IDC Analyst Warns ICT Sector Against ‘Complacency’ From Ukraine Crisis
There’s a “danger of complacency” in the information and communications tech supply chain that the economic risks of the Russia-Ukraine conflict will stay confined to Europe, Stephen Minton, IDC program vice president-data and analytics, told an IDC “first look” webinar Thursday on the impact of the Russia-Ukraine war on the global ICT market. Minton estimates $240 billion or more in global ICT spending could be “wiped out” from the war through 2025, and that’s assuming the most “optimistic scenario” of a diplomatic end to the hostilities within three months.
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For ICT people outside Europe, “the crisis might not yet have shown up in a severe impact on their revenue,” said Minton. “They’re all reading a lot of statistics in The Wall Street Journal and elsewhere about how Russia represents a relatively small portion of the global economy or a relatively small proportion of trade for the U.S.,” he said. “That might lead to a certain sense that this is a faraway crisis.” IDC estimates Russia and Ukraine combined generate 1% of global ICT commerce and 5.5% of the ICT economy in Europe.
The region’s small contribution to the global ICT economy “might partly explain” why many Western vendors were able to “halt or scale down or suspend their operations” in Russia “in a relatively short time window,” said Minton. “It’s a small share of revenue, but it’s large enough that for a global vendor, even 1% or 2% of revenue is likely to mean that they are eager to re-engage whenever it’s politically expedient to do so and we get to beyond the current crisis.”
U.S. companies will be “restricted” by sanctions from re-engaging with Moscow once the crisis passes, said Minton. Chinese vendors “will wait and take their lead from the government in terms of how to respond to the different sanctions,” he said. China will need “to find a balance between the political considerations on the global stage and the economic opportunities” to grab market share in Russia, he said.
The “real risk” to the global ICT economy is in the “secondary impact” from a “prolonged war” in Ukraine that stretches into 2023, said Minton. “A more prolonged war would start to have a much more severe impact on economic activity, on supply chains, and in particular on inflation and on energy prices,” he said. “That in turn would inevitably start to have an impact on ICT spending, which currently is in a pretty good place.”
The industry shouldn’t be lulled into thinking that “just because ICT spending performed as well as it did during COVID that that necessarily means that we’re immune to the kind of economic crisis that we could be heading for in a pessimistic prolonged war scenario if this thing goes on well into the second half of the year,” said Minton. “This could get pretty bad,” not just for Russia and Ukraine, but “for every region around the world,” he said. He surmises that devices, especially PCs and smartphones, are “the most vulnerable segment in terms of the potential impact in that pessimistic scenario.”
IDC estimates the crisis will cause the ICT market to “contract” by 25% this year in Russia and by 60% in Ukraine, said Philip Carter, group vice president-worldwide thought leadership. Those declines are “in large part linked to the conflict” itself, but also to “operational issues” that have rippled through both countries, he said. “We’re watching closely the digital skills emigration from Russia and Ukraine,” said Carter. “Tens of thousands of developers, digital nomads, are moving out of the region,” he said. “In Georgia alone, we’re seeing tens of thousands of skills arriving from both Russia and Ukraine.”