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Impact of COVID-19 on Software/Services Spend

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Derrick Wood, Cowen’s Software analyst, speaks with Peter Wokwicz, CIO at Tatum. They discuss the impact of COVID-19 on IT projects, software pricing, payments and purchasing behavior.  In addition, they explore the impact of work-from-home trends. Nick Yako, Cowen’s Software Analyst and Bryan Bergin, Cowen’s Computer Services & IT Consulting Analyst join their conversation.

Press play below to listen to their discussion.

Cowen Hosts:

J. Derrick Wood, CFA, Managing Director, TMT – Software
Nick Yako, Director, TMT – Software
Bryan Bergin, Managing Director, TMT – Computer Services & IT Consulting


Peter Wokwicz, CIO, Tatum

Mr. Wokwicz is the CIO for Tatum. Tatum is a management consulting company that offers hands-on strategic, financial and technology solutions to measurably improve business performance and meet professional and interim needs. He is also the current Director at Alpine Consulting, Inc. His company is a current reseller and partner of Informatica, which sells $13 million of their products.

Mr. Wokwicz primarily focuses on strategy, design, development and support of complex applications and environments for Fortune 100 and mid-sized companies such as Target, Sears, Safeway, IBM, Emerson Electric, Kraft, Walgreens, Discover Financial and Adidas/Reebok. He advises clients on different technologies, software products, and system architecture. As interim CIO and Adviser for both mid-size and large corporations, he has transitioned many companies from a traditional on-premise model to a cloud infrastructure model. In addition, he currently holds interim CEO and Board member positions for 2 companies that have cloud-based solutions as their primary go-to-market products.


Announcer:                      Welcome to Cowen Insights, a special look at the coronavirus and its effects on sectors across the economy, as well as the policy arena. You will hear the latest insights from leading experts about where things stand and what’s around the corner.

Derek Wood:                   [00:00:30] Thanks, everyone, for joining us today. And on the line, you’ve got me, Derek Wood, analyst covering enterprise software. Nick Yaco in security software, and Brian Bergen in IT services. And our guest speaker is someone we’ve had on multiple times, Peter Wokwicz. He’s the CIO of Tatum. Tatum does management consulting. They advise clients on technology strategy and Peter sometimes acts as interim CIO. So we’ve asked him to come on and share [00:01:00] what he’s seeing and hearing in the environment, given everything that’s going on in the world.

                                         So, Peter, let’s start with, obviously, the situation is early and still developing. And I think it’s hard to really get a sense for how much IT budget plans are changing at this point, but maybe you could start with a high-level in terms of what kind of behavioral changes you’re seeing out there in terms of how people are thinking about spending [00:01:30] on technology.

Peter Wokwicz:               Sure. Thanks Derek. So obviously, there are obvious trends out there already happening, the shift towards remote work and how that’s impacting IT. Really what I’m seeing in budgets is essentially projects are being put on hold or slowed down, I think that’s… And it’s more than non-essential type of projects. It’s the ERP upgrades, it’s… “Hey we’ve got to get on [00:02:00] the latest version of this software.” Those are the ones I’m seeing slowing down. So there is an impact on IT budgets definitely. It’s happening. There’s less spend right now. How that goes into percentage, it’s impossible to tell right now. We’ve got to see what the next couple of months pertain to. Some of these projects that are put on hold, or slowing down may be canceled. They may get in gear again if the economy gets going again and everything is [00:02:30] closer to normal. So it’s impossible to tell what that’s going to look like right now.

                                         I think hiring, a lot of hiring freezes also in the IT world. So seeing that from the corporate side. We have one company I help out that is actually hiring, but in general it’s let’s wait and see, put hiring on a hold and wait and see. So those budgets around the employee spend have pretty much been frozen there too.

Derek Wood:                   [00:03:00] We were just talking about this, but in terms of contract engagements and contract terms, how are those getting impacted?

Peter Wokwicz:               Yeah, so the number one thing I’m seeing around especially on the services side is asking for lenient terms of payments. So both from… And I do do some work on the service side of the consulting world. Clients have come back and said, ” [00:03:30] Hey we want that 60, we want that 90 payment terms, can you do that for us? We’re going to keep the project going, but we need better terms.” And seeing that, so that will have an impact soon here on some of the larger services vendors that aren’t on a monthly recurring retain or anything like that. Where they’ll have to have a little more cashflow to weather the new payment terms. That is happening I would probably say, of all the companies [00:04:00] I deal with, I’d say about 40% are from one side or the other dealing with payment term changes. A lot of those are just going from net 30 to net 60. I got a couple that have pushed really hard for net 90.

Derek Wood:                   If you look at what you’ve seen in the last recessionary environment, anything you can call out to where budget gets pulled first? If you look at line of business, [00:04:30] marketing, sales, HR, finance, IT. Anything that sticks out that gets hit most or gets hit least?

Peter Wokwicz:               Yeah, it’s a little hard to specify that exactly. From what I’m seeing, so some of the areas around obviously have IT budget lessening a little bit around more of the HR side, the recruiting side just because that’s going down. [00:05:00] Marketing, I haven’t seen a major impact. I’ve seen a little bit more switch into digital there a little bit from traditional markets. Not a huge impact there. Haven’t seen much yet, not to say it won’t happen. Finance, no. Actually everybody I deal with from an IT perspective on the Finance side is actually pretty busy right now but again that could change. I think that’s just part of what’s going on with, “Hey we need a better handle on our finances.” We have the CARES bill we’ve got to learn how to respond to. [00:05:30] Items like that are actually keeping IT on that side a little bit busier. Customer Service, that’s not a major impact there yet. I think look at big areas of the company and it’s hard to say. Obviously on the sales side, on the sales departments the IT spend hasn’t changed all that much yet. But I have on the sales side, that’s [00:06:00] where I think people are scrambling a little bit as there’s less sales, less leads going around now. I sense a little more urgency there. People are fighting for their jobs a little bit.

