WEBVTT - Technology 'Saved the Day' in the Pandemic

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic from Bloomberg Radio. Well, our world,

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<v Speaker 1>the reopening trade, we are seeing it as we come

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<v Speaker 1>out of the pandemic, but we've also known the pandemic

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<v Speaker 1>has caused a lot of innovation and transformations definitely accelerated

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<v Speaker 1>in things like healthcare, corporate travel. Think about all the

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<v Speaker 1>meetings that conversations we've had virtually retail supply chains. A

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<v Speaker 1>lot of things have been impacted. Yeah, they certainly have.

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<v Speaker 1>And the big question is to what extent is the

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<v Speaker 1>disruption continue with the transformation to the cloud. How much

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<v Speaker 1>of this has been pulled forward already? And do we

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<v Speaker 1>see the spend decline from these I T systems? Sounds

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<v Speaker 1>like a question for next guest. Crawford del Prett back

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<v Speaker 1>with US president at International Data Corporation i d C.

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<v Speaker 1>As you know it, he's on the phone in Massachusett's Crawford,

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<v Speaker 1>nice to have you here with Tim and myself. How

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<v Speaker 1>are you, hey, how you guys been. It's great to

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<v Speaker 1>talk to you, and yeah, what a what a crazy

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<v Speaker 1>time this has been over the last year and a

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<v Speaker 1>half or so. It's great to catch up. We talked

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<v Speaker 1>with you, we were looking at our calendar. I think

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<v Speaker 1>back in April of a lot has happened since then.

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<v Speaker 1>Those are pretty dark times. How do you describe and

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<v Speaker 1>explain the innovation disruptions that we've seen and what it

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<v Speaker 1>says more significantly about the world to come? Yeah, you know,

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<v Speaker 1>So what's interesting is we now have a lot of

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<v Speaker 1>data right over the last eighteen months that we can

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<v Speaker 1>look at and you know, anecdotally kind of what we

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<v Speaker 1>thought we were we were seeing, we can now see

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<v Speaker 1>in the numbers and I'll just go with you for

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<v Speaker 1>a little bit. But what we saw over the last

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<v Speaker 1>two years, it felt like, you know, tech kind of

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<v Speaker 1>its strengthened, right, and there were some areas that got hit,

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<v Speaker 1>but it definitely uh strengthened. But you know, what we've

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<v Speaker 1>seen from a parallel standpoint, totally broke down in COVID.

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<v Speaker 1>So if we go back all the way to the

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<v Speaker 1>PC downturn of the nineties, if we go to the

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<v Speaker 1>dot bomb or the dot com, if we go to

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<v Speaker 1>the crisis of two thousand eight when GDP crashed, check

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<v Speaker 1>would crash more. So you know, in two thousand one,

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<v Speaker 1>g d P went to zero. Tech crash to minus

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<v Speaker 1>three percent growth in two thousand and nine two eight,

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<v Speaker 1>g d P went to minus let's call it to

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<v Speaker 1>check went to minus five. In this downturn, GDP went

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<v Speaker 1>to minus four. Tech stayed positive and actually core tech

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<v Speaker 1>stayed at three percent growth. And so the story here

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<v Speaker 1>and what we saw in is that companies leaned into tech.

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<v Speaker 1>They use tech to get out of this mess, to

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<v Speaker 1>create new experience for customers, to create a stickiness with

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<v Speaker 1>their services. In some sectors, it boosted in another sectors. Um,

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<v Speaker 1>you know, they were able to stay very very productive

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<v Speaker 1>even as we know as the world work from home.

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<v Speaker 1>So it was it was really a downturn unlike any

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<v Speaker 1>other and in a lot of ways, tech kind of

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<v Speaker 1>saved the day. Well the Crawford, when you use the

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<v Speaker 1>term tech, you mean technology, but not all tech is

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<v Speaker 1>created equally. And there's different segments of tech. Right, there's

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<v Speaker 1>I T spend, there's spend for cloud transformation. So break

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<v Speaker 1>it down for us and where we saw the spending

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<v Speaker 1>grow and perhaps parts where we didn't see that weren't

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<v Speaker 1>so resilient. Yeah, So I mean you're you're you're absolutely right.

