 From the CUBE studios in Palo Alto in Boston connecting with thought leaders all around the world. This is a CUBE conversation As we've been reporting the COVID-19 pandemic has created a bifurcated IT spending picture and over the last several weeks We've reported both in the macro and even some for come at it from from a vendor and a sector view I mean for example, we've reported on some of the companies that have really continued to thrive We we we look at the NASDAQ and it's you know near its all-time highs companies like And in crowd strike, we've reported on snowflake Ui path the sectors are PA some of the analytic databases around AI Maybe even to a lesser extent cloud but still has a lot of tailwinds relative to some of those on-prem Infrastructure plays even companies like Cisco Bifurcated in and of themselves or you see this Maraki side of the house, you know doing quite well the work from home stuff But maybe some of the traditional networking not as much well Now what if you flip that to really try to understand what's going on with the shape of the recovery? Which is the main narrative right now? Is it a v-shape? Is it a u-shape? What is what's what do people expect and now to understand that you really have to look at Different industries because different industries are going to come back at a different pace with me again is saga Kadakia Who's the director of research at ETR saga? You guys are all over this as usual timely information. It's great to see you again. Hope all as well in New York City Thanks so much. David's it's a pleasure to be back on again Yeah, so where are we in the cycle? We've you've done a great job and very timely ETR was the first to really put out data on the COVID impact with the survey that ran from mid-March to to mid-April and now Everybody's attention saga is focused on okay. We're starting to come back Stores are starting to open people are beginning to to go out again And everybody wants to know what the shape of their recovery looks like so where are we actually in that research cycle for you guys? Yeah, no problem. So like you said, you know in that kind of March April timeframe We really want to go out there and get an idea of what we're doing the budget impacts You know as it relates to it Because of COVID-19 right so we kind of ended off there around a decline of five percent and coming into the year The consensus was a growth of four or five percent, right? So we saw about a nine hundred thousand base point swing, you know to the negative side and then Covered in March and April were you know, which sectors and vendors were going to benefit As a result of work from home And so now as we kind of fast-forward to the research cycle as we kind of go more into May and and into the summer Rather than asking those exact same question again again because it's just been you know, maybe 40 or 50 days We really want to hang on the recovery type as well as Kind of more emerging private vendors, right? We wanted to understand what's gonna be the impact on on these vendors that Typically rely on, you know larger conferences more in-person meetings because these are younger technologies There's not a lot of information about them. And so last Thursday We launched our biannual emerging technology study. It covers roughly 300 Private emerging technologies across maybe 60 sectors of technology and in tandem We launched a COVID flash pull Right what we wanted to do was kind of twofold one really understand from CIOs the recovery type They had in mind as well as if they were seeing any any kind of permanent changes in their IT stacks IT spend because Of COVID-19 and so if we kind of look at the first chart here and kind of get more into that first question around recovery type What we asked CIOs in this kind of COVID flash pull Again, we did it last Thursday was what type of recovery are you expecting? Is it V-shaped so kind of a brief Decline, you know, maybe one quarter and then you're going to start seeing growth into 2h 20 Is it you shaped so two to three quarters of a decline or deceleration revenue? And you're kind of forecasting that growth and revenue as an organization to come back in 2021 is it L-shaped right so maybe three four five quarters of a decline or deceleration and then You know very minimal to moderate growth or none of the above, you know Your organization is actually benefiting From from from COVID-19 as you know, we've seen some many reports So those are kind of the options that we gave CIOs and you kind of sit on that first chart here Oh Interesting and this is a survey of flash service 700 CIOs or you know, approximately and the interesting thing I really want to point out here is this you know, the COVID pandemic was it didn't suppress, you know All companies, you know, and and the return is it's not going to be a rising tide lifts all ships You really got to do your research. You have to understand the different sectors really try to peel back the onion skin and understand Why there's certain momentum how certain organizations are accommodating the work from home We heard, you know, several weeks ago how there's a major change in in networking mindsets We're talking about how security is changing. We're going to talk about some of the permanence But it's really really important to try to understand these different trends by different industries Which you're going to talk about in a minute, but if you take a look at this slide I mean, obviously most people expect this u-shape decline. I mean, you know u-shape recovery rather So it's two or three quarters followed by some growth next year But as we'll see some of these industries are going to really go deeper with an L shape recovery And then it's really interesting that a pretty large and