Big Tech Prepares to Emerge Stronger from the Pandemic

Huge profits. Mountains of cash. Hundreds of millions of users. Must-have products and services.

It’s no surprise that Alphabet, Amazon, Apple, Facebook and Microsoft can survive a pandemic. Tech stocks overall have roared to new highs in recent days. Netflix has scooped up millions of new subscribers. Zoom has surged to new heights. Many tech companies are flying high.

What may be a little more unexpected is how powerful tech giants will be in a post-pandemic world, and not just because competitors are weaker and promising startups go bust.

The COVID-19 outbreak has supercharged one area of IT that was already thriving: The cloud, a segment where sales soar some 30% year-over-year as businesses and governments buy remote computing horsepower and storage that they tap into via high-speed internet connections.

The sudden rush to work from home after the onset of the outbreak led to a surge of investment in digital tech. “We have seen two years’ worth of digital transformation in two months,” said Microsoft’s CEO Satya Nadella on a company earnings call last month, citing a sudden spike in users of its video meeting and collaboration software, Microsoft Teams, for schools, hospitals and other businesses. Over the longer term, Microsoft sees the current environment as a tailwind for its business.

The pandemic cemented the fact that cloud computing is not optional anymore. It is a fundamental cost of doing business, operating a government, or running a school. “The cloud is integral to business operations and service providers must maintain datacenter and network performance,” says Stephen Minton, a vice president at market research firm IDC who focuses on IT spending.

Keep in mind that the technology industry overall won’t escape the economic crisis. Global spending on information technology could fall this year by 10% or more as companies put tech projects on ice and consumer demand sinks for gadgets, such as smartphones. Even Microsoft and Apple aren’t immune to the global downturn. Business closures hurt demand for Microsoft’s work software, and the financial hardship of millions of consumers lowers demand for iPhones. Meanwhile, Facebook and Alphabet, reliant on advertising, will suffer as advertising budgets dry up.

But once the recovery gains steam, businesses that are hunkering down to conserve cash will dive headfirst into digital projects. That means upgrading ecommerce websites, plowing more money into digital marketing, and upgrading online collaboration software. It also means more businesses and governments will ditch their own datacenters for the ease and flexibility of the cloud, especially Amazon’s AWS cloud system.

The coronavirus has accelerated a digital shift that will be with us for years. “In general, I would say the highest-level opportunity is across everywhere,” said Sundar Pichai, Alphabet’s CEO, when asked about the pandemic at the company’s recent earnings call. “We see businesses thinking deeper about the shift to digital.” Apple’s CEO Tim Cook noted that lockdowns led many people to discover that they could work and learn remotely. “I think we have significant solutions and products for all of those groups,” he said.

Such comments are par for the course during an earnings call, of course. But they are jarring when other large companies underscore future worries and uncertainties of this unprecedented situation. What’s more, I think these tech CEOs might even be underselling how well-positioned they are for the future.

Plenty of other tech companies are selling shovels in a gold rush. Intel and Nvidia are seeing strong sales of computer chips that power datacenters. Wired and wireless carriers are seeing higher demand for faster and better internet service. More computing power and faster connections create more opportunities for digital startups to harness artificial intelligence, superfast 5G and other advances.

After the virus is vanquished, tech giants will seem insurmountable. Lawmakers in Washington will look harder at ways to rein in big tech for abuses of market power and misdeeds related to privacy. Some of those efforts could lead to strong regulations, but it will take years and won’t curb tech profits much.

However, the tech leaders of today aren’t set in stone. I still think there’s plenty of room for disruption. The history of technology is one of seemingly invincible companies being disrupted by upstarts. The old guard fails to react to a major technology shift or makes a disastrous bet. Sometimes the shift is sudden; other times it’s a slow decline. The key is studying the impact of powerful trends and paying close attention to emerging technologies that matter.

That’s not to say it will be easy to take on today’s behemoths. But the seeds of future hit digital products and services are being planted today as tech entrepreneurs survey a new world hammered by a once-in-a-generation pandemic. Right now, coders are working on better videoconferencing software, education tools and much more. There’s still space for the next big social media app or a new must-have piece of consumer hardware. Or even a better way to surf the internet.

