Why it’s Not All Bad News for the Enterprise Software Industry

By Alex Zukin, Software Equity Research Analyst, RBC Capital Markets, LLC
Published March 27, 2020 | 2 min read

The enterprise software industry continues to feel the impact of the coronavirus.

The initial outbreak of COVID-19 in China halted global supply chains, but now that the virus has quickly turned into a worldwide pandemic, the consequences on the industry have become broader and less predictable.

To learn more, we conducted the RBC Enterprise Software COVID-19 Impact Survey, an in-depth analysis of how the virus has impacted sales, travel, remote work, and corporate budgets. Additionally, we surveyed venture capitalists, HR professionals, and public equity investors to learn how the pandemic will affect financial results, capital deployment, hiring, and general public sentiment.

We’ve shared some key insights below. Please visit RBC Insights to access the full report.

Here is a snapshot of key themes that emerged in select sectors covered in the report:


Business meetings and travel take a hit, while teleconferencing use skyrockets

Sales. With the rapid uptick in cancelled meetings, trade shows, and travel bans, sales is likely to be among the hardest-hit sectors from the coronavirus outbreak. Salespeople now face the prospect of delayed deals and missed opportunities from in-person meetings. This impact is likely to ripple through many aspects of business planning and budgeting.

Annual sales targets are likely to suffer, with many already expressing low expectations during the initial outbreak. The continuation of meetings for the rest of this year will largely depend on the duration of the pandemic, travel bans and state and local lockdowns.

Remote work. Without in-person meetings and events, salespeople have resorted to remote work and mobile communications, particularly teleconferencing. Salespeople who never worked remotely in the past expect to do a lot more of it, even as the crisis wanes, signaling increased demand for communication/collaboration and other software over the long term.

Corporate budgets. Travel bans and cancelled meetings have cut or delayed spending decisions—except when it comes to remote working software for collaboration, file sharing, and project management.


Chief Information Officers freeze spending, but scale up VPNs

“The scale of the outbreak and market downturn have prompted a deep freeze on general spending—except for any projects that facilitate remote work and communications."

Our discussions with CIOs suggest that some pending deals and contract renewals may still go through, but most have been pushed out for at least three months.

The scale of the outbreak and market downturn have prompted a deep freeze on general spending—except for any projects that facilitate remote work and communications. Several clear winners emerged from our discussions, including VPN providers and communication/collaboration software.

The market downturn has introduced uncertainty into CIO’s spending outlook, but going forward, we can expect tighter budgets in the event of a prolonged recession.


Downturn jolts venture capital financial results and valuations

After a record year of fundraising and capital deployment, the market and economic downturn has sent a chill throughout the venture capital (VC) community. We see a few exceptions in certain sectors, but activity in the deal-making world will mainly dry up until the dust from the pandemic has settled.

The uncertainty will impact valuations as well as the financial results of portfolio companies. As a result, VCs are likely to put hiring, research and development expenses, and fundraising on the back burner for now.

The download: Demand for technology may limit the fallout from coronavirus

The effects of the virus will undoubtedly send a chill throughout software industries. Missed sales opportunities and tighter budgets will put the damper on spending, purchasing, and growth estimates.

But as employers increasingly rely on technologies to mirror in-person communications, collaboration, and other functions, we believe they’ll adjust their spend to scale up, potentially generating strong tailwinds for this sector in the future.

Alex Zukin authored the RBC Enterprise Software COVID-19 Impact Survey. For more information about the full report, please contact your RBC sales representative.

Alex Zukin, Software Equity Research Analyst