substantial portion See this as a tailwind presumably those with, you know strong SAS models some And you're occurring revenue models your thoughts if we kind of start on this kind of aggregate chart You know, you're looking at about 44% of CIOs anticipate a u-shape recovery, right? That's the largest bucket on then you can see another 15% anticipate an L shape recovery 14 on the v-shaped and then 16% to your point that are kind of seeing this this tailwind But if we kind of focus on that largest bucket that you shaped, you know One of the things to remember in and again when we asked this to CIOs within the within this kind of COVID flashball We also asked can you give us some commentary? And so one of the things that or one of the themes that are kind of coming along with this u-shape recovery is, you know CIOs are cautiously optimistic about this u-shape recovery You know, they believe that they can get back onto a growth cycle Into 2021 as long as there's a vaccine available. We don't go into a second wave of lockdowns Economic activity picks up a lot of the government actions, you know become effective So there are some kind of let's call it qualifiers with this bucket of CIOs that are anticipating a u-shape recovery What they're saying is that look we are expecting these things to happen. We're not expecting another lockdown We are expecting a vaccine and if that takes place then we do expect An uptick in growth are going back to kind of pre-covid levels in in 2021 But you know, I think it's fair to assume that If one or more of these are absent and things do get worse as as as all these states start opening up Maybe the recovery cycle gets pushed along. So kind of at the aggregate. This is where we are right now Yeah, so as I was saying you really have to understand the different not only different sectors and other different vendors But you really got to look into the industries and then even within industries So if we pull up the the next chart We have the industry sort of breakdown And sort of the responses by the industry's v-shape u-shape or shape. I had a conversation with the CIO of major resort Just the other day And even he was saying well, actually, I'll tell you it was windham resorts public company I mean and obviously that that business got good crush. They had their earnings call the other day They talked about how they cut their capex in half, but the stock Saga since the march lows is more than doubled. Yeah, so, you know, that's amazing and now But even there within that sector, they're peeling that on you saying well Certain parts are going to come back sooner certain parts are going to take longer depending on You know, what type of resort what type of hotel? So it really is a complicated situation So take us through what you're seeing by industry Yeah, sure. So let's start with kind of the it telco retail consumer space Dave to your point, there's going to be a tremendous amount of bifurcation within Both of those verticals. Look if we start on the it telco side You know, you're seeing a very large bucket of of individuals right over 20% that indicated They're seeing a tailwind right or additional revenue because of cove in 19 and You know, Dave, we spoke about this all the way back in march, right all these work from home vendors You know cio's were doubling down on on cloud and sass and we've seen how some of these vendors have reported in april You know with very good reports all the major cloud vendors, right select security vendors And so that's why you're seeing on the kind of telco side definitely more positivity, right as it relates to recovery type Right, some of them are not even going through recovery. They're they're seeing an acceleration Same thing on the retail consumer side. You're seeing another Large bucket of people who are indicating what we've benefited And again, there's going to be a lot of bifurcation. There's been a lot of retail consumers. You just mentioned with the hotel lines that Are definitely hurting But you know, if you have a good online presence as a retailer and you know, you had essential Goods or groceries you benefited and and those are the organizations that we're seeing You know really indicate that they saw an acceleration due to cova 19 So I thought those two those two verticals between kind of the it and retail side There was a big bucket or you know of people who indicated positivity So I thought that was kind of the first kind of you know, I was talking about kind of peeling this onion back You know, that was really interesting You know tech continues to power on and I think you know a lot of people try I think that somebody was saying that the record Um time in which we've developed a vaccine previously was like mumps or something and I mean it was just like years But now today We've got ai we've got all this data You've got these, you know great companies all all working on this and so You know, wow if we can compress that that's going to change the equation A couple other things saga that jump out at me here in this chart that I want to ask you about I mean the education You know colleges are really you know kind of freaking out right now some are coming back I know like for instance, my daughter university, arizona. They're coming back in the fall evidently others are saying no You can clearly see the the airlines and transportation Has the biggest sort of l shape which is the most negative i'm sure restaurants and hospitality are kind of similar and then you see energy You know, which got crushed. We had you know oil Negative people paying you take barrels of oil But now look at that, you know expectation of a pretty strong, you know U-shaped recovery as people start driving again and and the economy picks up So maybe you could