Derek Wood:                   There’s obviously a massive effort to support work from home. Any set of technologies you’re hearing that has seen a lot of increased adoption? I think we know some of them that’s front and center in the press, but any tools that you’ve particularly heard about?

Peter Wokwicz:               Yeah, so I [00:06:30] guess… And a lot of these are just common, and a lot of these are big names. But I think there is some people missing all the stuff they do. So I take Microsoft for example, before two months ago Microsoft Teams I probably used it once a month. In the last couple months I’ve been using it probably five or six times a day. So Microsoft Teams for communication, project management things like that is really gaining speed. Other Microsoft technologies [00:07:00] doing well, Office 365, which now I think they just rebranded it to Microsoft 365 and all the tools are on that. They’re still pushing out great features, Microsoft is doing well through all this. I think outside of maybe Dynamics and their ERP software, I kind of think of what area Microsoft isn’t doing well from this. I think that’s an important note.

                                         Outside of the obvious ones, there’s some out there [00:07:30] like Zoom, Citrix is maybe one that if you had asked me a year ago I’d say, “Citrix definitely on the decline.” How long are they going to do well. But Citrix has really taken a bump up as far as usage goes. They have had some performance problems as far as some of their software environments and some of their cloud offerings. They’re more forefront with CIO’s out there. [00:08:00] Yeah things like Shopify for E-Commerce, I see overall they’re slowing on, some of their customers obviously are slowing what they can sell. But at the same time when a CIO comes to me and says, “Hey we need to get an E-Commerce channel set up quick.” When a lot of retail closed and a lot of businesses closed, everybody is going to Shopify. Everybody is getting a site up in a day so they could sell product at least. So that’s another one that I think people [00:08:30] maybe are missing that. It is probably benefiting from this but I don’t if it’s a net benefit with what they lose from their traditional channels, because Shopify does have a model where it takes a percentage of the sale for a lot of their plans.

                                         Yeah things like Ring Central, Atlassian which is the [inaudible 00:08:51] of confluence products. Those are being used more. Slack, obviously everyone’s heard of Slack and I think that is being used more, definitely is being used more now. [00:09:00] You have probably the last one that I see used more on a personal level is some of the consumer type security software, like Norton, Norton Life Lock. Things like that where businesses don’t use it that much, but consumers do. Now they have a laptop at home and they need security software, where do they go to? Norton Life Lock is one where they probably would gravitate to pretty quick just because it’s known on the consumer side. Not really used much [00:09:30] on the business side anymore. So I could go on there but those I think are some of the top ones that I’m really seeing, and Microsoft especially which has went from Teams not being used at all to Teams being used all over the place pretty much overnight.

Derek Wood:                   Yeah, okay, all makes sense, super helpful. Then just thinking about some of the segments. I guess you’ve already touched upon or you think that ERP and maybe HR recruiting applications [00:10:00] may be a backseat.

Peter Wokwicz:               Definitely.

Derek Wood:                   Obviously it sounds like collaboration, communications type of software is certainly higher priority and even E-Commerce is high priority that could be impacted by volume variability. I guess marketing it doesn’t sound like you’ve heard much impact to Mar Tech budget. [00:10:30] How about analytics or even APM, performance management for digital applications. Any view on those two areas?

Peter Wokwicz:               Yeah it hasn’t been talked about that much, haven’t seen much impact. So yeah, I really can’t respond to that too much. Again, I think a lot of it is a little bit status quo there until we see where things end up in those two market segments. So I can’t add much on those two right now.

Derek Wood:                   [00:11:00] Got it. All right, I’ll open up for questions and if we don’t have any we’ll move on to Nick.

Announcer:                      Your first question is from Jonathan Curtis from Franklin Templeton, your line is open.

Jonathan Curtis:              Hey Derek, thanks for doing this. On the ERP/HR activity, may I presume nobody is downgrading existing installations, [00:11:30] it’s just net new stuff that’s slowing down or being pushed out. Is that the right framework?

Peter Wokwicz:               Yeah, that is correct. So I don’t know as these ERP’s, some ERP projects get put on hold that will eventually have an effect on licensing. Not yet, but it could. So if I have an SAP implementation I’m doing right now and I put it on hold or slow it down, eventually there may be some concessions that come back and say, “Hey we’re a year [00:12:00] into this and our six months free of licensing is up, can we get another six months?” So you may see that start to happen. I haven’t seen it yet though. None of the budgets I’m responsible for have had to deal with the licensing side yet. I’ve dealt with the project side but not the licensing side yet. I would guess that may come up here in a couple months.

Jonathan Curtis:              Have you seen any of the really challenged sectors, travel, hospitality folks where business has gone almost to zero, how are they reacting? Are they coming back immediately and saying, “I’ve got to [00:12:30] cancel installations or change payment terms immediately?” Has that started showing up around you?

