The great transition

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June 21, 2021

 

Much of the workforce is going back to the office for the first time in over a year. As companies around the world implement a hybrid work model, enhanced technology could be key to facilitate the transition, according to George Saffaye, BNY Mellon Investment Management global investment strategist.

Hybrid return-to-work models will spell yet another major change for corporations. While the seismic shift to remote work instituted throughout the COVID-19 pandemic proved to be difficult for some, technology such as video conferencing software and apps that enable collaboration helped buoy business communication. Certain technologies will likely be vital for the transition back as well, or at least halfway back.

A recent Microsoft study, which surveyed 30,000 people in 31 countries, found that 66% of business executives are considering redesigning office space to accommodate a hybrid work environment.1 The “hybrid model” would require some employees to be in the office full time, while others solely work remotely, and a third segment would go in less than five days a week.

The overall functionality of hybrid work will likely require a stronger technological infrastructure, according to Saffaye. In fact, similar to how “pandemic stocks” performed well during lockdowns, he believes some areas of the tech industry may stand to benefit from the soon-to-be ubiquitous model.

“Anecdotal evidence supports that office and employee connectivity will need to be more robust to facilitate increased collaboration under a hybrid work design.” Saffaye says. “We expect these conditions could lead to a broad and robust cycle for information technology (IT) hardware and networking equipment.”

IT hardware consists of essential computing components such as hard drives, RAM, and motherboards, as well as accessories like keyboards and printers. Some companies are planning to instate hoteling, or shared workspaces, where different employees would share the same desk and computer on alternating schedules. This will likely require greater investment in hardware, partially because companies will need to sanitize equipment like computer mice and keyboards more frequently, calling for more backups.3

“We also see networking equipment opportunities where cyclical upgrades may play out,” Saffaye says.

A 2020 study by Swedish enterprise software company IFS, which surveyed over 3,000 executives from six regions across the world, found that 70% of businesses planned to increase or maintain spending on information technology (IT) after the pandemic.4 As for individuals, there is expected to be a growing demand for portable devices. Business advisory firm Gartner forecasts that the number of laptops and tablets in use will increase 8.8% and 11%, respectively, in 2021.5 Anecdotally, this is also a contributing factor regarding the demand for semiconductors, according to Saffaye.

“Semiconductors are at the heart of all technology, where they provide the processing capabilities to work faster, more capably and take advantage of more powerful software,” he says.

But what’s good for hardware is also good for software. As a result, technology like cybersecurity solutions, programing interfaces and video conferencing software should see increased spending, according to Saffaye. In particular, data breaches have become more prevalent throughout the pandemic due in part to widely distributed workforces.

“We believe this new threat vector is providing tailwinds for many forms of security: cloud application security brokers, secure-web gateways, vulnerability management, end-point detection and remediation, two-factor authentication, firewalls-as-a-service and API security gateways,” says Rob Zeuthen, senior portfolio manager of the BNY Mellon Small Mid-Cap Growth Strategy.

“We see prospects for robust growth in cybersecurity-related technologies and networks that can authenticate and protect both edge devices and the burgeoning digital economy.”

With an expected influx of more hardware to accommodate hoteling, as well as a remaining portion of workers who will continue to work from home, organizations will need to continue to invest in cybersecurity solutions. This is reflected in recent forecasts, as the cybersecurity industry is expected to grow at a compound annual growth rate (CAGR) of 12% over the next eight years, from US$165.8 billion in 2021 to US$366.1 billion in 2028, according to market research firm Fortune Business Insights.7

Additionally, video conferencing should continue to play a dominant role in day-to-day operations. “The sustained role of video, which has permanently replaced a portion of corporate travel, also requires more robust networking infrastructure,” Saffaye says.

A recent study by market research firm MarketsandMarkets projects the global video conferencing market will undergo a CAGR of 19.7%, from US$9.2bn in 2021 to US$22.5bn in 2026.8 Corporate use should continue to drive growth, as the hybrid model will still require in-office workers to communicate with their remote counterparts.

According to Saffaye, some of the tailwinds that occurred during lockdowns will continue to propel both hardware and software. He adds, “We also see potential opportunities as Biden’s infrastructure proposal could be more impactful to end markets typically leveraged to private non-residential spending.”

If US President Biden’s infrastructure plan allocates money to corporations, they could possibly use it to build a more robust digital infrastructure; especially if the shift from traditional operations results in environmental benefits like reduced paper consumption and less waste. Increased reliance on digital operations would also reduce the emissions created by corporate travel.9 And if creating a more sustainable environment is a shared priority between corporations and governments alike, it is fair to assume digitization will continue to be a long-term theme.

1 Microsoft: The next great disruption is hybrid work—are we ready? March 22, 2021.

2 C suite refers to executive-level managers withing a company.

3 Computer World: How IT must adapt to the emerging hybrid workplace. January 11, 2021.

4 IFS: 70 percent of businesses increase or maintain IT project spend post-pandemic. Accessed June 2021.

5 TechRepublic: More laptops and tablets, fewer desktops… April 1. 2021.

6 The Internet Crime Complaint Center (IC3) provides the public with a reliable and convenient reporting mechanism to submit information to the FBI concerning suspected Internet-facilitated criminal activity and to develop alliances with law enforcement and industry partners.

7 Fortune Business Insights: Cyber Security Market Size. March 2021.

8 WBOC: Video conferencing market growing at a CAGR 19.7%. June 4, 2021.

9 Forbes: Digitization drives opportunities and challenges for transformation. June 4, 2021

 

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Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

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