 From the CUBE studios in Palo Alto in Boston, connecting with thought leaders all around the world, this is a CUBE conversation. Hello everyone and welcome to this week's Wikibon CUBE Insights powered by ETR. In this breaking analysis, we're changing the format a little bit. We're going right to the new data from ETR. You might recall in last week ETR received survey results from over a thousand CIOs and IT practitioners. And they made a call at that time which said that actually surprisingly, a large number of respondents, about 40% said they didn't expect a change in their 2020 IT spending. At the same time, about 20% of the survey said they're going to spend more, largely related to work from home infrastructure. ETR was really the first to report on this. And it wasn't just collaboration tools like Zoom and video conferencing. It was infrastructure around that, security, network bandwidth, and other types of infrastructure to support work from home like desktop virtualization. So ETR made the call at that time. Did it look like budgets were going to be flat for 2020? Now you might also recall consensus estimate for 2020 came into the year at about 4% slightly ahead of GDP. Obviously that's all has changed. Last week ETR took the forecast down and we're going to update you today. We're now gone slightly negative. And with me to talk about that again is Sagar Kedakia who's the director of research at ETR. Sagar, great to see you again. Thank you for coming on. Thanks for having me again, Dave. I really appreciate it. So let's get right into it. I mean, if you look at the time series chart that we showed last week, you can see how sentiment changed over time. That blue line was basically people who responded to the survey starting at 311. Now you've updated that forecast really tracking after the COVID-19 really kicked in. Can you explain what we're seeing here in this chart? Yeah, no problem. So the last time we spoke, we were around an N or sample size of about a thousand. And we were right around that 0% growth rate. One of the unique things that we've done is we've left this survey open. And so what that allows us to do is really track the impact on annual IP growth essentially daily. And so as things have progressed as you look at that blue line, you can really see the growth rate has continued to trend downwards. And as of just a day or two ago, we're now below zero. And so I think because of what's occurring right now, you know, the overall current climate continues to slightly deteriorate. You're seeing that in a lot of the CIO's responses. Yeah, so if you bring that slide back up, Andrew, I want to just sort of stay on this for a second. What I really like about what you guys are doing is you're essentially bringing event analysis in this. So if you see that blue line, you see on 313 a national emergency was declared. And that's really when the blue line started to decline. What ETR has done is kind of reset that, reset the data since 313, because it's now a more accurate reflection of what's actually happening in the market. Notice in the upper right, it says the US approved, the Senate last night approved a stimulus package. Actually they're calling it an aid package. It's really not a stimulus package, right? It's an aid package that they're injecting to help a number of out-of-work workers. Actually it sounds like existing workers and small businesses and even large businesses like Boeing. Boeing was up significantly yesterday powering the Dow and potentially airlines. So you can see ETR is going to continue to monitor the impact and roll this out. Really ETR is the only company that I know of anyway that can track this stuff on a daily basis. So Saga, that event analysis is really key and you're going to be watching the impact of this stimulus slash aid package. Yeah, so here's what we're doing on that chart. So if you look at that yellow line again, effectively what you're seeing is if we remove the first, I think six or 700 respondents that took the survey and start tracking how budgets are changing as a 313, right? That's when the US declared a national emergency. We can recalculate the growth rate and we can see it's around, it's almost negative one and a half. And so the beauty of doing this, really polling daily is it allows us to be just as dynamic as a lot of these organizations are, right? I think one of the things we talked about the last time was some of these budget changes are going to be temporary and organizations are figuring out what they're doing day by day and a lot of that is dictated based on government actions. And so uniquely here, what we're able to do is kind of give people a range and also say based on these events, this is how things are changing. And so I think we think the first biggest event was on 313 where the US effectively declared a national emergency over COVID-19. And now what we're going to start tracking between today and over the weekend and Monday is, are people getting more positive? Is there no change or is there further deterioration because of this aid package that got passed this morning? Now I want to share