Peter Wokwicz:               Yeah, so without naming, so a couple direct contacts of mine they’re actually in that industry, the CIO’s of very, very large companies there. We do have biweekly calls that we’ve been doing. They have pulled back on some of that already. So they’re already looking a little bit… Obviously with [00:13:00] I call it active employees. I think a whole term that a lot of people are missing right now, you have employees and you have active employees. You may have somebody that’s employed, but they don’t need support because they’re really not working or doing the full work schedule. So active employees as that decreases, it means less per-user licensing and then servicing around that too. So that is another thing that’s going to impact licensing. I think maybe some of the monthly recurring, as some of that user count may go down for some of that. That dynamic [00:13:30] can actually reduce the licensing cost each month. If that answered your question or were you asking…

Jonathan Curtis:              No that’s great, just one follow-up. What percentage of the contracts let’s say in HR are these sort of monthly recurring versus here’s how many employees I expect to have over the next year, versus a more volatile or very flexible count of active employees?

Peter Wokwicz:               Yeah, the licenses I deal with gets complex around that, [00:14:00] and actually that’s on my task for actually one of my clients dealing with that this week to see what flexibility we have in licensing, we just cut some flexible per month items around licensing for some products. But there is some flexibility there. I think it really depends on the contract you’re in. For example I use Salesforce, Salesforce I really can’t cut the number of users that easily, but sometimes you can. So it’s really based on your licensing contract and what [00:14:30] provider it is, especially now that almost everything is in the cloud. You probably have half of your software spend is cloud-based, monthly recurring, another half is more traditional hey I buy a big license and then let it run. So seeing about that 50/50 is what I think.

Jonathan Curtis:              Okay, thanks for your help.

Announcer:                      Your next question comes from the line of Steven Shin from Eliska Investment Group. Your line is open.

Steven Shin:                    [00:15:00] Hey guys, thanks for doing the call. I have two questions, one on the follow-up from the prior questioner. Just in general, when folks are looking at these per-seat, looking at ways to save on the licensing costs. Based off of what you know in your discussions, where are the most likely places that they’re going to look for their savings I guess, are there buckets? [00:15:30] The project-specific delays make sense, but I’m just curious if there’s some kind of pattern that you’re seeing in terms of where people are looking to lighten up on the licensing cost on the per-seat licensing cost.

                                         The second question is around Citrix, you mentioned that Citrix is seeing a big getting attention. I’m curious for your review if you think work from home is going to become a more permanent thing, and if so what is your outlook around Citrix? [00:16:00] Is it just a short-term sugar high, or do you think there’s something more sustainable relative to their business? Thanks.

Peter Wokwicz:               Yeah excellent question around Citrix there. So Citrix, again if we were to talk about Citrix a year ago I would have said, “They’re on the way out. I see them less and less.” So what has happened here has given them a little bit of reprieve. I think Citrix the outlook now is good. The question [00:16:30] I have is do businesses actually move towards Citrix when things start to get back to normal? And the answer is probably no. I think Citrix is more of a stopgap solution here. Especially for those that already had it up and working. So now they have Citrix up and working, they get to all of their apps, etc. Now they’ve got to add a bunch of users, because now they have a lot more people going through Citrix. I think from my perspective and what I hear is, Citrix isn’t a long-term solution. [00:17:00] Especially as more of a move towards direct cloud structures. So it’s a reprieve, long-term I’m still a little bit negative on them as far as being used. But definitely in the short-term, and I assume it already has spiked up their uses, their licenses, their number of users have skyrocketed, I’m sure.

                                         So I think that’s my view on Citrix, and again the number of users [00:17:30] there just increasing dramatically. Usually Citrix a lot of times you had some key employees go through Citrix, you had some remote employees go through Citrix and now all of a sudden everybody is going through Citrix. That really adds to the performance side, so that’s been one issue I’ve been dealing with is some of the performance around Citrix. But I’m sorry, what was your first question again?

Steven Shin:                    Just from what you’re seeing about businesses, your customers have they looked to find ways to find costs [00:18:00] on per-seat licensing on these SaaS applications? Is there a bucket or a pattern that you’re beginning to see these guys look to the most in terms of where to find some savings here and there?

Peter Wokwicz:               Yep, yep, so it’s really that monthly recurring per-user licensing that’s flexible. So if you were using products… And there are tons out there, to use the example Adobe Cloud. So if using Adobe Cloud, now I have [00:18:30] a lot of people using outside their Marketing department and maybe those people aren’t really as active employees as they once were. I’m not trapped in a contract with that, it’s per-user, per-month type licensing. So I’m going to cut the number of users there. But then you also have the argument, now they’re not in the office, they don’t have access to that desktop in the office for doing some graphical work. So now they may need licensing at home. So I think that’s one example.

                                         [00:19:00] Salesforce, I have less active employees, do I really need that many Salesforce licenses? When you get into the Workday’s, things like that, can I get by with less licenses? That’s something that I’m actually dealing with this week right now. Before this I wasn’t really dealing with it, but now it’s really going back to see where licenses aren’t being utilized that we can start to cut a little bit. You start to get into expense systems, things like that that you can maybe [00:19:30] cut licenses to. When employee counts go down you obviously cut licenses, but also when you have a non-active employee you can cut licenses too. One example, just yesterday I did cut… I won’t name the company but I did cut licenses by about 30% for one of the per-month, per-user type licensing structure. Just because we did a full audit and really went through in who’s using it and who’s not, and we can knock off about 30%.

                                         [00:20:00] Often on the per-user, per-month sometimes you overbuy because of the future, and now I think everybody starting probably last week, this week everybody is taking a new look and saying, “Maybe we can be more aggressive, we’re not going to grow, we don’t need that padding there so let’s cut down the per-user, per-month.” At the same time you have things like Atlassian and things like that where that count is going way up because people are using it and it’s more remote. You have Office 365, things like that that count is going up. So I think [00:20:30] that’s my view of it and that’s what I’m seeing.