Amazing breakthroughs are in the pipeline. That bodes well for America’s technology race with China. More importantly, it bodes well for a promising future.

I’ve greatly enjoyed sharing my analysis of technology for the past five years. We’re ending Kiplinger Alerts, but we’ll continue to write about these issues in our weekly Kiplinger Letter, which you’ll start receiving by e-mail at no charge in lieu of Alerts, each Friday afternoon. (If you’re already a Letter subscriber, you’ll receive a complimentary extension of your subscription.)

Thanks for reading and please feel free to e-mail me about any tech-related topics in the future.

How a Pandemic Will Change the Tech Industry

Though it’s still early days for the coronavirus crisis, it’s already clear that the outbreak will spark major changes in the technology industry. Here are a collection of some significant tech shifts that bear watching.

DIGITIZATION

Even more of daily life will take place online as businesses and consumers increasingly adopt online banking, video conferencing, remote education, video calls, ecommerce and more. Folks who have avoided online services will shed their skepticism as the virus underscores how crucial the web is during disruptions of in-person interactions. Many of the last internet holdouts will cave and get service. And those who are already digitally savvy will double down on their online habits.

Consumers will upgrade internet speeds and even consider backup plans, such as a Wi-Fi hotspot from a cellular carrier. Many people working from home with children in the house are experiencing bogged-down speeds. The answer will be a faster plan and new wireless equipment from internet providers such as Comcast, Verizon, AT&T and Charter. Continue reading “How a Pandemic Will Change the Tech Industry”

Internet Networks Are Being Tested By a Surge of Traffic

A massive work-from-home experiment is now underway because of the threat of the coronavirus.

“Traffic towards video conferencing, streaming services and news, e-commerce websites has surged,” says Louis Poinsignon of Cloudflare, a San Francisco-based web infrastructure company, in a March 17 blog post. “We’ve seen growth in traffic from residential broadband networks, and a slowing of traffic from businesses and universities.”

That includes my new work-from-home routine, which is like that of many other Americans. Yesterday I joined a video conference, made an internet phone call, watched online video, surfed the web and sent scores of emails and other messages. My wife also used our network to do an array of similar tasks.

Travel bans, restrictions on public gatherings, business closures and quarantines are keeping more and more people at their homes 24/7. That means more video streaming, gaming and social media posting during all hours of the day. After Italy’s lockdown, the country saw its daily traffic soar 20% to 40%, according to Cloudflare.

The prolonged surge of web traffic around the clock is perhaps unprecedented for home broadband networks, which usually see traffic spike during evening hours when folks get home from work and scroll through Instagram or stream Netflix.

Internet providers are assuring customers that their networks can handle the higher-than-usual demands. Verizon recently said in a statement that they “stand ready for increases in data traffic” and highlighted an increase in network investment this year. T-Mobile got special approval from the Federal Communications Commission to tap additional airwaves to boost wireless capacity, though that bandwidth only works on newer smartphones. Other providers have issued similar notes of confidence.

Wireless and wired networks should be fine under the new traffic demands, says Roger Entner, the founder and lead analyst of Recon Analytics. “The networks are designed around busy hours at night” or whenever people are watching Netflix, Entner says. During the day, that capacity is still there. “Video is really the driver for data consumption” and video services can be downgraded in quality if there’s congestion. Plus, a lot of at-home office work doesn’t require streaming HD or 4K video.

The challenge could come with videoconferencing software or other online tools, says Entner. “The bottleneck comes together on Zoom or WebEx.” The root cause is not the internet providers themselves, but rather how the different online tools have set up their content delivery systems. But even then, it might only mean a video meeting sees downgraded video quality. Or perhaps workers have to switch to audio, which uses a sliver of the bandwidth that HD video does.

Expect some major online tools to roll out small changes to keep services running smoothly. Microsoft 365, the online suite of tools that includes email, spreadsheets and video meetings, told users it may change video resolution; the frequency with which it checks that a user is there; and how quickly it shows another party is typing a message. The update is to “accommodate new growth and demand during unprecedented times.” That minimizes some background data usage that Microsoft doesn’t absolutely need, says Entner.

The critical importance of consumer internet and cellular service at this time puts a magnifying glass on any hiccups in service. Expect regulators and lawmakers to watch service reliability and resilience closely. Telemedicine and 911 are especially critical.