give us some thoughts on on some of those sort of outliers Yeah, so I kind of bucket, you know the the next two outliers as From an l-shaped and a u-shaped so on the l-shaped side like like you said Education airlines transportation and probably to a little bit lesser extent industrials materials manufacturing services consulting These verticals are indicating The highest percentages from an l-shaped recovery, right? So three plus quarters of revenue declines and deceleration Followed by kind of you know minimal to moderate growth And look there's no surprise here. Those are the verticals that have been impacted the most By less demand from consumers and and businesses And then as you mentioned on the energy utility side, and then I would probably bucket maybe healthcare pharma those have some of the largest percentages of u-shaped recovery And I it's funny like I read a lot of commentary from some of the energy in the healthcare Cio's and they were said they were very optimistic about a u-shaped type of recovery And so it kind of you know, maybe with those two initiatives that you could even kind of lump them into You know Probably to a lesser extent, but you could probably lump it into the the prior one with the airlines and the education and services consulting and IMM where you know, these are definitely the verticals that are going to see the longest longest recoveries It's probably a little bit more uniform Versus what we've kind of talked about a few minutes ago with you know, it and retail consumer where It's definitely very bifurcated. You know, there's definitely winners and losers there Yeah, and you know again, it's a very complicated situation a lot of people that I've talked to are saying look You know, we really don't have a clear picture. That's why all these companies of are not giving guidance Many people however are optimistic only for a vaccine But but but also they're thinking is you know young people with the disposable income They're going to kind of say don't damn the torpedoes. I'm not really going to be exposed and you know, they can come back much stronger Um, you know, there seems to be pent up demand for some of the things like elective surgery Or even some other sort of more important health care needs So that obviously could be a snapback. So, you know, obviously we're really closely looking at this One thing though is is certain Is that people are Expecting a permanent change and you've got data that really shows that on the on the next chart That's right. So one of the one of the last questions that we asked kind of this, you know quick covet flashball was um, do you anticipate permanent changes to your kind of it stack it spend based on the last few months, you know, as everyone has been been working remotely and You know rarely do you see results point this much in one direction, but 92 percent Of cio's and and kind of it, you know high-level it end users indicated. Yes There are going to be permanent changes And, you know, one of the things we talked about in march and look, we were really the first ones, you know You know in our discussion where we were talking about work from home spend kind of Negating or balancing out all these declines, right? We were saying look Yes, we are seeing a lot of budgets come down But surprisingly we're seeing 20 30 of organizations accelerate spend and even the ones that are are spending less Uh, they even them, you know, some of their some of their budgets are kind of being negated by this work from home spend, right when you think about collaboration tools and additional vpn and networking bandwidth and laptops and then security all that stuff, uh cio's now continue to spend on because what what cio's now understand is productivity has remained at very high levels, right? In march cio's were very concerned with the catastrophe and productivity that has not come true So on the margin cio's and organizations are probably much more positive on on that front um, and so Now, uh, because there is no vaccine where we know cio's and just in general the population We don't know when one is coming And so remote work seems to be the new norm moving forward, especially that productivity You know levels are are pretty good with people working from home. So from that perspective Everything that looked like it was maybe going to be temporary just for the next few months as people work from home That's how organizations are now moving forward Well, and we saw twitter, um Basically said we're going to make work from home permanent And that's probably because their cio wants to you know live in africa Google I think is going to the end of the year I think many companies are going to look at a hybrid and and give employees a choice Say look if you want to work from home and you can be productive you get your stuff done You know, we're cool with that I think the other point is you know, everybody talks about these digital transformations You know leading into coven and I got to tell you I think a lot of companies were sort of complacent. They talked to talk, but they weren't walking the walk meaning They really weren't becoming digital businesses. They really weren't putting data at the core And I think now it's really becoming an imperative I think there's no question that that what we've been talking about and forecasting has been pulled forward And you you're either going to have to step up your digital game or you're going to be in big trouble And the other thing that's i'm really interested in Is will companies sub-optimize profitability in the near term In order to put better business resiliency in place and better flexibility Will they make those investments? And I think if they do You know longer term they're going to be in better shape. You know