2020 will see a video conferencing profit boom, but it could be short-lived

Zoom might be riding a high for the moment, but unless it starts to add additional value into its products it will soon wither away to the realms of irrelevance.

Yesterday, June 2, Zoom announced its financial results for the three-month period ending April 30. Total revenues increased by 169% year-on-year, while the management team boasted of more than 265,000 customers with more than 10 employees, up 354% year-on-year.

The coronavirus pandemic has certainly been profitable for the video conferencing firm.

“We were humbled by the accelerated adoption of the Zoom platform around the globe in Q1,” said CEO Eric Yuan. “The COVID-19 crisis has driven higher demand for distributed, face-to-face interactions and collaboration using Zoom. Use cases have grown rapidly as people integrated Zoom into their work, learning, and personal lives.”

For some companies, the rapid shift in working behaviour has been a welcome change, and while some of these trends will remain permanent, what remains to be seen is whether the profits will be.

Telecoms.com Poll – Do you think your business will continue the current work from home dynamic once the coronavirus pandemic has passed?
34% Yes, we’ll be given the option to work as we please
25% Yes, but we’ll have to check into the office occasionally
4% No, but others job functions in the company will
6% No, can’t do my job properly unless in the office
6% No, my company is still not convinced by remote working

What has been made quite clear over the last few weeks is that the remote working dynamic will at least partly be embraced. The digital transformation programme companies have been strong-armed through has proven successful, economies have not ground to a halt through COVID-19, and even the most traditional (dated) managers would have to keep some of the new working practices.

Admittedly this is a small poll, but Gartner supports the outcome, suggesting that while 60% of meetings take place in-person today, this could drop to as little as 25% in 2024.

Employees are happier, productivity has been maintained and cost-savings can be realised with a more mobile workforce. What is there not to like?

But the question some suppliers will ask is how much money can be made in the future?

According to Gartner unified communications (UC) research, overall spending on video conferencing software will increase 24.3% in 2020. This is the second-fastest growing category in the UC market, only behind cloud-based telephony. Both of these surges can be easily explained by the coronavirus pandemic.

Worryingly for companies like Zoom, this growth is forecast to taper off in 2021, while are suspicions that cloud expenditure could be rationalised over the mid-term, effectively penalising niche suppliers who do not offer a portfolio of services.

When we spoke to Nick McQuire of CCS Insight, he highlighted that while increased cloud spend might be sustainable post-COVID-19 as mobility trends are embraced, there are likely to be rationalisation projects on the horizon. As many of the decisions made to enable remote working were likely to have been knee-jerk reactions, overlap within organisations could exist or decisions might have been poor ones.

These rationalisation programmes could manifest in numerous different ways. Centralised procurement could mean single suppliers are selected, contracts could be ended as better options are found, or free services could be bundled into existing commercial contracts as value adds.

The final possibility is one which should be feared by all nice software providers who specialise in single areas. Best in breed suppliers could be sacrificed at the altar of financial efficiency. You have to consider what is out there currently.

Zoom is a video conferencing service, with plans to offer a cloud-telephony service in addition, however it offers little else. Other companies will offer the same services, perhaps not as high a quality, but as long as a satisfactory experience is achievable this is a palatable concession for a bundled contract.

Google, for instance, has made its video conferencing services free for all. This is temporary, but it could be made free for corporate customers in the future bundled into a contract which also includes desktop virtualisation, cloud storage, data analytics and numerous other elements. Bundled contracts are generally cheaper for the customer, and Google would most likely be very accommodating.

GoToMeeting is another niche player in the video conferencing world, though it is part of the LogMeIn group which also offers desktop virtualisation and user authentication services. This is not as broad as a supplier like Google, but there is an opportunity to bundle. Another example of a niche service is BlueJeans, however this was recently acquired by Verizon and will certainly be bundled into larger connectivity contracts for enterprise customers.

During the recent earnings call, Zoom CEO Eric Yuan said the business would continue to be ‘laser-focused’ on video and phone service, though competition should be welcomed to encourage innovation. Being the best in one area and little else is fine in a perfect scenario, but the world is very rarely in such a state. Decision makers will state that they will search for best in breed, but sometimes concessions have to be made. Budgets do exist after all and the ultimate objective is to make money.