Steven Shin:                    Are there particular vendors that have maybe more of a habit of future selling a larger number of seats, I.E there’s more unused software licenses sitting there in these accounts?

Peter Wokwicz:               Yep, yep. So based on the licensing, so when you get into some of the ERP vendors, cloud ERP vendors, when you get into some of the CRM vendors, [00:21:00] HR vendors, you’re often buying a bucket of per-user licenses, and you can add above that but you can’t go below it. Those are the ones that may start to get pressure where they get a phone call from a customer saying, “Hey, we couldn’t go under 500 licenses on this, but now with our times we have less than 500 users, can we go below it and can we get a credit back?” On a licensing agreement no you can’t, you’re trapped in that for usually three years. [00:21:30] So those are the kind of conversations that will probably take place soon here.

Steven Shin:                    Okay thanks.

Announcer:                      Your next question comes from the line of Jason Thorne from Mainsail. Your line is open.

Jason Thorne:                  Yeah hey and thanks again for doing this call. Two quick questions. One is are you seeing IT teams still assess new software in this environment where there’s going to be a pop as [00:22:00] we come out of it, and software vendors will see strong demand coming out of it? How do you think this affects the sales cycle for an enterprise software company? Does it push it out until let’s just say this is Q2, does it switch out to Q3? Or will the sales cycle start all over again at the end of when this all returns to normal? My next question is just are you seeing any interesting payment terms being provided by software [00:22:30] vendors? I know some software vendors have switched to a premium model to get customer acquisition completed and then plan to start charging once things return back to normal. Anything you’re seeing on that side that’s been successful for software vendors.

Peter Wokwicz:               Yeah based on all the software vendors, etc, I see out there, the salespeople in all those companies, most of them are scrambling right now. I really sense that [00:23:00] they’re scrambling trying to find leads. So that pipe has definitely slowed. So what I’m doing in the budgets I manage, I actually am not canceling things entirely but really pushing them off so when things do come back, those things are ready to go. So for example, for a large product out there, actually still going ahead with discovery. They have about a three week process that’s [00:23:30] still discovery, and that can lay out the exact budget that’s needed, it’s going to lay out the number of users. So that’s still moving forward realizing… And I’ve been open and honest with them saying that we’re not going to get start on this until Q3 at the soonest. But they’re still more than happy to do it now and then put it on pause and then start it in Q3 assuming things come back. At least I know the exact budget. So I think that’s one way that vendors could help out is actually coming and say, “Hey, we’ll finish the system selection for you, we’ll finish the discovery for you.” Realizing it’s not [00:24:00] going to happen for a while. In general, all that’s being pushed off. I think it’s pent up demand right now for things that are more strategic.

                                         I think one of the big realizations, I do a lot in E-Commerce, one of the big realizations is we don’t have our E-Commerce channel down, we don’t have B2B E-Commerce. I hear that nonstop, and a lot of companies are saying it’s too late now, but those projects are going to be put on the top burner when things start coming back, and [00:24:30] people know their budgets and what they can work on. Those things are really going to come back, and that’s just pent up at this point. You have other areas I don’t think will ever… With the change for remote workforce that may not come back as quickly or for a long time. I think to answer an earlier question, the change from remote workforce, that is a pretty much permanent change. A lot of companies are scrambling, and [00:25:00] are still scrambling today to get their remote workforce up and by and far most companies have done it successfully.

                                         I’ve dealt with companies that literally shut down for two or three days while they transition to remote. A lot of that is going to be permanent. A lot of those people are not going to come back to the office, are going to work from home more often. That’s a titanic shift, even if life goes back to normal tomorrow, we’re still going to see much more work from home. [00:25:30] Obviously there’s a huge impact to office space and things like that, but there is another side of that with computer spend, things like that, laptop spend that has went way up as I can’t get a laptop right now. It takes me 40 to 60 days to order a laptop right now, where it used to be ten days max. So I think you’re starting to see that change a little bit too. Did that answer your question?

Jason Thorne:                  Yeah that was great. The second question was just any interesting payment terms you’re seeing either to acquire new [00:26:00] customers, like premium models, or to retain customers that may churn. Are any software vendors providing two months free, or some sort of reprieve on subscription payments for a couple of months in order to help customers and make sure that they don’t churn in this environment?

Peter Wokwicz:               Yeah I’m not seeing the two months free right now, I’ve seen some solicitation around easier [00:26:30] ways to get started, or slower ramp up to the payment, or you don’t have to pay until you’re live. I’ve seen some solicitation on that, I haven’t been involved in any of those directly but I’ve seen some solicitation on that from some of the vendors out there. So I think you are seeing that a lot of it. You won’t get that licensing revenue as quickly as you would in the past. Some of that gets pushed out, so yeah I think you’re seeing some of that. But I haven’t seen it take full effect yet where they’re [00:27:00] actually saying, “Here’s three months free as part of your license deal.” I haven’t seen that yet, it’s been more pushed off a little bit as far as you can ramp up slower, you can start slower. I’ve seen more of that.

Jason Thorne:                  Great, okay thank you.

Announcer:                      Your next question comes from the line of Erica Yoon from Cowen, your line is open.