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<v Speaker 1>So we saw you know, application software and and and

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<v Speaker 1>and core apps. You know, they they stayed with their

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<v Speaker 1>double district growth. We saw you know, things like infrastructure

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<v Speaker 1>as a service you know still you know, delivering you

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<v Speaker 1>know over um growth. But you're right, I mean, if

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<v Speaker 1>you're talking about you know, core infrastructure, you know, core servers,

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<v Speaker 1>core enterprise network UM. You know that stuff in was

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<v Speaker 1>you know barely growing or or or in the case

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<v Speaker 1>of enterprise networks, you know, in terms of dollars, actually

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<v Speaker 1>you know shrank almost um three percent. So you know,

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<v Speaker 1>if it was something that was related to the cloud, um,

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<v Speaker 1>if it was something that was um related to um

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<v Speaker 1>uh a A A h an app, you definitely saw

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<v Speaker 1>a massive acceleration. But then in terms of tech, you

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<v Speaker 1>also saw some kind of not intuitive things. Right. It

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<v Speaker 1>wasn't just you know that we couldn't build PCs, which

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<v Speaker 1>is a situation we are now. PC demand went nonlinear,

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<v Speaker 1>so categories that you know, we're kind of um left

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<v Speaker 1>for dead. You know, we saw a PC shipments grow

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<v Speaker 1>fourteen percent um uh sorry, we expect PC's uh shipments

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<v Speaker 1>to grow about foe, so you know, continuing to grow,

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<v Speaker 1>you know, very very dramatic. I want to get back

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<v Speaker 1>to Crawford. Del Prett back with US president at ADC

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<v Speaker 1>Research on the phone in Massachusetts. Heay credit, Uh, Crawford,

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<v Speaker 1>we want to continue with you, but we just mentioned

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<v Speaker 1>a story about Google scrapping its planned to offer bank

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<v Speaker 1>accounts to users big tech. I mean, are they at

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<v Speaker 1>some point do you think going to be Are you

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<v Speaker 1>seeing or having conversations with folks in the industry that

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<v Speaker 1>eventually they will be much more involved when it comes

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<v Speaker 1>to finance, when it comes to healthcare? Absolutely? Um, yeah,

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<v Speaker 1>you're this is gonna be. This is is gonna play out

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<v Speaker 1>over a number a year. Pers And I think you

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<v Speaker 1>know what you're seeing with Google is right now. I

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<v Speaker 1>mean tactically, you know, Apple was able to and and

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<v Speaker 1>everything Apple does is about leveraging the power of you know,

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<v Speaker 1>people talk about the numbers in their ecosystem, it's also

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<v Speaker 1>the quality of the number in their ecosystem. You've got

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<v Speaker 1>a spender with more disposable income in the Apple system ecosystem,

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<v Speaker 1>and Apple is able to do things like yet this

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<v Speaker 1>spend this this customer to use the Apple credit card

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<v Speaker 1>to aspire to an Apple credit card. Um, they you know, frankly,

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<v Speaker 1>just have more means. And even though Google's ecosystem is

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<v Speaker 1>larger in terms of units, they don't drive as much value,

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<v Speaker 1>they don't drive as much revenue out of that ecosystem,

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<v Speaker 1>and I think that's kind of the the rub that

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<v Speaker 1>you're seeing right now. But over time, you will see

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<v Speaker 1>healthcare companies and banks using more tech to create new

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<v Speaker 1>experiences for customers, and that will involve tech companies that

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<v Speaker 1>we all know. Does it present regulatory risk though, Crawford

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<v Speaker 1>to these companies. I mean, if you the term big

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<v Speaker 1>tech is sort of majority for Democrats and a blickens,

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<v Speaker 1>and I wonder if they get into healthcare more so,

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<v Speaker 1>if they get into banking more so, if that just

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<v Speaker 1>puts a target on their back from regulators. Yeah, it

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<v Speaker 1>goes well. I mean that's already happened, right, I mean

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<v Speaker 1>bigger target for a lot Yeah, yeah, earlier for a

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<v Speaker 1>lot of these companies. We gotta Yeah, it would be

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<v Speaker 1>a bigger target. I guess. I believe that healthcare companies

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<v Speaker 1>are healthcare companies and banks are banks, and I think

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<v Speaker 1>you know, Apples figured that out and that's why they

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<v Speaker 1>have done the partnerships that they've done. And I think

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<v Speaker 1>you'll see more of those kinds of partnerships going forward,

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<v Speaker 1>I I think these companies are going to be in

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<v Speaker 1>a position of powering other companies to be stronger with

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<v Speaker 1>their tech as opposed to jumping in and entering um

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<v Speaker 1>these these these new sectors at this you know, kind

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<v Speaker 1>of breaknext speed. I think you're probably gonna see that

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<v Speaker 1>happening a lot slower than them going it alone, if

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<v Speaker 1>you will. Hey Crawford, I want to get back to

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<v Speaker 1>something that you said earlier, which was the growth of

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<v Speaker 1>the PC market, and we saw that a lot of that, uh,

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<v Speaker 1>demand for PCs get pulled forward over the last eighteen

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<v Speaker 1>months as people were working from home and needed machines

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<v Speaker 1>at their homes rather then at the office. And I'm

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<v Speaker 1>wondering because earlier this week HP in check our HPQ

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<v Speaker 1>was downgraded to neutral from overweight at JP Morgan, the bank,

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<v Speaker 1>lowering its price target to thirty dollars, the bank saying

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<v Speaker 1>that they see moderating tail wins for the PC market.