This is the risk that niche providers will face. They could be muscled out of the market as enterprise decision makers elect for more cost-effective bundled service offerings. Such thinking would benefit the tech giants, but with a recession on the horizon it might be a trend we’ll have to get used to.

YouTube is the UK’s most popular video streaming app

New data from App Annie reveals that YouTube still tops the SVoD platforms when it comes to time spent streaming in the UK via apps.

Precise metrics aren’t offered, but we wouldn’t be surprised to learn that YouTube was miles ahead of the rest. Not only is it free, but many people, especially children and teenagers, actively prefer the kind of user-generated content they find there to high production-value proper telly and movies.

Netflix is next, which also comes as no surprise, followed by the BBC’s catch up service – iPlayer – and then Amazon video, which is free to anyone who already has an Amazon Prime subscription. In at number 5 is MX Player which, we have to confess, we had to look up. It’s an Indian SVoD platform, so clearly there’s a lot of demand for content from that part of the world in the UK.

Rounding off the list we have a bunch of other catch-up apps and Twitch, which is mainly used to stream computer games. Another data point that would have been interesting to see is total time spent on streaming apps compared to previous quarters. There must surely have been a significant increase.

Investors pressuring AT&T to divest TV assets – report

Reports are circulating the telecoms press pages suggesting AT&T investors are pressuring new CEO John Stankey to sell assets in DirecTV.

According to Fox Business News, ‘bankers’ are pushing for divestment in DirecTV to reduce the heavy debt which are weighing down financial spreadsheets. This is not the first time there have been calls to sell interests in the content units, but the telco has resisted so far, emphasising the importance of streaming and entertainment in the convergence mix.

While debt is something which will always exist in the corporate world (some see the accumulation of debt as a measure of corporate ambition and market confidence), AT&T seems to be in a position which is making investors uncomfortable.

As it stands, AT&T currently has $164.3 billion in debt, $147.2 of which is deemed long-term. Considering how cash-absorbent the telecoms industry is, there will always be debts on the books at AT&T, but this is a company which has made very large bets on the content world, the success of which is very debatable.

During July 2015, AT&T purchased DirecTV for $67.1 billion including assumed debt, and a year later it announced it was acquiring Time Warner for an eye-watering $108.7 billion. The business also has a 2% stake in Canadian entertainment company Lionsgate, as well as several smaller bets. The aims are to add additional revenue streams to the AT&T business, attempt to sell convergence packages and add greater resilience against macroeconomic trends and the commoditisation path the telco industry is treading.

It is of course a valiant quest from the executive team, dipping fingers into additional pies to create a more diversified business, but it is questionable as to how successful the team has actually been.

These are very big gambles to make, working against general consensus in the industry with many rivals choosing to take a content aggregator position, a safer albeit less profitable bet on the platform economy. Of course, doing something different to the status quo is not necessarily a bad thing, it just has to work out well.

The question is whether the telco is any good at managing such a multi-faceted and eclectic business; evidence suggests it is not.

Firstly, the content business unit is incredibly fragmented. We are aware that you need different brands to appeal to different demographics, but it is quite extraordinary at AT&T where you have DirecTV, DirecTV Now, U-verse, HBO Max, HBO Now, HBO Go, Watch TV and DC Universe. It’s scattered, chaotic and overlapping.

Of course, none of this would matter if the unit was growing and making money, which leads us onto the second point. The content division is costing AT&T a lot of money, while subscriptions are disappearing faster than toilet roll in the first days of lockdown. During the latest earnings call, AT&T executives somehow had to defend losing 1.03 million TV subscribers.

Activist investor Elliott Management, which owns roughly 1.2% of AT&T, has already kicked up a stink regarding the diversification strategy, though this is hardly surprising. This is a company which focuses on forcing asset disposal to hike share price. It is a successful business model for Elliott Management, but it is questionable whether the long-term interests of the company is at the heart of the strategy. Forcing AT&T to sell content assets and purely focus on connectivity is not necessarily a sensible idea for the long-term.