Erica Yoon:                      Hey Peter. Some of the questions I had lined up have been asked. But [00:27:30] I will ask you one that’s bigger picture. Digital transformation, are you seeing any push out of those, or parts of those deals where you may be dealing on the software side? Or are companies just saying this is non-negotiable, we have to continue on this path of digital transformation? So just wondering what you’re seeing there. Then I guess another way to skin the cat on the licensing fee [00:28:00] questions that you’re getting. In cases where you cited in CRM where it may be actually hard to cut the number of committed seats, are you seeing any push on pricing or discounting? Or trying to give more features, products or modules as part of what they have? Because I imagine a lot of companies are going to be doing what you mentioned which is doing an audit of what they’re actually using and maybe they’re trying to get more for what they’re paying for if they can’t cut the number of seats and the licensing dollars.

Peter Wokwicz:               [00:28:30] Yeah so again on the cost side, the rate side, I haven’t seen that much pressure. I haven’t seen really from either side of the equation much talk about lowering prices at this point. So I haven’t seen that yet, not that, that won’t happen soon here. But I haven’t seen that. It’s more about payment terms, things like that, that I’ve seen that I think is an open discussion going on [00:29:00] everywhere right now. Beyond me I’m sure it’s going on with some of the… Again if you ask a CRM vendor I’m sure people are talking to Salesforce right now about hey can we… There are other CRM vendors, I use Salesforce. “Can we delay our payment that is due next month? Can we delay it 30 days?” I’m sure that’s happening. But I haven’t seen, “Hey we want to cut our licensing cost, or per-user rate to [00:29:30] X.” I haven’t seen that discussion happen yet. Usually it’s payment terms first and then those discussions later. I think that’s how things get back to normal, who knows. Then Erica, what was your first question again?

Erica Yoon:                      Just on digital transformation projects, if software projects are a part of that, are they just being protected?

Peter Wokwicz:               Yeah digital transformation. That’s such a big animal right now. I’ve seen less cut in that for sure. So digital transformation, certain parts of that are moving forward. As [00:30:00] the connection to the customer is more important digitally right now than ever before. Certain sectors of the economy, retail etc, where digital transformation is more important. Getting everything to digital, getting everything in the cloud, getting everything all your marketing tech together so you know how to target people online. I haven’t seen a big foot on the digital transformation side, but digital transformation is such a big animal that within [00:30:30] that the less crucial, behind the scenes projects don’t really interact with customers much. There’s some slowdown in there, and those are some of the projects being put on hold. As far as the forefront, customer-facing digital transformation, that’s going to continue here.

Announcer:                      There are no further questions at this time, I turn the call back to the presenters.

Derek Wood:                   Hey one more question Peter, you mentioned that it’s getting tougher to get office equipment, PC’s, monitors. So there’s [00:31:00] obviously a mismatch in demand and supply right now. Are you hearing about customers saying we need to go to some new procurement software system, I.E. Koopa or Areba to help with procurement?

Peter Wokwicz:               I haven’t seen that too much. It’s just been more of the delay. Recently especially the last six weeks it’s been around laptops, everybody is grabbing for laptops or even tablets at this point. [00:31:30] For example one of the service companies, we strictly do Apple, Microsoft Surface or Lenovo. Those are the options for hardware you can order at a personal level. Again none of those took, some were customized a little bit but most were off the shelf. None of those took more than ten days to receive. That was traditionally the way it was. The last six weeks, if you want a custom build it’s at least 60 days out. If you want [00:32:00] something off the shelf, for something decent you’re looking at 30 days out. That’s a huge impact when somebody needs a laptop, they’re working from home, they need a laptop tomorrow. That’s a big deal. So I think from that perspective you’re definitely already seeing that shift.

                                         Other hardware, I haven’t seen issues getting routers, I haven’t seen issues getting accessories. I don’t know about monitors, things like that, I’d imagine that’s probably harder to get right now. But as far as [00:32:30] the work from home accessories everybody uses, there has to be some impact there but I’m not familiar with it, it’s more on the laptop side that’s been a headache for me. As far as using the procurement systems, I don’t do much of that. They may end up going through one of those systems that I’m not aware of. It’s more just about the delay in getting laptops right now.

Derek Wood:                   Got it, makes sense. Well great set of questions there. I’m going to pass it on over to Nick Yaco now.

Nick Yaco:                        Thanks Derek, and [00:33:00] thanks Peter for doing the call. As it relates to security, I think through the end of February the general consensus was that the demand environment was pretty healthy. Just curious what you’ve seen or heard here over the past few weeks as it relates to security specifically.

Peter Wokwicz:               I was actually in San Francisco right before lockdown started and had a dinner with a group of CIO’s out there. Everybody was talking about the potential work from home, the number one topic everybody [00:33:30] talked about was security. How are we secure when people are working remote? That’s why everybody shifts back to you need VPN, you need anti-virus software, you need a way to get into our system, something like a Citrix. You need monitoring tools, you need all those type of things to really lock down security. So a lot of those are small providers. VPN’s out there, there’s a couple public companies that offer VPN’s, Citrix does, you’ve got Norton, you’ve got other VPN’s out there. But the vast majority of VPN’s, [00:34:00] even the ones I go with, are small, trusted companies that aren’t public. So I think you’ve seen that shift for sure. I don’t think that’s going to change. Security is the number one concern that everybody has, but fortunately everybody is getting through that.

                                         You look at Microsoft services, Dell services, Citrix does services, all of those companies all have little services arms. That’s where people are reaching out to, to see how can I improve [00:34:30] my security, what do I need to help with that? I think that was the number one issue that was discussed at that dinner. I haven’t seen it fade away at all since then.

