” – that the world’s governments, businesses and citizens are so interconnected that no location is insulated from tremors in the global economy.
The isolation used to contain Covid-19 has a devastating effect on economic activity. Manufacturing doesn’t work when people don’t, as is seen in the recently-published fact that Chinese exports fell by 17.2% in January/February of this year. The impact on solutions is harder to quantify, but may well be even greater. As just one example, the ability for people to come together in large groups to discuss issues of common concern has virtually disappeared: Mobile World Congress, SXSW, Google I/O, Facebook F8, HIMSS and others have cancelled major events, with others are expected to follow (here’s a current status tracker from Ziff Davis, and here’s a list of cancelations from IT World Canada). Vox reports that the direct economic loss from the cancellation of nine of these events already surpasses $1 billion, and that is just the impact on airlines, hotels, restaurants and other direct suppliers – the loss in economic activity/momentum resulting from the inability of suppliers, customers and partners to interact will be many, many times that amount. Smaller gatherings will continue –most business meetings involving up to a dozen or so participants will continue, and trade shows of under 500 attendees seem safe so far – but the connections needed to assemble, deliver and optimize solutions will be frayed by the reactions to the virus, both those based on medical advice and those resulting from corporate or personal caution.
Note: Working with The NPD Group, I will be delivering a presentation on the impact of coronavirus on the IT industry to the board of the Canadian Channel Chiefs Council on April 1st. More on the economic impact – including channel sales numbers comparing the past three years sales patterns – at the meeting!
Every person will need to make a determination as to how ‘public’ they are willing to be. Many are likely to opt initially for isolation, moving to increased interaction in response to economic imperatives. In time, of course, we will all need to return to the business of business…but we will need to see that the medical responses to Covid-19 provide us with reasonable assurance that the effects of the virus won’t typically exceed a cough and fever. The balance of caution will place a strain on families and national economies alike. At a human level, virtually everybody needs to work – the much-quoted United Way Alice Project found that in 2017, 44% of Americans said that they could not cover an unexpected $400 emergency expense – but to quote Clint Eastwood, “dying ain’t much of a living.” And at a government level, political ‘lives’ are tied to economic viability.
As I write this (2:05 pm, March 9) the Dow Jones Industrial average is at $23,811.47. The market is moving too quickly to keep this figure up to date – DJI has lost more than $2,000 in value, or about 8%, since the start of trading today – so I apologize in advance if subsequent prices have changed dramatically.
Stock market averages aren’t an apt measurement of economic conditions for most workers, but the Dow has been a point of emphasis for Donald Trump and his supporters, and the underlying economy is of course important to leaders in all countries.
We’ve already seen governments looking for ways to take action on Covid-19, with different objectives and tactics. South Korea is clearly prioritizing citizen health, and Italy (with its Lombardy travel restrictions) appears to be trying to follow this path as well. The US on the other hand, is emphasizing policy levers focused on the economy – it has already reduced interest rates by .5%, and will probably consider stimulus packages (such as small business credits) as well. The scope of these initiatives isn’t infinite – the US benchmark funds rate is 1%-1.25%, and the US federal deficit is already more than $1 trillion – but with an election looming, the current US administration will need to take action to halt economic implosion, and Canada and other countries will most likely follow suit.
Throughout the next several months (at least), there will be political urgency with respect to pandemic management and to economic vibrancy. These are tightly-coupled requirements, in that failure in either area will likely bring down a government. But as is discussed above, the tactics used to achieve the goals may be in conflict – the best actions to delay spread of the virus aren’t the best options for restarting the economy. Government, as well as individuals, will need to balance health caution with economic need.
Despite the uncertainty surrounding coronavirus, there are a number of developments that seem safe to predict. On the health front, the number of cases will grow rapidly: It seems likely that R0, the number of new cases that an infected person will cause, will be high for coronavirus, since testing has been sporadic or worse, and asymptomatic carriers will encounter many different people before they recognize the need for self-isolation. It also seems likely that the CFR will be much lower than 3.4%, potentially below 1%. Regardless, this is a significant epidemic today, and will become much worse before it gets better: in time, all of us will either contract coronavirus or know people who have gotten the disease, The economic outlook is also gloomy – the damage done to some industries (such as cruises) may be permanent, and damage in many other sectors will be deeply felt. On the political (or perhaps, social) front, it seems certain that economic anxiety will eventually exceed health anxiety, and that businesses and individuals will be driven to prioritize revenue above isolation/caution. Notwithstanding Clint’s observation, we can’t simply stop generating income.
The Four Stages of Corona
Based on the admittedly-partial evidence at hand, I think it’s possible to make a case for a four-stage approach to coronavirus:
- Panic – the virus is here, and it’s spreading!!!