CEO Stankey will have his resolve tested in the first few months of his tenure here. He has explicitly stated the DirecTV business unit is not for sale but will also be acutely aware of the dangers of resisting the demands of investors. After all, Stankey was placed in charge of AT&T following Randall Stephenson being ushered out the exit under the guise of retirement.


Telecoms.com Daily Poll:

Should privacy rules be re-evaluated in light of a new type of society?

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Facebook reignites the fires of its Workplace unit

Facebook has announced its challenge to the video-conferencing segment and a reignition of its venture into the world of collaboration and productivity.

Back in 2016, Workplace by Facebook was announced, an attempt to diversify the Silicon Valley giants output and create a starting point to work with enterprise organisations in way outside of advertising. Much was made of the launch at the time, but it effectively dwindled away into irrelevance over the years as profits failed to materialise.

While none of the senior executives have paid much attention to the business unit, Workplace is very rarely mentioned by the likes of Mark Zuckerberg, it has been bundling along in the background. After starting to charge customers for the service in October 2017, Workplace now has more than 5 million paid users, a fraction of rivals but it is admirable for a business unit which has not been given much attention or praise.

Last night would appear to be the relaunch of efforts to crack into a new market, capitalising on remote working trends being forced onto companies of all sizes around the world.

“The coronavirus crisis has forced us to rethink how we work,” said Julien Codorniou, VP of Workplace at Facebook. “Changes expected to happen over several years have happened in just a couple of months. And what many companies have realised is that it’s not about where your people are, but whether they are connected and informed.

“At Workplace we believe strongly that video will be central to the future of work – enabling companies to maintain community, while exploring the opportunities and diversity that flexible working can offer.”

This is of course a very relevant trend for today and could be even more so moving forward. 84% of Telecoms.com readers believed the work from home trend would continue following the relaxation of societal lockdowns, meaning at least some elements of the coerced digital transformation projects which have been sprint through today will remain in place.

Facebook might not be getting in on the ground floor of this trend, but the prior existence of Workplace and the power of the Facebook brand should be enough for it to muscle some benefits and business of the likes of Microsoft Teams, Slack, Zoom and various other businesses which are so richly benefitting from today’s adverse conditions.

As part of this latest push into the enterprise space, ‘Rooms’ has been introduced as a video conferencing feature, Live Video Improvements allows for Town Hall style engagements, Workplace on Portal likes the enterprise push with its consumer IOT gamble, Oculus for Business ties VR into the mix and Work Groups is a productivity and management toolset.

Overall, it is a solid effort to bring a broad set of functionality and features into a single offering, with the opportunity to tie into other emerging elements of the Facebook business. The first attempt to muscle into this market in 2016 might not have been very successful, but this one should certainly be taken more seriously by rivals.


Telecoms.com Daily Poll:

Can the sharing economy (ride-sharing, short-stay accommodation etc.) survive COVID-19?

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Major blow for Google and Apple as Rogan podcast moves exclusively to Spotify

The streaming wars have opened a major new front with the news that Spotify has lured the Joe Rogan Experience away from YouTube and iTunes.

For those unfamiliar with the JRE podcast, it is the defining long-form, open discussion show, featuring completely unstructured conversations between host Joe Rogan and usually one other guest. As a comedian and martial arts commentator, those two topics are covered frequently, but the guest list is very eclectic, ranging from academics to politicians to showbiz figures.

JRE has 8.4 million subscribers on Google-owned YouTube and while that’s a massive number it’s nowhere near the top of the list of all YouTube subscribers. But if you strip out the music and TV brands, it must be right up there. The real traffic for podcasts, however, is from audio streams and downloads, which Rogan himself estimates are around ten times greater that video views. The biggest single platform for that is probably Apple iTunes, on which JRE is the second biggest in the US.

The raw numbers only tell half the story, however, with Rogan’s cultural influence extending even further, especially in the US. US Democratic presidential candidate Bernie Sanders used a claimed Rogan endorsement for political capital at the start of this year while, more recently, Rogan’s negative assessment of the eventual winner of the Democratic nomination, Joe Biden, sent shockwaves across the country and beyond. Most recently, his criticism of how California is handling the coronavirus lockdown seems to have made many residents consider fleeing the state.