Nick Yaco:                        Okay, and you mentioned companies starting to audit their software and what they’re using. Are you seeing something similar happening on the security front?

Peter Wokwicz:               Less so right now I think on the security front, that gets a pass right now. I would imagine that will probably be a second swing here in a month or so. Where we’re going to take a step back and actually look at the security [00:35:00] per-user list, and do an audit of that. I think just because paramount right now, that’s taking a backseat right now. But it will come, it will come a month from now, the next step is let’s make sure all the security licenses is okay right now. It’s been we’re going to add users to our security side as needed.

Nick Yaco:                        Okay makes sense. I guess thinking about the two delivery models of hardware or security appliances versus maybe a software-delivered model. [00:35:30] Have you heard anything or seen anything as it relates to those two buckets? Are people still shipping appliances or putting things into place? Or have those things been put on hold?

Peter Wokwicz:               As I think the move away from the office has occurred, I don’t know, again that’s such a small portion of my spend right now on any of the budgets I deal with that I’m not all that in tune with how that hardware works. I would imagine that with [00:36:00] the move to remote there is less need to buy some of that infrastructure side on an office basis. There are still a lot of data centers out there. A lot of companies still have data centers. I still have people going to manage a data center in Chicago, so there is on-premise data center. Network traffic has spiked into that data center. Does that warrant a need for more hardware there? Probably, [00:36:30] but I don’t think it’s that widespread right now, if they’re going to add anything right now they’re probably going to add a cloud service. They’re not going to add a service into their data center.

Nick Yaco:                        Okay, makes sense. Maybe last one for me then I’ll kick it over to Brian. Obviously there’s been a huge uptick in VPN usage and demand, but have you seen an uptick in demand for some of these newer zero-trust network access tools?

Peter Wokwicz:               [00:37:00] I’m a little bit familiar with them, but again if I had to name which ones actually go that route I couldn’t right now. So yeah, I can’t really speak much on that unfortunately.

Nick Yaco:                        Okay, well thanks for your insight. I’ll kick it over to Brian.

Brian Bergen:                  Thanks Nick, hi Peter. Some services questions here for you. So first just wanted to start out, is the pricing commentary that you said on software, is that similar to services? I’m curious as far as have you noticed any changes in bill rates and pricing [00:37:30] due to COVID-19?

Peter Wokwicz:               So the projects in-flight, no request, no changes to bill rates. The projects that are looking to close, or efforts, if it’s not around an urgent need obviously those contracts I’m going to negotiate those contracts much more directly, much more heavy. I have the benefit of rate right now of negotiating with a services vendor out there. Where in the past, if you go back even to [00:38:00] Q4 list year, you pretty much had to pay the rate. You had to pay a pretty high rate, you could negotiate down a little bit. But I think now that factor comes you negotiate it down more. But one thing I’m not seeing, I’m not seeing in-flight service contracts being asked for a rate decrease. I’m not seeing that. Not to say it won’t occur, but right now I’m not. It’s been more on the payment terms.

Brian Bergen:                  Okay, priorities, you mentioned some areas like spend around ERP or HR expansions being pushed [00:38:30] out. Are there any specific programs that are actually being prioritized and moving up the list that you’d want to call out?

Peter Wokwicz:               Yeah, so again I think anything that gets… The whole digital side of interaction with the customer. So digital customer service, some automated technologies around there. So you get a little bit into the RPA software side. E-Commerce, those are the areas where I see effort being put in and more money being put in. Again, I think [00:39:00] all of those are realizations that even when things get back to normal, every company realizes they’re going to have to spend more money on those items. Because this could happen again, it could happen next winter, we have to be ready for that, we have to have that digital connection to the customer. I think anything around digital connection to the customer, those are the type projects that are not being cut at all.

Brian Bergen:                  Okay. As far as remote workforces go, with the companies you work with, were they ready to shift [00:39:30] work from home internally? Were they able to do it by themselves? Or did they actually require more consultants and third-party work to get that done?

Peter Wokwicz:               Yeah, so everybody kind of had a rough plan. I can use certain areas. I can’t tell you how many people, all my CIO’s pulled out their disaster recovery plans when this went in action. So we all had it, California has the earthquake scenario, we had in the Midwest you have the snowstorm/blizzard scenario. So all these plans, [00:40:00] they were fine for a day or two, or even a week. But when you get beyond that, that’s when the changes occur. That’s why the disaster recovery plans didn’t really pan out beyond the short-term. So I think that was kind of the logic going on, and that was some of the changes there.

                                         So I did see some vendors get involved, but it’s been more around [00:40:30] questions about how do I do this? Can you come in and audit that? I need software around this, can you put together a stack? It’s been more of the shorter, quicker efforts. It hasn’t been, “I’m going to outsource all of my remote hardware, my remote services, I’m going to outsource all of that tomorrow.” I haven’t seen that, it’s been more around piecemeal. It was that call to Microsoft saying, “Hey come in a week. Can you send one of your service guys in for a week to actually [00:41:00] go through and tell me what I’m doing wrong on the security side or on Microsoft products? Around what products I should be using to make sure my workforce can be remote?” Same thing, I know some companies called Dell, Dell also for that a little bit. So I think you’re seeing that a little bit.

                                         I don’t think it’s like the big KPMG, Cap Gemini Accenture projects where, “Hey we’ve got to transition to a remote workforce. Here’s all this money for the next two years.” I didn’t really see that that much. It’s been [00:41:30] more of the stopgap, let’s fix up this, let’s do that. It’s been more of the little stuff. So you reached out to your nearest neighbor at that point. Who is your most trusted consultant that knew a little bit about that and you reached out to that. I literally got about 50 calls, at least in Illinois when the work from home mandate came. Just about, “Hey who do you use? Who do you call?” So there was a mad rush there, but it wasn’t the big swath, it was more the smaller, “I need help with this little piece.”

