SUMMARY

• Big Tech have the financial clout to weather looming economic uncertainty
• Big Tech have the scale and technological capabilities to combat the COVID-19 outbreak
• We will see industry consolidation, driven by acquisitions by Big Tech
• We see growing concerns about the dominance and dependency of Big Tech due to resilience and risk
• For business, the dominant concern will (still) be to leverage Big Tech to increase resilience

Big Tech is on the radar of futurists and corporate strategists alike. With the power and influence they yield, it is fascinating to follow their strategic playbook – and equally intriguing to contemplate the impact these firms can have in shaping the future.

Last week, Apple, Amazon, Alphabet, Facebook, Microsoft release their earnings reports; but besides the financials, what have we observed from Big Tech recently?

Obviously, there is a lot about COVID-19. In this regard, two things stand out in the events of the past months:

1. Big Tech have the financial clout to weather the economic uncertainty

It is clear that Big Tech is in a better state than most. Amazon’s share price is already up 25% since the beginning of 2020, and has reportedly hired 175,000 new employees in Q1 2020. Amazon will absolutely be impacted by a looming recession in Q2 2020, and some of those job gains may only have been temporary (…and a drop in the ocean compared to the over 33m that as of May 7th have filed for unemployment in the US since the outbreak).

But Big Tech is Too Big To Fail – this time probably without needing government bail-outs. Big Tech will acquire the weaker links in the value chain, and take over competitors who falter. Further industry consolidation is almost a given.

2. Big Tech have the scale and tech capabilities to combat the COVID-19 outbreak

Big Tech have been making significant and valiant contributions to combatting hte COVID-19 outbreak. Witness, for example, Google and Apple committing to develop contact tracing apps. Microsoft’s application of AI technology for virus research, and free online services to nonprofits. Or perhaps most surprising – Facebook’s offering of $100m in small business grants. [Facebook’s recent activities are worthy of a separate article]

Big Tech deserves praise and some goodwill. However, drawing observations 1 and 2 together, Big Tech’s outsize role in combating the outbreak and its ability to survive may strengthen another ‘flank’ in the public discourse on Big Tech – illustrated through articles like the following:

• Whose Information? [Project Syndicate – paywall]
  Argues that Big Tech has capitalized on the power of information to shut out competitors and manipulate consumer preferences and behavior.
• Coronavirus has made Amazon a public utility – so we should treat it like one [The Guardian]
  An opinion piece emphasising the need to protect Amazon’s employees.
• Amazon and Microsoft Need to Give Businesses a Break [Bloomberg – paywall]
  Argues that unlike landlords, banks, and governments, tech companies continue to demand payment for digital services and see no need to offer deferrals or other relief.
• Amazon has been indispensable during the pandemic – but it’s clear who really wins [NBC]
  Outlines how many third-party businesses have little choice but to use Amazon for logistics – and Amazon’s fees are putting them under financial strain.
• The Immunity of the Tech Giants [NY Times]
  Argues that the momentum to rein in tech giants is faltering, and after the crisis Big Tech will yield even greater power and unaccountability.
• The Pandemic has made sudden heroes of the tech companies – for now [WSJ – paywall]
  Examines how many tech companies, which were previously viewed with distrust, are increasingly viewed as essential and lifesaving.
• Big Tech’s earnings prove it’s immune to the coronavirus [CNBC]
  Reviews the financial earnings of tech companies, and outlines a few potential challenges.

3. Is Big Tech too big to rely on?

Big Tech will come under increasing scrutiny. But this time, it will not just be a question of trust: issues like data privacy, the role of surveillance, or combating fake news – though these issues remain even more relevant today. Rather, because COVID-19 has emphasized the need for resilience – the ability to adapt in the face of adversity, and even ‘bounce back’ after negative events – it is increasingly an issue of risk. It is clearer than ever that Big Tech truly is more powerful than many states. But with power comes great responsibility. There is a fear that we are at risk if societies are too dependent on such a powerful actor.

For many, the issue centers on what our increasing dependence on Big Tech means for our resilience. The battle may well be fought on ideological lines. It is much too early to tell. We can make two initial observations:

1. Keep Big Tech’s diversity and agility in mind
   Any comparisons to ‘Big Oil’, or the fear that Bezos is the new Rockefeller, are somewhat unfair and misguided. Big Tech can and do contribute a panoply of services that benefit society in a way that fossil fuels never could – surely another failed Microsoft product is an order of magnitude different to another Deepwater Horizon (the Cambridge Analytica case may be another story altogether…)
    
2. In times of crisis…it is OK to have someone to depend on
   Right here and now, it is vital to have Big Tech contributing to the fight against the COVID-19 outbreak. For better or worse, we need companies – of all sizes – and their specialist competencies. Whether to complement public services or, if need be, to substitute public services when they fail.

Having said that, no firm or group of firms should dominate markets to such an extent that they achieve monopoly/oligopoly power. Ensuring this, however, we will have to leave up to those in charge (the EU and some US regulators…)

4. Big Tech will remain a business enabler – because the benefits simply outweigh the risks

For businesses, the issue of resilience and risk are of course also at the fore. However, the above doubts weigh heaviest from a policy/regulatory and societal perspective – Big Tech will remain a necessary enabler for corporations, regardless of the risk(s) it entails. Due to the clear need to digitalize, Big Tech’s solutions have become a necessity.

Internally, Big Tech’s cloud services can provide the productivity tools needed for remote working. As a baseline. From an innovation and transformation perspective, however, these cloud services also offer advanced technology that firms can leverage to increase efficiency and even develop new offerings (e.g. AI). Every firm should be digital in this day an age, granted, however developing the ‘technology’ to do so need not be a core capability: Big Tech (and others) can provide the digitalization and automation solutions required.
Externally, Big Tech’s consumer-oriented services have become a, if not the, dominant customer interface – whether we’re talking about Amazon’s e-commerce platform, Facebook’s pages, or Apple’s App Store. These are interfaces where firms must simply be present to engage with and capture a large share of their customers. Besides concerns about Amazon’s dominance of the logistics chain and the death of retail, nothing has really changed here due to COVID-19.

Of course, businesses too may worry that they become too dependent on one or two service providers. Fortunately, specific characteristics of digital innovation mean that it is difficult for one player to completely dominate the market. Alternative technology providers and services do exist – however niche. Two forces drive this:

• Speed of Scaling – digital innovation happens quickly, so keeping up takes resources; however services and solutions are technically fairly easy to duplicate and replicate.(Consider Android vs. iOS, Skype vs. Zoom, Slack vs. Teams, etc.).
• Ease of Switching – provider lock-in can occur, but it is fairly easy to migrate between services. Indeed, from a consumer perspective, there’s always a new alternative to meet changing needs or preferences. (Consider TikTok vs. Snap vs. Periscope vs. YouTube)

Of course, these two forces are often opposed by another force: the ‘winner takes all‘ nature of digital technology, where the first to scale typically dominates (often by creating a platform/ecosystem). For this reason especially, Big Tech are here to stay and will dominate due to their size and capabilities.

Businesses should not only fear this, but must monitor Big Tech’s moves to avoid encroachment. Additionally, firms should leverage the benefits that Big Tech’s services and platforms provide – and be open to explore opportunities to innovate together.

For more on Big Tech, see our briefing covering Big Tech’s latest strategic moves and focus areas.