So for Spotify to lure Rogan away from these two internet giants with a deal that will be exclusive from the start of next year is a major victory and a significant blow to its competitors. The WSJ reports that it cost Spotify $100 million, which is serious money. While that’s great news for Rogan, we will probably never know if it pays off for Spotify, but if Netflix (where you can find Rogan’s excellent standup) is anything to go by, paying for big names is the way forward.

As you may have gathered your correspondent is a big fan of JRE. At a time when public discussion seems to be more shrill, polarised and dumbed-down than ever, Rogan offers the kind of honest, nuanced, agenda-free discussion that is desperately needed. JRE fans not currently on Spotify will have some serious thinking to do at the start of the year and the Swedish streaming giant is betting a lot of the new users Rogan brings will upgrade to premium services.

The only thing that could go wrong is for Spotify to in any way try to alter the format or censor the often colourful content. Netflix hasn’t and it would be very surprising for Rogan to agree to any such interference. “While Spotify will become the exclusive distributor of JRE, Rogan will maintain full creative control over the show,” assures the Spotify announcement.

To date the streaming wars have largely focused on video content, but this move brings audio to the fore. Once people start commuting again, podcasts will be more important than ever and it increasingly looks like you need to be a Spotify user if you want access to the best ones.

Incidentally the only pod more popular than JRE in the US is currently in the middle of a drama over switching platforms. It may be no coincidence the YouTube recently lured its biggest star, PewDiePie, back from a rival platform. In these fractious times, authenticity has become a precious commodity, one that the internet giants are prepared to pay top dollar for.


Telecom Italia wrestles with Europe’s biggest COVID-19 dent

Telecom Italia (TIM) has released its latest financial results, revealing painful battle scars as European nations continue to fight the coronavirus pandemic.

While it should come as little surprise when you look at which countries were most severely impacted by COVID-19, the figures have confirmed it. Telecom Italia is still profitable, which is often forgotten when companies miss expectations, but the impact of the coronavirus pandemic has been very notable.

Total revenues for the three-month period to March 31 stood at €3.9 billion, down 11.3% year-on-year, while profits declined 10.8% year-on-year to €1.7 billion.

Financial results for European telcos through to March 31 (Euro (€), thousands)
Telco Revenue Year-on-year Profit Year-on-year
BT (£) 5,632 -4% 2,007 -2%
Telecom Italia 3,964 -11.3% 1,735 -10.8%
Orange 10,394 1% 2,602 0.5%
Telefonica 11,366 -5.1% 3,760 -11.8%
DT 19,943 2.3% 6,940 7.4%

Although it does look like business as usual at Deutsche Telekom, let’s not forget that as well as the country effectively combatting the coronavirus, the Group also contains T-Mobile US, which has been flying over the last few years. Total revenues in the US grew 0.3% to $11.1 billion over the quarter, while profits shot up 11.6% year-on-year to $3.6 billion.

What is worth noting is that it is not all bad news at Telecom Italia. This is a company which is under extraordinary pressure because of a truly unforeseeable event, but previous initiatives to create a healthier and more sustainable business are seemingly working. Improvement in cash generation (14% year-on-year increase) and debt reduction (down €923 million) have continued through the three-month period thanks to strategic initiatives launched in 2019. The underlying business model and strategy is still theoretically sound.

One of these projects, the network sharing agreement with INWIT and Vodafone, and subsequent sale of a stake in the towers joint venture, contributed €650 million to the debt reduction mission. Negotiations with KKR, for the sale of a minority share of the secondary fibre network, are continuing which will also reduce debt. It is not necessarily perfect scenario to be offloading assets, but needs must occasionally when pressure mounts on the spreadsheets.

It might be tempting to look at the surface figures, but it is always important to remember that COVID-19 is creating trading conditions no-one could foresee. TIM is still a business which is under threat from a highly competitive landscape in Italy, but the reaction from the team still looks competent.

Looking at the non-financial performance data, TIM Vision, the content platform saw a 20% increase in active users across the period, though mobile subscriptions dropped 579,000 year-on-year. IOT connections slightly compensated, but not enough. In fixed broadband, net customer losses across both consumer and wholesale totalled 233,000. It is clear the business is still adjusting to the new market dynamic with Iliad on the scene.