- Medical – we need to deal with the reality of the situation, reduce the CFR and ultimately, the spread of the disease. This can include a variety of responses: as we’ve seen already, it can involve mandatory lockdowns, voluntary self-isolation, cancellation of travel and group events, etc. The main imperative, as noted above, is for public health departments to slow the spread of the disease, so that the healthcare system can keep pace new cases.
- Economic (1) – we need some semblance of business as usual, we can’t simply stop generating revenue. China is getting to this point now, with companies mandated to resume operations. Production levels are still low (and worries about the potential for infected returnees to restart the isolation cycle are high), but there is at least some evidence that when new cases plateau and the number of recoveries becomes significant, the drive towards renewed business activity will outweigh concerns about further spread of the disease.
- Panic 2 – We need to make some money RIGHT NOW! I think the rational risk/reward balance between health caution and economic imperative will quickly give way to a manic compulsion to make up for lost time: bonuses, corporate growth and KPIs/MBOs/etc. will demand action, and – as long as the health risks aren’t overwhelming – the business community will respond by working as hard as possible to restart growth engines, probably with some priming from government.
Speaking specifically to Canada, it’s easy to see an expedited path from stage 1 to stage 4. Cases are beginning to be found here, and the spread (and panic) will be significant. Stage 2 will be scary, though Canada (and especially Toronto), which experienced SARS and has socialized healthcare, will probably be spared the worst of the US experience. Stage 3 might well get unanimous support from the various parties in Parliament, and other levels of government will want to be seen as proactive here, too.
The real key, though, is stage 4. Businesses in Canada tend not to do much in July and August, meaning that a stage 4 reboot would involve an all-out business frenzy in June or be delayed until Q4 of what would be a disastrous year. If the health factors allow, I believe June will see a nation-wide surge of business activity, followed by work a bit deeper into July than is usual, and perhaps a September restart that is less gradual than we’ve seen in years past.
I apologize if parts of this In the New seem a bit disjointed – this is an enormous and volatile issue. Hopefully, the observations above will be useful as you and your organizations (and families) come to grips with coronavirus in the weeks/months to come. Comments would be very welcome!
Last month in review
Highlights from the InsightaaS website include:
- Extending and linking the data centre globe (Mary Allen) – analysis of Digital Realty’s expansion/acquisition strategy.
- Where automation meets SDDC (Michael O’Neil) – a review of a new DC Foresight report and description of the launch event Meetup, which featured Oregon-based Rami Radi of Intel and Canadian IT executives Rocco Alonzi and Joe Belinsky; includes a download link for the In-Band vs. Out-of-Band Data Centre Monitoring and Management
- Cloud expansion in Canada: market portent or more of the same (Mary Allen) – a tremendous, long-form (nearly 2,000 words!) examination of the data centre market in Canada, focusing on how and why Azure is poised to win share from AWS.
- “Trending now”: News items, including:
- auticon expands operations in Toronto in collaboration with Deloitte Canada
- University of Waterloo launches venture fund for healthtech startups
- Eguana announces $5.0 million strategic investment by ITOCHU Corporation
- D-Wave launches Leap 2, opening door to in-production quantum applications
- Uncertain economic growth and lack of key skills among top Canadian CEO concerns
- ENCQOR 5G signs memorandums of understanding with 6 telecom service providers
- Honeywell launches first autonomous building sustainability solution to fight rising global energy consumption
- WorkJam announces acquisition of Forge
- mCloud announces acquisition of AI visual inspection technology from AirFusion
- Hydro-Quebec partners with Mercedes-Benz on development of solid-state battery technologies
I mentioned the April 1st Coronovirus-focused NPD presentation to the Canadian Channel Chiefs Council board earlier in this piece. Between now and then, we will be hosting three research calls in support of a new report, When your Hybrid Cloud Network is Secondary to Your Cloud-First Strategy. If you’d like to contribute on either March 16th (2:00-3:30) or March 23rd (10:00-11:30, or 2:00-3:30), please follow this link and let us know – we’d be happy to have you as part of the report research team!
Also, please stay tuned for an announcement on GCDCS20 – which will be the Canadian highlight of this year’s June frenzy. The website is still work-in-progress, but it does include 20 of the speakers who will make this Canada’s – and North America’s – best professional development session of the year. Here’s a link to the site, which includes a registration link for anyone who wants to reserve a seat ‘in the room where it happens’…
If you’d like to ask questions about anything in this edition of “In the New,” request a briefing, pass on a tip or perspective, or ask about InsightaaS services, please contact me at michael (dot) oneil (at) insightaas (dot) com. If you know people who would benefit from this content, please share!