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<v Speaker 1>And I'm wondering if if you're seeing those those tail

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<v Speaker 1>wines moderate as well, if if that demand has been

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<v Speaker 1>pulled forward. Yeah, So there's a couple of there's a

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<v Speaker 1>couple of factors going on here. There's there's a ton

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<v Speaker 1>of demand that you know, we just can't with the

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<v Speaker 1>PC companies can't meet because of the semiconductor shortage. But

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<v Speaker 1>if you look at right, we expect to see the

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<v Speaker 1>market girl about four this year in the units. One

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<v Speaker 1>percent of that growth happens in the first half, and

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<v Speaker 1>about between two and three percent happens in the second half.

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<v Speaker 1>Um sorry, you know, up in the first half, up

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<v Speaker 1>between two and three in the second half of the year.

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<v Speaker 1>So our forecast kind of kind of plays that out. Now.

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<v Speaker 1>Having said that, this market, we expect um will continue

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<v Speaker 1>to grow, but it'll grow oh at lower rates going forward,

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<v Speaker 1>you know, more traditional rates. But the market expanded by

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<v Speaker 1>you know, um double digit percentage in terms of units,

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<v Speaker 1>and won't necessarily give that back because what we see

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<v Speaker 1>happening is that PCs are now viewed as kind of

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<v Speaker 1>a safety net um and and something was happening with PCs.

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<v Speaker 1>People are consuming more media on them, they're using them,

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<v Speaker 1>they're enjoying the bigger screams, and they're also basically saying,

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<v Speaker 1>I got to have more of these in my you know,

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<v Speaker 1>as as a family, we need more of them in

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<v Speaker 1>our lives. So in the US, the average number of

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<v Speaker 1>PCs for household prior to COVID was about two and

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<v Speaker 1>a half. Now it's more like three. We don't see

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<v Speaker 1>that necessarily going down. We don't see it rising, we

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<v Speaker 1>don't see it going down. So so we basically there's

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<v Speaker 1>been a shift here. So just to rehash some headlines

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<v Speaker 1>crossing the Bloomberg and it does relate to our conversation present,

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<v Speaker 1>Pine says that we're going to get this done. He's

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<v Speaker 1>talking about the infrastructure legislation, completing his economic agenda. He

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<v Speaker 1>says doesn't matter. After meeting with Democratic lawmakers on the

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<v Speaker 1>US Capital are at the U S Capital he says, quote,

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<v Speaker 1>it doesn't matter when it doesn't matter if it's six minutes,

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<v Speaker 1>six days, or six weeks. He also uh says that, um,

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<v Speaker 1>a smaller bill can make historic investments. So I'm assuming

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<v Speaker 1>he's talking about the software infrastructure side of that. On

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<v Speaker 1>the harder side. Crawford, UM, how do you what kind

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<v Speaker 1>of analysis have you done that this potential infrastructure spending,

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<v Speaker 1>which includes connecting more of America high speed internet access,

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<v Speaker 1>which we have reported in here in Business Week about

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<v Speaker 1>how many millions of Americans it's huge, don't have that access.

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<v Speaker 1>What kind of analysis have you had because I think

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<v Speaker 1>about our investment audience are saying, okay, so how do

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<v Speaker 1>I maybe play this ultimately if this infrastructure bill goes through? Yeah,

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<v Speaker 1>I mean so what So what you're going to see

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<v Speaker 1>if this infrastructure bill goes through is you're going to

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<v Speaker 1>see steady demand and what we call I C T

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<v Speaker 1>so you know I T and communications technology. So you're

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<v Speaker 1>gonna see UM, you know, significant interest in the telecom

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<v Speaker 1>infrastructure UM and building out telecom infrastructure. You're going to

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<v Speaker 1>see UM the carriers, you know, continue to be able

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<v Speaker 1>to UM, see sustained demand. You're going to see uplifts

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<v Speaker 1>and continued investment in things like security because the security

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<v Speaker 1>landscape becomes more and more complex as you bring more

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<v Speaker 1>and more people on online. So you know, that's why

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<v Speaker 1>we believe that if you look at I T spending,

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<v Speaker 1>you know that kind of comes back to about six

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<v Speaker 1>percent by our forecast says that I C T including

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<v Speaker 1>communications that gets over that gets to over seven percent

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<v Speaker 1>growth by So it's really that idea that we'll bring

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<v Speaker 1>in more people online, and that really means that more

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<v Speaker 1>has to be spent on the foundational technologies, the core

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<v Speaker 1>infrastructure in order to make this reality for you. All right,

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<v Speaker 1>really appreciate the time with you. Crawford Del President at

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<v Speaker 1>I d C on the phone from Massachusetts, so thank you.