China Virus and its impact on Digital Economy

First published in StratNews Global https://stratnewsglobal.com/china-virus-and-its-impact-on-digital-economy/

As the China virus globally ravages people’s lives and the economy, and as more than 50% of the people on this planet are in a lockdown, the virus has had a deep impact on the digital economy. For starters, people have moved towards a more digital approach to work and life. A cultural change that would have required atleast a decade, if not more, has happened in a few weeks’ time.

As per Forbes, by March 25, internet usage had gone up by 70% in US. And this is mostly a pre-lockdown stage data. As per Ookla, the internet speed-test company, except for China, all countries had a significant dip in either their mobile internet speeds or their fixed line internet speeds or both, as more people suddenly started consuming more bandwidth. This shows the massive uptake of online activities post global lockdown.

The data also shows that perhaps China was already well prepared for the virus as it is the only country whose mobile internet and fixed line internet speeds actually went up considerably.  

Students (millennials) are now getting lessons online, which also implies that whenever they start going to school, and the school shuts for unforeseen reasons such as heat wave or pollution, students will continue with their classes online from home, seamlessly. The same applies to many professions and life in general, where online meetings, online business deals, online trainings, online concerts and webinars have all become much more acceptable. 

This is the shift that has led to increase of internet data consumption. Interestingly, the Internet Protocol was developed in a manner that it could survive a nuclear attack, where the internet gets splintered and can still function. Its robustness and reliability is now getting tested under a different kind of attack – a biological virus attack. Thankfully, the internet is being able to largely scale up, inspite of the significant increase in data consumption, thanks to all the video streaming applications such as software web conferencing to streaming movies and series.

The data usage is also reflected in the stock prices. Stock prices of software web conferencing company, Zoom, went up by 2.5 times since the pandemic started, and then dipped on revelations of the company routing calls and user data to China. Zoom was founded by a Chinese American. 

The crisis has also led to growth of other web conferencing software providers including recent startups such as Loom. There is an increased usage of document signing solutions such as DocuSign and HelloSign, whose usage is up by 5x. Even open source solutions such as FalsiScan has had a significant jump in usage. In fact most SAAS (cloud hosted) offerings has seen an uptick in usage.

However, the impact on hardware manufacturers, has been to say the least, hard. In India alone, mobile handset manufacturers stare at a Rs 15,000 crore production loss. There is similar impact on laptop and PC manufacturers. Atleast 2 month’s worth of sales has been impacted, and there is more expected due to the economy having an overall -5% to -6% contraction, accompanied with significant job losses. Needless to say, the stocks of hardware manufacturers globally is significantly down.

There has been similar losses for software companies that do not have SAAS based offerings, that is, their offerings are not hosted on cloud. It is ofcourse expected as with reduced sale of hardware, software sales will also have an impact.

However, one class of apps that are not tracked, and have shown significant uptake, are the predatory apps such as Bigo Live, Likee, TikTok etc. Bigo Live is a live streaming app that has recruiters hiring young women from across India and encourages them to titillate viewers at a cost and takes a high share of money that is earned. Likee is a similar app and both are Chinese origin with the money getting sucked out to China. TikTok is already banned by the US military but has proliferated even more during the lockdown. They pose myriad challenges, including potential honey-trapping in the military and violation of RBI norms.

But the hardest impact of the China virus has been the exacerbation of the digital divide. Those who are digitally enabled, are able to continue with their lives and their livelihoods in a significantly better manner than those who are not digitally enabled. Thus students who have access to the digital infrastructure, are continuing with their education as opposed to students in large parts of India, Africa and other places, who do not necessarily have the requisite digital infrastructure. Similarly, many of the white collared workers who are digitally enabled, are continuing to be productive, whereas blue collared workers are facing the prospects of loss of income and livelihood. The virus is ripping apart the social fabric which will have a deeper impact on the global economy in future, as the digital have-nots will not be able to compete in future due to lack of access, leading to lack of appropriate skills.

Managing businesses in the fallout of the COVID-19 pandemic

First Published by IIM Calcutta Innovation Park in http://www.iimcip.org/resource/entrepreneur-speaks-7/

We are going through unprecedented times, where the COVID-19 virus has brought our economy, our businesses and our way of life down to our knees. It has disrupted supply chains, demolished demand in short term, evaporated jobs, especially blue collared jobs, decimated balance sheets and fundamentally changed how employees work and interact.

However, it has also provided multiple opportunities. It has provided the opportunity to become significantly more efficient by adopting techniques such as WFH (Work From Home) in a more permanent bases, and its collateral benefit of Reduced Travel as the acceptability of closing deals through video conferencing has gone up. It would not only reduce cost of doing business, but also save commute time and reduce carbon footprint of businesses. Which also means that there will be a long-term effect on airlines as they would face a reduced demand even after the pandemic is over.

The question really is, how do businesses and startups manage this pandemic. TO being with, each business should form a coordinating body or what I would prefer to call a War room that will address immediate challenges such as employee morale, cash flow management, customer/ client outreach and ensuring business continuity. It would also work out the modalities for post lockdown working protocols. No company should immediately get all its employees coming to office, especially critical employees, since if they get infected, it will impact the company significantly. Rostering systems need to be worked out so that the same batch of employees come at the same time and do not mix up with another batch of employees.

The war room would then need to address near-term challenges, including Cash management, future lockdowns, safe environment protocol etc. It will also have to work out how the organization returns back to BAU (Business as Usual) and also, what will the new BAU look like? If we have been able to successfully work from home, do we still need all employees to come to office or can we reduce office space requirement and get some people to continue to work from home?

The war room would also have to therefore envision new processes for the new BAU and also work out new business models as opportunities that the disruption will present. It would also look at restructuring the capital structure and perhaps retire some of the high cost debt and borrow from the current market that is offering a much lower cost debt. It should also look at possibility of buying out other businesses that are available cheap now and also look at acquiring technologies that are now available cheap.

And lastly, the war room should have an investor outreach program to ensure that your investors are on-board with the fast pace of changes that your company will go through.

This is an excellent opportunity or organizations to emerge as more competitive entities that will go out and win more market segments and more market share.