Segment Subscriptions Year-on-year
TIM Vision (TV) 1.85 million 21%
Mobile 20.42 million -2.8%
Fixed (retail) 8.98 million -1.5%
Fixed (wholesale) 8.01 million -0.6%

Brits have the lowest mobile download speed among G7 users

New report on mobile experience from Opensignal shows the UK has the lowest average download speed among the G7 countries, and it has barely improved since a year ago.

The user experience measurement company has just published its 2020 report to compare mobile experience in 100 countries across six domains: upload and download speed, video, voice and games experience, and 4G availability. On all parameters the UK has delivered a respectable but not spectacular performance.

In download speed, the UK ranks 36 out of the 100 countries, with an average 22.9 Mbps. This puts the UK on the bottom of the G7 countries. The minor improvement of 1.2 Mbps over last year’s 21.7 Mbps is also the most meagre incremental among the G7 countries. Globally, Canada just manages to edge South Korea to the top spot with 59.6 Mbps, a whopping 17.1 Mbps increase from a year ago. South Korea, which topped last year’s table, has clocked up an average download speed of 59.0 Mbps and sits in second place.

The authors of the report observed that, countries that have launched 5G services typically registered higher download speed and registered bigger increase than those that have not. However, with the exception of South Korea, where 5G penetration is approaching 10% of mobile users, 5G’s lifting impact on average download speeds in other countries is minimal. Surprisingly, among the 5G countries, Sweden, Denmark, and Norway all reported average download speed decrease. The report does not say why, and by the time of writing, Opensignal has not responded to Telecoms.com’s request for explanation. In a separate research published earlier the company compared 5G download speeds in different countries. Saudi Arabia led with 291 Mbps, followed by South Korea at 224 Mbps.

The G7 Comparison

The UK’s 7.5 Mbps average upload speed gives it a mid-table position. Switzerland leads with 16.2 Mbps, followed by South Korea (16.1 Mbps), Norway (15.7 Mbps), and Singapore (15.0 Mbps).

In video streaming experience, by which the company consolidates scores on picture quality, video loading time, stall rate, as well as perceived video experience as reported by mobile video users, the UK sits in the “Very Good” category with a score of 71.7 (out of a total of 100). The “Excellent” category, with scores over 75, has 15 countries, led by the Czech Republic with 79.1.

When it comes to 4G availability, UK mobile users were able to connect to 4G networks 89.2% of the time, up by 4.5% from a year ago, putting the country on position 31 in the table. Japan sits on the top with 98.5% availability closely followed by South Korea at 98.1%.

In games experience, the company measures how mobile users experience real-time multiplayer mobile gaming on mobile networks including latency, packet loss, and jitter. The Netherlands comes top in this category with 85.2 (out of a total of 100), edging the Czech Republic to the second place with a score of 85.1. The UK, with a score of 77.5, ranks among the better ones but is still trailing the best countries by a sizeable margin.

The last category measured in the Opensignal report is voice app experience, by which the company measures the quality of experience of OTT voice services like WhatsApp, Skype, and Facebook Messenger. Again, the score consolidates both technical measurements and perceived experience. South Korea leads the table with 84.0 (out of 100). Japans comes a close second with 83.8. The UK’s 80.6 is among the better scores.

In general, to look at it globally, UK mobile users enjoy a better than average experience across multiple categories. Meanwhile the benefits of 5G have yet to visibly spread more broadly. In the 5G research published by Opensignal, the UK’s 5G smartphones only connect to 5G networks in slightly over 5% of the time.

Latest Quibi damage limitation exercise does anything but

The CEO of new video streaming service Quibi has turned to the press once more to address its faltering launch, but he continues to score own-goals.

Jeffrey Katzenberg has impeccable credentials as a video content exec, having founded DreamWorks and headed up Walt Disney Studio. He is the joint CEO of smartphone-focused streaming service Quibi alongside experienced tech CEO Meg Whitman and thus ultimately responsible for the success or failure of the venture, which has received billions in venture funding.

It would be fair to say that, right now, the numbers for Quibi are not what was hoped. Three weeks ago Katzenberg said the following in an interview: “Under the circumstances, launching a new business into the tsunami of a pandemic, we actually have had a very, very good launch.” Either that assessment was misleading, or Quibi’s fortunes took a dramatic turn for the worse since then, because he’s singing a very different tune now.