with our audience. So I've been down to EPR's headquarters in New York, staffed with a number of data scientists and statistical experts. The ends here are well over 1,000. I think we're over 1,100 now. Is that correct? What is the end that we're at today? That's right. Yeah, we're pushing right over 1,200 and we're going to expect a few more hundred respondents. And so the good thing is it's balanced, which is important, right? All these events that are occurring, we want to make sure that we have at least a few hundred more CIOs and IT executives answering. And so every week as we kind of continue to do some of these breaking analyses, there are going to be a few more hundred CIOs and we'll really be able to zero in or hone in on what they're saying. And so the growth rate on the IT side, it's going to continue to fluctuate. It's going to continue to be dynamic over the next few weeks. But right now, versus just last week ago, we are in negative territory now. Now I want to also explain. I mean, the end is important, but in and of itself, it's not the be all end all. What's important about the end, the larger it is, the more cuts you can make. And I want to share, you guys have been doing this for the better part of a decade. And so you have firm level data. And so, and you've got indicators and markers that you've tracked over the years. So for example, one of the things that ETR tracks is giant public and private, GTP we call it. And so, and that's for example, I'm not saying that Mars is one of the companies, but Mars is a huge private company. UPS before they went public, huge private company. So ETR tracks firm level data, they first anonymize that, but they can see markers and trackers and trends and probably have, I don't know, dozens of those types of segments. So the bigger the end is, the higher the end within those buckets and the better the confidence interval. So, and you guys are experts at really digging into that and trying to understand and read the tea leaves. That's right. The key to this survey is it's not anonymous. We know who is taking the survey. Now to your point, we do anonymize and aggregate it when we display those results. But one of the unique capabilities is we're able to see all of these trend lines, the entire drill down survey that we did on COVID-19 through the lenses of different verticals. So we can take a look at industrials or tools manufacturing, healthcare, pharma, airlines, delivery services, health, and all these other verticals and get a feel for which ones are deteriorated the most, which ones look stable. And we talked about last week and it continues to remain true this week. And again, the ends have gone up on all these verticals on the supply chain side, industrials, materials, manufacturing, healthcare, pharma, they continue and they also anticipate to see these things in the next few months, broken supply chains. And then on the demand side, it's really retail, consumer, airlines, delivery services. That's coming down quite substantially. And I think based on what United and some of these other airlines have done in just the last few days in terms of cutting capacity, that's just a reflection of what we're seeing. So let's dig into the data a little bit more and bring up the next chart. So last week, where about 40%, actually exactly 40% were that gray line that said CIOs and IT practitioners said no change their IT budget, the green, the green was actually at about 20, 21%. So it's slightly up now at 22%. And you can see, most of the green is in that one to the 10% range. And you can see in the left-hand side it's obviously changing. So now we're at 37% and the gray line slightly up in the green and a little bit more down in the red. So take us through what's changed, Sagar. Yeah, so to reiterate what we were talking about last week and then I'll kind of talk about some of the changes is, I think the market and a lot of our clients, they were expecting the growth rate to be more negative. Last week when we talked about 0%, the reason that it wasn't more negative is because we saw all these organizations accelerating spend because they had to keep employees productive, right? They don't want to catastrophe in productivity. And so you saw this acceleration, as you mentioned earlier in the interview, around work from home tools, right? Collaboration tools, increasing bandwidth on the VPN networking side, laptops, MDM, so forth and so on. And so that continues to hold true today. Again, if we use the same example that we talked about last week, Fortune 100, Fortune 500 organizations, they have 40, 50, 60,000 employees or more working from home, you have to be able to support these individuals. And that's why we're actually seeing some organizations accelerate spend and the majority organizations, even though they are declining spend, some of that is still being offset by having to spend more on what we're calling kind of this work from home infrastructure. But I will say this, you are seeing more organizations versus last week, which is why the growth rate has come down, moving more and more towards the negative bucket. So