if they don't They could maybe be okay in the near term, but i'm going to put a precaution sign a little longer term No, look, I I think Everything that's been done in the last few months, you know in terms of having those continuation plans because you know due to pandemics and all that stuff That is now it look you got to have that in your playbook, right? And so to your point, you know, this is where cio's are going and if you're not Transform yourself or you didn't before, you know lesson learned because now you're probably having to move twice as fast To support all your employees. So I think you know this pandemic really kind of sped up You know digital transformation initiatives, which is why You know, you're seeing some Companies sass and cloud related companies with very good earnings reports that are guiding well And then you're seeing other companies that are pulling their guidance because of uncertainty But it's it's likely more on the side of they're just not seeing the same levels of spend Because if they haven't oriented themselves On that digital transformation side. So I think you know events like this they typically You know showcase winners and losers Then you know when when things are going well and you know, everything's kind of going up Well, I think that too there's a big, you know discussion around is the s&p overvalued right now Um, I won't make that call But I will say this that there's a lot of data out there. There's data in earnings reports There's data about this pandemic It which is continues to change maybe maybe not so much daily But you're getting new information multiple times a week So you got to look to that data. You got to make your call Pick your spots. I already talked about a stock pickers market. I think it's very much true here There are some some going to be really strong companies emerging out of this, you know, don't gamble But do your research and I think you'll you'll find some, you know, some gems out there You know, maybe Warren Buffett can't find them. Okay, but the guys in main street. I think, you know I'm I'm optimistic. I wonder how you feel about about the recovery I think we're now maybe tainted by tech, you know, I'm very much concerned about certain industries But I think the tech tech industry which is our our business is going to come out of this pretty strong Yeah, we look the one thing we should we should have stated this earlier The majority of organizations are not expecting a v-shaped recovery Uh, and yet I still think there's part of the consensus is expecting a v-shaped recovery Uh, you can see as we demonstrated in some of the earlier charts The you know, almost the majority of organizations are expecting a u-shaped recovery and even then as we mentioned, right That u-shape there is some cautious optimism around there and I have it you probably have it where yes, if everything goes well It looks like 2021 we can really get back on track But there's so much unknown and so yes, that does give I think everyone pause when it comes from an investment perspective Uh, and and even just bringing on technologies into your organization, right? Which ones are going to work? Which ones aren't so I'm I'm definitely on the boat of this is a more u-shaped than a v-shaped recovery I think the data backs that up Uh, I think you know when it comes to cloud and sass players those areas And I think you've seen this on the investment side a lot of money has come out of All these other sectors that we mentioned that are having these l-shaped recoveries a lot of it has gone into The tech space I imagine that will continue um And so that might be kind of you know It's tough to sometimes balance what's going on on the investment the stock market side with you know How organizations are recovering? I think people are really looking out into two three quarters and saying look You know to your point when you said up earlier Is there a lot of that pent up demand are things going to get right back to normal because I think You know a lot of people are anticipating that and if we don't see that I think you know The next time we do somebody's kind of covet flash polls Uh, you know, I'm interested to see whether or not, you know Maybe towards the end of the summer these recovery cycles are actually longer because maybe we didn't see some of that stuff So there's still a lot of Unknowns, but what we do know right now is it's not a v-shaped recovery Agree, um, especially on the unknowns. There's monetary policy. There's fiscal policy. There's an election coming up There's there's there's escalating tensions With china, there's your thoughts on the efficacy of the vaccine. What about therapeutics? You know, do people who've had this get immunity? How many people actually have it? What about testing? So the point I'm making here is it's very very important that you update your forecast regularly That's why it's so great to have this partnership with you guys because we you know, you're constantly updating the numbers It's not just a one-shot deal. So saga, you know, thanks so much for coming on Uh, looking forward to having you on in uh in the coming weeks. I really appreciate it Absolutely. Yeah, we'll we'll really start kind of digging into how a lot of these emerging technologies are faring Because of cobit 19. So that's uh, I'm actually interested to start digging through the data myself. So yeah We'll uh, we'll we'll do some reporting in the coming weeks about that as well Well, thanks everybody for watching this episode of the cube insights powered by etr. I'm dade valante for Saga, kadakya. Check out etr dot plus. That's where all the etr data lives Uh, I publish weekly on wikibon dot com and silicon angle dot com and reach me at d valante We'll see you next time