Speaking to the NYT, Katzenberg said: “I attribute everything that has gone wrong to coronavirus, everything. But we own it.” He seems to be trying to completely exonerate himself from any underperformance while at the same time claiming to do the opposite. Not a great start, regardless of how plausible the excuse is.

That wasn’t the last of the doublespeak. “If we knew on March 1, which is when we had to make the call, what we know today, you would say that is not a good idea,” said Katzenberg in response to a question about the timing of the launch. “The answer is, it’s regrettable. But we are making enough gold out of hay here that I don’t regret it.” It’s regrettable, but he doesn’t regret it, OK?

In response to the disappointing launch Katzenberg and co have been desperately trying to tweak the offering to broaden its appeal. They initially left out the ability to cast the content from your phone to your TV, apparently out of a desire to avoid diluting its smartphone specialness, but soon reversed that decision. Now the penny seems to have dropped that allowing some sharing of content online might help spread the word.

“There are a whole bunch of things we have now seen in the product that we thought we got mostly right,” said Katzenberg, “but now that there are hundreds of people on there using it, you go, ‘Uh-oh, we didn’t see that.’” Again, a perfectly normal part of refining a new product, but it’s hard to see how the previous ‘walled off’ approach was ever considered a great idea.

Part of the problem, on top of the pandemic, could be that Katzenberg is used to heading up operations that already have massive brand recognition and value. Disney can afford to limit the distribution of its content and over-charge for it because its unique and highly sought-after. The same it not true of Quibi, so acting all haughty and distant from the start would probably have been a bad idea no matter when it was launched.

Will coronavirus compound the concentration of cloud computing champions?

With COVID-19 forcing more people to work and entertain themselves at home, the cloud segment has been profiting. But it is debatable as to whether these riches are being evenly spread.

Although many would presume cloud is now a mainstream concept in the business world, it still accounts for less than 5% of total IT budgets. It will of course never be 100%, but this is a remarkably low percentage for how many companies who boast about how forward-looking and innovative they actually are.

The coronavirus has not only forced a new social dynamic, but also coerced traditional organisations through digital transformation projects.

This is of course an opportunity for the cloud companies, but you have to question whether this bounty will be distributed across the market, or whether it will be concentrated at the top, extending the lead which the likes of AWS, Microsoft, Google and Alibaba have worked over the chasing peloton, featuring companies such as IBM, Rackspace and Oracle.

Will everyone benefit, or just the market leaders?

Cloud computing market share by period
Company Q1 2020 Q4 2019 Q1 2019
AWS 32% 32% 33%
Microsoft Azure 17% 18% 15%
Google Cloud 6% 6% 5%
Alibaba Cloud 6% 5% 5%
Other 38% 39% 42%

Source: Canalys

The data above suggests the cloud profits are being increasingly concentrated at the top. This data will not make a comfortable read for niche cloud companies, but there is always hope. One of COVID-19’s success stories has elected to go outside market leadership to scale its offering.

Despite poor security credentials, suspect ties to Chinese ownership and misleading statements made by the management team, Zoom is proving to be one of the bolters of 2020. Thanks to enforced work from home trends and keeping in touch with friends and family during lockdown, usage of Zoom’s video conferencing services is skyrocketing.

The more popular Zoom becomes, the more cloud capacity the business would need, and Oracle won the race to secure the popular video conferencing company as a customer. High value customers are of course very beneficial to the financial spreadsheets, but it provides more confidence for other potential customers to sign on also.

Interestingly enough, Oracle sits outside the leaders in the cloud computing segment. Most would have assumed Zoom would select one of AWS, Microsoft or Google to scale services, but in electing for Oracle perhaps this is evidence the fortunes of coerced digital transformation are being spread proportionally.

How this money is being distributed through the community is a bit unknown for the moment, though it is clear companies are being forced through a digital transformation project.

“Up to now, there has been a tendency to not be fully committed to cloud,” said Nicholas McQuire, SVP and Head of Enterprise Research at CCS Insight.

This is an issue in itself. As McQuire highlights, many companies are being forced to rush into decision making to ensure business continuity, but this might only be a short-term gain with a recession looming on the horizon.