again, there is some offset there, but the offset we talked about last week, work from home infrastructure is not a one for one when it comes to taking down your IT budget. And that continues to hold true. Right, so let's talk a little bit about some of the industries, retail, airlines, industrials, you know, pharma, healthcare. What are you seeing in terms of the industry impact, particularly as it relates to supply chains, but other industry data that you squinted through? Yeah, I think the biggest takeaway is that healthcare pharma, industrial materials, you know, manufacturing organizations, they've indicated the highest levels of broken supply chains today. And they think in three months from now, it's actually going to get worse. And so we spoke about this last time, I don't think this is going to be a V shaped recovery from the standpoint of things are going to get better in the next few weeks or the next month or two. CIOs are indicating that they expect conditions to worsen over the next three months on the supply chain side. And in even demand, you know, the ones that are getting hit the hardest on the retail consumer side, airlines, delivery services, they are again indicating that they anticipate demand to be worse three months from now. And so, you know, the goal is to continue serving and pulling these individuals over the next few weeks and months and to see if we can get a better timeline as we get into two H, but for the next few months, conditions look like they're going to get worse. Yeah, I want to highlight some of the industries and just make some comments here. Retail, you guys called our retail airlines, delivery services, industrial materials, manufacturing, pharma and healthcare as some of the highest impact. I'll just make a few comments here. I mean, I think retail really, this accelerates the whole digital transformation. We already saw this starting and I think you'll see further consolidation and some permanence in the way in which companies are pivoting to digital. Obviously, the big guys like Walmart and the like are competing very effectively with Amazon, but there's going to be some more consolidation there. I would say potentially the same thing in airlines. They're really closely watching what the government is going to do, but do we need this many airlines? Do we need all this capacity? Maybe yes, maybe no. So we're watching that. And of course healthcare right now, as I said last week in the breaking analysis, they're just too distracted right now to buy anything. I mean, they're overwhelmed. Now of course pharma, they're manufacturing. So they've got disruptions in supply chain and obviously the business but there could be an upside down the road as COVID-19 vaccines come to the market. Yeah, on the upside, I think you kind of hit it right on the nail. When you get these type of events that occur, sometimes it speeds up digital transformation. One of the things that the team and I have been talking about internally is this is not your father's keep the lights on strategy, so to speak. Organizations are very focused on maintaining productivity versus significantly cutting costs. So what does that mean? Maybe three to five years ago, if this had occurred, you would have seen a lot of infrastructure as a service, platform as a service, right? So a lot of these cloud providers, you would have seen those projects decline as organizations spent more on-prem. And we're not seeing that. We're seeing continued elevated budgets on the cloud side and Micron just reported this morning and again cited strong demand on the cloud and data center side. So that just goes to show that organizations are trying to maintain productivity. They want to continue these IT roadmaps and they're going to cut budgets where they can but it's not going to be on the cloud side. You know, that's a really important point. This is not post Y2K, not 2008, 2007, 2008, 2009. And because we've been a 10 year bull market, companies are doing pretty well. Balance sheets are generally strong. And so they somewhat can weather. They use the stronger companies can weather this so they're not focused right now anyway on cut, cut, cut as it was in the last two downturns. Let's go into some of the vendor data and some of the sector data, Andrew, if you'd bring up the next chart. So what we're showing here is really comparing the blue is the January survey to the current survey in the yellow and you're seeing some of the sectors that are upticking. So you've identified mobile device management, big data and cloud, some of the productivity. You know, you mentioned DocuSign, Adobe, Zoom, Citrix, even VMware with desktop virtualization. We've talked about security. You've got marketing and LinkedIn, my LinkedIn inbound is going through the roof as people are probably signing up for a LinkedIn, you know, premium. So let's talk about this a little bit. What you're seeing sort of help us interpret this data. Yeah, sure. So one of the things that everybody wants to know is, okay, so work from home infrastructure is getting more spend for the vendors that are benefiting the most. And