Brian Bergen:                  Okay, [00:42:00] makes sense. What about offshore? Obviously India moved to a stricter quarantine last week. Has this caused any impact to the performance of your service providers, their ability to deliver?

Peter Wokwicz:               Yeah so last week there was a little bit of major concern there. I do manage resources in India, some were impacted, more around the bandwidth side. In general the tech workers over there did have the ability to work remote. [00:42:30] But there have been major bandwidth issues. I had a group work on Saturday just to catch up from time missed on Friday, and it seemed like the bandwidth was fine on Saturday. But I’m really waiting this week and I’m actually still waiting for a couple of people to get back to me on how things went last night. But there’s a bandwidth impact. When you start seeing some of the big service providers out there, they are going to be impacted by this greatly. What’s going on in India right now it’s more of a bandwidth concern than anything else. [00:43:00] Again I’ll use the Accenture example, a lot of resources in India, I know they’re well provided for, they have laptops, they can probably already work from home. But now they go back to home, and their bandwidth sucks. They can’t even pull up a website. So that’s the impact that’s happening. I’m seeing it, I haven’t really seen it hit the common discourse yet. But I’m seeing it happen with people that rely on India a lot right now. So that is something that is happening that [00:43:30] I think is a little unseen right now, but it’s happening.

Brian Bergen:                  Okay. You mentioned Accenture there. Who else are you working with here and your customers are engaging with. I’m just curious are you seeing any notable vendors that are budget gainers here, budget losers? Any new notable players that are popping up?

Peter Wokwicz:               Not all that much. I think… Again we already talked about a lot of them. I think that maybe are benefiting a little bit. [00:44:00] So if you would ask me a week ago, I would say some of the ITL sourcing vendors, the Infosys that do a lot of IT outsourcing and things like that are probably going to get some more work out of this. But now with the quarantine in India, that’s going to impact them negatively. So I think the net effect there might be negative. Again, I ask myself what large services vendors out there are going to do better from this, [00:44:30] it’s not many of the traditional service players, because the ones that may do IT outsourcing also do regular services that are getting hit right now. I can’t really name one that’s all of a sudden going to do better. What I’m still using, all the big names, still using them. Not adding projects. So that’s the issue there, I don’t see that big swath of hey we want to outsource all of IT now, [00:45:00] that’s just not a conversation that’s going on at the moment.

Brian Bergen:                  Okay. Last one for you, just longer term, any impacts to the business model? The IT services industry. Anything you’re thinking about here when we come out of this? Any lasting things to consider?

Peter Wokwicz:               Yeah, on the services side I think who has that… What services vendors out there do a great job at [00:45:30] digital transformation, E-Commerce, those are probably the ones that are going to look good on this. Unfortunately if you want a pure play in that, they’re usually smaller. The bigger players out there, the net effective, they have obviously negative impact from this. So they might have some bright spots around a couple areas, but looking for more of the pure plays around services, you’re probably getting into some of the smaller players there already. So I think the permanent impacts are [00:46:00] the work from home, the servicing around that, the work from home side. The E-Commerce side, some parts of the digital transformation journey. Customer service, remote customer service I should say. I think those are probably the ones… And the one sector that I’m not an expert in, but bandwidth.

                                         Throughout the world there’s a struggle for bandwidth right now. I don’t think a lot of people realize it, but if I’m an average consumer I don’t realize there’s [00:46:30] a bandwidth issue. But if I’m a coder, if I’m a person that’s doing graphical design, if I’m a person that’s doing bandwidth intensive work, it’s tough right now. Even in the US I hear people complain. I think that’s another shift. So improved bandwidth in the US and throughout the world. That’s going to be another thing that’s going to come out of this that a lot of people need to look at, that’s going to change forever. I know so many people using their cell phones for hotspots right now [00:47:00] because it’s faster than their cable, for example. You’re starting to see that occur already. So that’s another area that will probably change forever, is how we deal with the bandwidth.

Brian Bergen:                  Okay, Jason can we open the line to see if there are anymore questions?

Announcer:                      Your first question is from the line of S Jain from Millennium.

S Jain:                               Hi there. Quick question on the security side of things. If you look at the different buckets for [00:47:30] security, endpoint, identity management or firewalls. Where do you see the likelihood of most starts in the current environment? Do you see more on the firewall side? Or is it more on the identity management side? Endpoint has been holding up reasonably well, so just your thoughts there.

Peter Wokwicz:               Yeah good question. So the endpoint side, that’s where the major rush has been. As far as identity management goes, I think that’s the second thought process is, “Okay, how do [00:48:00] I really make sure to make the whole identity management side easier from the infrastructure side?” So it’s really been more on the endpoint where the focus has been. That’s really been the push to the work from home type structure. There’s still a lot of hacking going on, and I think it gets missed in the press because obviously there’s more pressing things going on. But there’s been a lot of major security holes, hacks, phishing attacks have been going on I would say even more than normal. [00:48:30] A lot of that is that endpoint side that is being taken advantage of.

                                         On the firewall side, I think that’s pretty well. If you have a good team, your firewall is going to be in good shape right now. There may be a little bit of hardware spend there, a little bit of software spend. But most people already, especially when you get into larger companies, they already have the technology in place around the firewall side already.