“The Internet was built to cope with an ever changing environment,” Cloudflare’s Poinsignon notes. “In fact, it was literally created, tested, debugged and designed to deal with changing load patterns.”

To monitor your internet speeds, visit Speedtest.net or Fast.com. You’ll find out your download and upload speeds, plus the latency.

How the T-Mobile/Sprint Merger Changes the Wireless Landscape

Key forecasts:

  • T-Mobile/Sprint will take the lead in nationwide 5G
  • Expect stiff price competition, but only in the near term
  • Deals on new 5G business offerings will be plentiful
  • Availability of 5G home internet service will proliferate
  • Dish will struggle to build a fourth wireless giant from scratch

Now that the T-Mobile and Sprint deal has cleared its final legal hurdle, Verizon and AT&T are about to face a much bigger foe. The merged company will create a cellular powerhouse with more than 100 million wireless subscribers, making it the second-largest nationwide carrier, behind Verizon. For years, T-Mobile rapidly gained customers by dropping prices and cultivating a rebellious brand, though those price cuts have levelled off in the past year or so. Meanwhile, Sprint has struggled financially, and the merger bails it out of its decline. Continue reading “How the T-Mobile/Sprint Merger Changes the Wireless Landscape”

Facial Recognition Technology Is Set to Take Off

Facial recognition technology will see a surge of new interest in 2020. The tech has made huge strides in the past few years, becoming faster, more accurate and cheaper, sparking new attention from retailers, hospitals, schools, manufacturers and more.

New uses range from spotting school threats to identifying VIP customers. Continue reading “Facial Recognition Technology Is Set to Take Off”

10 Tech Developments to Watch in 2020

As 2020 draws near, I’ve rounded up 10 technology stories that bear watching over the next 12 months. The list is a sampling of some of the most important tech trends on my radar. I’ll be covering these stories and many more next year. Feel free to contact me with questions or comments on any of the topics. Continue reading “10 Tech Developments to Watch in 2020”

The Coming Challenges for Disney in the Streaming Wars

Disney’s new online video streaming service is a blockbuster hit with consumers. Just one day after Disney+ launched on Nov. 12, the company announced a staggering 10 million sign-ups. Millions more have signed up since, a clear demonstration of Disney’s iconic brand and marketing muscle. “We’ve never seen a product coming to market with this amount of interest,” says Michael Goodman, the director of digital media at the market research firm Strategy Analytics.

But the streaming wars will be a marathon, not a sprint. Disney has a long way to go, though it has certainly made a splash with its content. The service features movies from Marvel, Star Wars, Pixar and Disney classics. It has The Simpsons, original TV shows and much more. Continue reading “The Coming Challenges for Disney in the Streaming Wars”

What’s Next for Drone Delivery

Imagine hankering for a pint of ice cream from your favorite ice cream shop five miles away. But this time, instead of hopping in your car, you tap the “drone delivery” option on a mobile app. About 10 minutes later, the mint chocolate chip is lowered via a tether from a drone hovering above your backyard.

It sounds like the stuff of science fiction. But drone companies have plans to make it happen. Continue reading “What’s Next for Drone Delivery”

More Manufacturers Turn to Robotic Arms

Labor shortages. Intense global competition. Fast-changing market demands.  Small and midsized manufacturers face a slew of challenges.

“There’s increasing pressure from all sides,” says Stuart Shepherd, regional director of sales in the Americas for Universal Robots, a leading seller of small robotic arms. Continue reading “More Manufacturers Turn to Robotic Arms”

China’s High-Tech Ambitions Take On 5G

Rising tensions between the U.S. and China extend far beyond trade. A battle over high-tech markets is ramping up as China seeks to lead the world in 5G, the latest version of cellular technology.

China’s 5G strategy increasingly worries U.S. officials, who see Chinese telecom gear as a national security threat that could allow Beijing to spy on communications or help developing nations censor parts of the web, as China does. There’s growing fear that China’s leading companies are poised to out-compete and out-innovate U.S. tech giants. That has riled U.S. lawmakers, who point to years of stolen intellectual property by China and unfair conditions imposed on U.S. firms doing business in the country. Continue reading “China’s High-Tech Ambitions Take On 5G”