so one of the unique things that we can do is because we're kind of collecting all the DNA, right? From a tech stack side, from these organizations, we can overlap how they're spending on these vendors and also with the data that they provide in terms of whether they're increasing or decelerating their IT budgets because of COVID-19. So what you're looking at here is we isolated to all of those organizations and customers, right? That indicated that they're increasing their budgets because of COVID-19, right? Because of the work from home infrastructure. And what we're doing is we're then isolating to vendors that are getting the most upticks in spend. And so this actually really nicely aligns with a lot of the themes that we were talking about, collaboration tools. You see VMware there, all right, on the virtualization side, MDM with Microsoft. And you're seeing a lot of other vendors with Citrix and Zoom and Adobe. These are the ones that we think are going to benefit from this kind of work from home infrastructure movement. And again, it's all very, it's not just qualitative in the commentary. This is all analytics. We really went in and analyzed every single one of these organizations that were increasing their budgets and tried to pinpoint using different data analysis techniques and to see which vendors were really getting the majority or the largest, you know, high of that spend. Yeah, now we had Sanjay Poonan, who's the COO of VMware on yesterday. And he was very sensitive to not trying to appear as ambulance chasing because obviously they do desktop virtualization and a VDI big workload. At the same time, I think he was also being cautious because there's probably portions of their business that are going to get hit. Michael Dell similarly, I think he was quoted in CRN and saying, hey, we're seeing a momentum in our laptop business and our mobile business. But as you guys pointed out, the flip side of that is their on-prem business is probably going to suffer somewhat. So it's a, it kind of like the work from home is a partial offset, but it's not a total offset. You're seeing that with a lot of these companies. Obviously Microsoft, AWS, a lot of the cloud companies are very well positioned. How about some of the guys that are going to get impacted? Obviously, as I said, the on-prem folks, you guys talked about, you know, earlier, it's not your father's keep your lights on strategy. Okay, but this, you asked the question, is this a reprieve for the legacy guys, not quite, was your conclusion? What did you mean by that? Yeah, I think a lot of times when you have these type of events, the clients, you know, a lot of the market think, okay, some of the legacy vendors are going to do well because, you know, we're in tumultuous times and we don't want to keep on this kind of next generation strategy, but we're not seeing that. And to the point that you highlighted earlier, there are, even though these companies like Dell, like Cisco, where they're seeing some products accelerate, there are products to your point that are not doing as well, right? The desktops, right? As an example for Dell or the storage. And so on the negative side or the legacy side, where we're just not seeing any traction, the IBMs, the Oracle on-prem, right? Symantec, right? Which got acquired by Broadcom, checkpoint, micro strategy. And there's probably another half dozen other vendors that we're seeing where they are not capitalizing. There is no reprieve for these legacy names and we don't anticipate them getting additional spend because of this work-from-home infrastructure kind of movement. So let's unpack that a little bit. I mean, it's interesting, Symantec and checkpoint and security, you think security, you think would get an uplift here, but what you're seeing here, let me just tell the audience who you've called out. Symantec, Teradata, MicroStrategy, NetApp, Checkpoint, Oracle, and IBM, and I know there are others, but I would say this, these are companies that are getting impacted in a big way by the cloud. I mean, particularly you think Symantec and checkpoint, that's cloud security companies are actually probably still doing pretty well. You take Teradata, Teradata's getting impacted by the cloud from folks like Snowflake and Redshift, MicroStrategy, a lot of modern BI coming out. NetApp, here's a company that's embraced the cloud, but the vast majority of the business continues to be on-prem. I think IBM and Oracle are interesting. They're somewhat different, actually a lot different. IBM has services exposure and you guys call that out, particularly around outsourcing. At the same time, it's going to be interesting to see IBM's got a lot of resources. It's going to be interesting to see if they start coming out with coronavirus related services. So we're watching for that. And then Oracle, their whole story is, okay, we got Gen2 cloud and mission critical in the cloud, but they're on-prem businesses, I think clearly going to be affected here is kind of what you guys pointed out and I would agree with that, your thoughts. Yeah, so I think what we're seeing is organizations, they