S Jain:                               Got it. Another question, you mentioned about the subscription SaaS models, how some of the existing [00:49:00] contracts may get to be the number of users and stuff. How about new business activity? Do you think most of the new business activities for some of these SaaS brands like a CRM, or Service Now or Adobe. For now, things have been put on a hold and no one is interested in adding more of these SaaS vendors at this point in time you think?

Peter Wokwicz:               Are you asking more licensing [00:49:30] side or services side? The licensing side?

S Jain:                               More on the license side, yeah.

Peter Wokwicz:               Yeah, yeah, so it really depends. Again, the CRM side I can’t imagine that those users aren’t being cut right now up until your discretion of where you can cut. So that’s definitely happening. Everybody is taking a look at that right now. I spent some time auditing all the per-month, per-user type structures and quite honestly it’s work I should have done anyways. But now because [00:50:00] of the desire, and the employee counts all over the place, now everybody is taking a step back and doing that, and actually calling those numbers.

S Jain:                               Got it. Just real quick, on the license-based models, they may be better positioned than the subscription-based models because you can’t do really anything with the license because you’ve already paid for that. What about the maintenance side of the license-based models? Are you seeing some tweaking there on the maintenance side or not really?

Peter Wokwicz:               [00:50:30] No, that’s been a burden for mine personally, the budgets I’m involved with that’s been a burden. You just have to pay that maintenance side. Sometimes it is based off the number of users, so you can save there a little bit. The maintenance side I think that’s something you have to pay. I haven’t seen or I haven’t put any of that on pause, or not paid maintenance fee yet. Again, those are the type of thing that usually happen a little bit down the road. That’s [00:51:00] number five or six on the list of cutting costs.

S Jain:                               Got it, got it, thanks. That was really helpful, thanks a lot.

Announcer:                      Your next question comes from the line of Rick Altman from Cowen. Your line is open.

Rick Altman:                    Yeah, hey thanks. Peter, earlier you said unified communications and video conferencing seeing some good adoption here. I’m curious, what have you seen on the [00:51:30] cloud contact center side of things? Have you seen companies start to take those conversations a little bit more seriously, perhaps migrate not their entire contact center over but perhaps get some agents up and running on a new cloud solution? Then a second question to that, when we come out of this do you think some of those conversations start to accelerate.

Peter Wokwicz:               [00:52:00] Can you define cloud contact solutions a little bit? Just so I understand what angle you’re coming from?

Rick Altman:                    Yeah, the FiveNine’s of the world, or the TalkDesk’s of the world. Moving your contact center software into the cloud. So everybody can work remotely, and you can scale up and down.

Peter Wokwicz:               Yeah, I’ve not been involved in that directly at this point but I would imagine that is happening. [00:52:30] I can’t imagine any reason it wouldn’t, that whole push to get it all in the cloud, especially with a remote workforce. I would definitely imagine that happening. Again, the whole side of it that we didn’t discuss yet is that push of especially people that could work remote, to getting things off their laptop, we don’t want them to have a document on the laptop that’s not shared. And we don’t want them to have any type of information that [00:53:00] just resides on the laptop. So I think that push, you’re a little less concerned in the office, but as they’re working remote, you want all that pushed up to the cloud. That include cloud contact, includes things like that, includes any type of CRM data, includes all that type of information that would have to be pushed up to the cloud.

Announcer:                      There are no further questions at this time, I turn the call back to the presenter.

Derek Wood:                   Peter I’ve got one additional question. [00:53:30] So you certainly sound like you’re seeing a lot of activity with Microsoft Teams. I guess I suspect that’s much more the case for Teams versus Slack. I guess A, is that true? Do you not see as much uptick in Slack? Then B, why is that? Do people gravitate more towards Teams because of price? Or because of integration with other Microsoft products? What are your thoughts there?

Peter Wokwicz:               So I think one thing that really benefited [00:54:00] Microsoft, and I do see an uptick in Slack. I do see more people using Slack, but I don’t know if that results in an uptick of many Slack licenses. It may have, but I’m using Slack more, I know everybody is using Slack more. I think one thing that Microsoft has to its advantage, almost every company out there, large company at least was already paying I guess the Office 365 tax, the O365 tax. That’s a task in [00:54:30] it’s just something you have to pay as an organization. Which you get great benefits from, and with a lot of those plans you already had Teams with it, and nobody is using Teams. Then all of a sudden we’ve got to do video conferencing, we’re remote. So now let’s just jump over to Teams. We already have it, everybody has a license to it a lot of times, so let’s just start using it. To me Teams is more of an enterprise tool, more of a business tool. When you get into the Slack world, it’s more of [00:55:00] I’m a group of developers, I’m a marketing team, I’m using Slack. It doesn’t really have the feel of my whole enterprise is running off of Slack.

                                         Where on the Microsoft side I can’t say that. My whole enterprise is running off Microsoft Teams. Some of the other products out there. Because O365 often has Teams in it depending on your licensing structure, it’s an easy value-add. There’s a lot of other things within Microsoft’s stack that you do get that you can use. So I think one of the things, even Microsoft has [00:55:30] Voice over IP, things like that, that I’ve seen more use of. So it just adds on, as long as I already have an account. As long as I’m moving forward, why not just go with Microsoft, they’re safe, they’re happy, I’m already paying them anyways.

Derek Wood:                   Okay. Well we’re on the top of the hour. Very helpful, a lot of good content, a lot of good questions. Thanks everyone for taking the time. Be safe, be well, thanks Peter and we’ll talk to everyone soon.