Disruptions, downturns, and recessions make the weak weaker and the strong stronger. It was true centuries ago, and it is true today.
The 2001 downturn turned telecom and cable giants into the Internet’s gatekeepers. Microsoft emerged victorious with its Internet Explorer. During the 2008 financial crisis, when cash was king, the big banks — JP Morgan Chase, for example — became more prominent and more pervasive. In a similar fashion, the present pandemic is making big tech bigger. And it is not just that their coffers are overflowing coffers. They suddenly have a much larger and more receptive audience.
Last week, we saw the mid-pandemic report record results for Amazon, Apple, Microsoft, Google, and Facebook. Spoiler alert: they’re not exactly suffering. Microsoft saw its revenues go up to $35 billion for the quarter, compared to $30.5 billion for the same quarter in 2019. Amazon’s revenues came in over $75 billion. Even with a shutdown, Apple reported earnings of $58 billion. You get the drift.
Even with worsening economic conditions over the next year or so, these companies are likely to come out big winners. Though, the upshot is not just that a handful of companies will become a more significant presence in our lives. This will be true of technology in general. Sure, there might be some companies — AirBnB, for example —that suffer in the near term. The startup ecosystem might contract. But overall, this is a big moment for technology, and it’s only going to get bigger.
If you live long enough, you experience enough downturns to develop at least one of two things: mental resilience or post-traumatic stress disorder. I now need at least two hands to count on my fingers the number of downturns I have experienced. These experiences have largely supported my blind faith in the power of the network and the inevitability of technology. This time around is no different.
Over the past few months, we have experienced the mainstreaming of technology-enabled behavior previously thought of as being on the fringe. Shopping for groceries online and having them delivered, for example, was something of coastal luxury. Now, it has been experienced and used by millions across the country. Instacart has boasted of hiring another 250,000 shoppers. Amazon is hiring an additional 175,000 delivery people. Food-on-demand services are going through a boom like none other — Doordash saw its revenues jump over 20% in March. Uber Eats is saving Uber’s bacon. There is no reason to expect these new behaviors to change.
In a conversation this week, Wired editor Nicholas Thompson marveled at the growth in telemedicine and online education, two technologies (for lack of a better term) that have been around for so long that we often overlook them. Khan Academy has seen 20 times as many registrations. The Silicon Valley investors who viewed remote work and the distributed company as a net negative, and penalized companies that didn’t have a physical presence in their backyard, are now “work from home” gurus.
Zoom has 300 million daily participants (which is not the same as users), while Slack has seen as many as 10 million simultaneously connected users. Microsoft’s Slack competitor, Teams, now has more than 75 million daily active users. No matter what, most companies have now experienced “working from home,” and they are unlikely to just return to their old ways. Once we get accustomed to new behaviors, it is hard for us to go back
Before technology became so pervasive in the lives of everyday people, it was a luxury for corporations, educational institutions, and governments. Servers, switches, big databases, and productivity software didn’t impact most of us very much. The personal computers were great, but they only sold a mere hundred million units at their peak, and a big chunk of those went to the buyers mentioned above. The Internet changed all that. Technology became us, and we became technology. If anything, recent history has been focused on fractionalizing what were once luxuries for the top five percent and making them commonplace.
Just as the productivity gains that were expected of big companies became commonplace in mid-sized operations over the past two decades, we have seen the convenience-of-technology flow downwards. What was “productivity” for corporations and organizations has morphed into “convenience” for us normals.
The economic downturn at the beginning of the millennium saw the emergence of broadband connectivity and its pervasiveness. Seven years later, we all embraced the social web, and then the mobile and app revolution. And as the pandemic ravages our social fabric, we are seeing a wholesale digital transformation in a compressed time frame. Each economic setback creates a craving for convenience, and in the long-term, this opens the door for the widespread adoption of technology.
Whether we like it or not, we are addicted to it now. We like being able to watch movies and television shows when we want, where we want, and on the screen we want. We love ordering food and groceries and want them delivered. Ironically, the consumer-focused services have been much more prepared for the future than the enterprises, which have been slower in embracing the significant shift to cloud, data, and automation.
But not anymore! Kicking and screaming, they have been brought into the future. “We have seen two years’ worth of digital transformation in two months,” noted Microsoft CEO Satya Nadella in a call with Wall Street analysts after reporting earnings that were just shy of astounding. Box CEO Aaron Levie noted that “years of IT acceleration being compressed into months.”
Levie also quipped that he had spoken to “multiple Fortune 500 CIOs in the past two days who have been implementing a fundamentally different IT strategy than they would have had a year ago.” They are all thinking more cloud, more digital, and more automation. Others have observed this shift in perspective. In a call with investors, ServiceNow CEO Bill McDermott noted that the pandemic has been an accelerant for digital transformation, which has now become a business imperative. ServiceNow is a
San Francisco Santa Clara-based cloud services company that helps other companies with their cloud transformation. The company executives are finding that senior executives at many companies are trying to figure out how to protect revenues, ensure business continuity, and increase productivity.
These observations from Nadella, Levie, and McDermott aren’t isolated examples. And you will hear more about this. Together with data, cloud, and automation — companies are going to be looking at a more resilient future, one that sits on top of a network. It is not as if they had a choice. COVID-19 has exposed one harsh truth: digital channels are more flexible and faster to adapt to change than physical channels. And now, the world is almost entirely running on the network. This affirms my long-held beliefs. It is a testament to the inevitability of the Internet, which I wrote about in 2008 — and again in 2013.
Now, the inevitable has happened.
May 3, 2020. San Francisco.