had a cloud roadmap and that roadmap is continuing. The one thing that is changing in some of that roadmap is we need to be able to support employees as they work from home as we achieve this roadmap. And so that's why we're not seeing a reprieve on the legacy side, but we are seeing upticks and spend where we just wouldn't anticipate them, right? Maybe on Citrix, on Dell laptops, Adobe and a few other areas. Now, in terms of security side, some of the next-gen security vendors like Crowdstrike, Okta, right? Which is an MFA, those vendors are doing well and it makes sense, right? You have more people working from home, you have more devices that are connecting to data applications, right? Just accompanying itself. And so you would expect spend to continue going up as you need more authentication, more endpoint protection. Cisco, Merakai, right? They do cloud networking. That piece is looking very good, even though hardware networking is not looking very good at all, but cloud networking is looking good, which again makes sense as you're increasing bandwidth on that side. Yeah, so definitely stories of two sides of that coin. I want to, Andrew, if you wouldn't mind bringing up the next chart, we're going to go back to the first one that we showed you with the time series. This is a very important point again. We can't stress it enough. We want to understand the impact of the stimulus or aid package and ETR is going to continue to track that. What can we expect from you guys over the next week or so? Yeah. The goal is to determine whether or not the stimulus is having an impact on how people are responding to our survey as it relates to how they're changing their budgets. And so the next four or five days, if we start seeing an uptick in this yellow and blue lines here, I think that's a positive. I think that shows that people are kind of wrapping their heads around, great, the government is taking action here. There is a roadmap in place to help us get out of there, out of this. But if the line continues coming down, it just may be that the last few weeks or the last month or so, there was just so much damage. There's no coming back from this, at least in the near term. So we are kind of watching out for that. Yeah, well, the Fed is definitely active. I mean, they're doing what they can, pushing liquidity into the marketplace. People think they're out of bullets. I don't agree. The Fed has quite a bit of headroom and some dry powder to go for, which is awesome. But the Fed itself can't do it. You needed to have this fiscal stimulus. So we're excited to see that come to market. I think what I would say to our audiences, my concern is uncertainty. The markets don't like uncertainty. And right now there's a lot of uncertainty. If you saw the peace on medium of the hammer and the dance, it lays out some scenarios about what could happen to the healthcare system. You see people who say, hey, we should shut down for 10 weeks. The president's saying, hey, we want to get back to work by April. So the big concern that I have is, okay, maybe we can stamp it out in the near term and get back to work by late April or early May. But then what happens? Are people going to start traveling again? Are people going to start holding events again? And I think there's going to be some real question marks around that. So that uncertainty, I think is something that we obviously have to watch. I think there is light at the end of the tunnel. When you look at China and some of the other things that are happening around the world, but we still don't know how long that tunnel is. Sagar, I'll give you final thoughts before we wrap. Yeah, I think, and that's the biggest thing here is the uncertainty, which is why we're doing a lot of this event analysis. We're trying to figure out after each one of these big events, is there more certainty in people's responses? And just when we were talking about sectors and verticals and vendors that are not doing well, well, because of the uncertainty, we're seeing a lot of downpicks and spend amongst outsourced IT and IT consulting vendors. And as long as the uncertainty continues, you're going to see more and more IT projects frozen, less and less spend on those outsource IT and IT consulting vendors and others. And until there's something really in place here where people feel comfortable, you're going to probably see budgets remain where they are, which right now they're negative. So folks, as we said last week, Sagar and I, ETR is committed, theCUBE is committed to keep you updated on a regular basis. Right now we're on a weekly cadence. As we have new information, we will bring it to you. Sagar, thanks so much for coming on and supporting us. You're welcome, thanks for having me again. You're welcome. And so thank you for watching this CUBE Insights powered by ETR. And remember, all these breaking analysis available on podcasts, go to ETR.plus, that's where all the action is in terms of the survey work, siliconangle.com, covers these breaking analysis and I publish weekly on wikibon.com. Thanks for watching everybody, stay safe and we'll see you next time.