As with every period of recession, belts are tightened as profits are protected. This can mean certain projects are cut back, or expenditure is rationalised. This could be a problem for the niche players in the cloud ecosystem, according to McQuire.

Multi-cloud will of course persist, but some companies may well sacrifice best-in-class purchases in pursuit of greater procurement value. For example, Microsoft and Google might look like very attractive cloud vendors as on top of the storage components, these companies can also offer productivity services such as desktop virtualisation.

“As a niche provider in a time of recession, you have to provide immediate business value above what is being offered elsewhere in the market,” said McQuire.

This may well prove to be a challenge for smaller players in the market, such as Rackspace or IBM, but it could prove to be an advantage for the likes of Microsoft, Google and AWS, all of which offer very broad services, across numerous business criteria. It could look very attractive to a company which is being forced through a digital transformation process at a time where profits are likely to be limited.

Interestingly enough, AWS might be a company to keep an eye on in this space. Amazon Chime, WorkDocs, and WorkSpaces are all productivity and collaboration tools offered by the company but are rarely pushed. During the most recent earnings call, they were all explicitly mentioned suggesting the productivity and collaboration could be an element of the Amazon war chest to get an upgrade during this period.

Looking at the financial statements of these companies, this is an assumption which is holding strong:

Quarterly financial gains for cloud giants
Revenues Year-on-year
AWS $10.2 billion 33%
Microsoft (Productivity) $11.7 billion 15%
Microsoft (Cloud) $12.3 billion 27%
Google Cloud $2.7 billion 52%

At Microsoft, Teams is a draw for decision makers on top of the Azure services, as would Dynamics, while the same could be said for Google and its G-Suite offering. The rationalisation process might help the big boys at the top of the pile, but with new companies entering the cloud space, familiarity might also help.

Companies like Oracle and Workday might enjoy success and capture newly created revenues as there are existing relationships in place with products such as Enterprise Resource Planning (ERP) and Human Capital Management (HCM). Companies who are not as cloud savvy as others already purchase this software and may well turn to their existing suppliers to help.

One final element to consider during this period is free offers.

Turning back to the Amazon earnings call, the team has said small businesses would be able to use certainly toolsets for free for a 12-month period. This is somewhat of a loss leader position to take, which will certainly be attractive to some decision makers. Major players might be able to offer such promotions due to diversity of revenue streams, bulging bank accounts and engaged investors, however niche players might be more reliant on cash moving through bank accounts.

It might not be the best way to win business, but the big players might just be able to undercut rivals at a loss and outwait the market.

More money in the cloud computing market might seem like a good thing on the surface but pay closer attention to where the money is actually going. AWS, Microsoft, Google and Alibaba have already worked a considerable lead over the chasing peloton of less successful cloud companies, though this could be extended if the fortunes are disproportionately directed towards the top.

Some might say this is due to tactical as opposed to strategic expenditure during a period where time is a luxury few decisions makers have when rapidly undertaking a digital transformation programme, but with the risk of supplier rationalisation on the horizon, it might not get any easier for the niche cloud players.

A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefonica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Full story here.


privacyHalf of Americans approve of using smartphones to track infected individuals

Pew Research Center asked thousands of US adults what they thought about how personal data should be used to help tackle the COVID-19 pandemic.

Full story here.


CSPs are being cut out of enterprise 5G projects – study

A new bit of research conducted by Omdia and BearingPoint//Beyond has found that only a small proportion of B2B 5G deals are being done by operators.

Full story here.


Streaming venture leads Disney to 29% revenue surge

The Walt Disney company has reported a 29% increase for year-on-year revenues thanks to its streaming bet, but COVID-19 has forced the team to withhold dividend payments.

Full story here.


Silver Lake pays a premium for a chunk of Jio Platforms

Private equity firm Silver Lake has shelled out $750 million for a 1.15% stake in the Indian telco, which represents a 12.5% premium on the price Facebook recently paid.

Full story here.


Online gaming seems coronavirus proof, but is it recession proof?

Online entertainment and gaming companies are seeing COVID-19 surges in revenues, but are these businesses in a position to resist the pressures of a global recession?

Full story here.