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April 24, 2020

COVID-19 & IT Services: Cyber Security & Cloud Expertise are Paramount

MHT Partners  | Business & Information Services Investment Bank

The COVID-19 pandemic is causing a huge spike in the number of at-home workers. Estimates show that two thirds of the U.S. workforce now work remotely, and this number is expected to remain steady through April and potentially May.(1) In turn, this has put extreme pressure on internet bandwidth. During the month of March, global internet traffic increased by 30% while normalized monthly growth was expected to be about 3%.(2) Yet companies are being forced to slash IT spending because of the growing economic uncertainties as a result of the pandemic. The combination of a larger remote workforce, increased internet traffic, and shrinking IT budgets has presented cyber criminals with an ideal environment for wreaking havoc.

Cyber attacks have exponentially increased since the onset of the pandemic, largely due to the transition to a distributed workforce. As employees bring corporate devices onto unsecured networks and unsecured devices onto corporate networks, they provide cyber criminals with a variety of potential entry points into a company’s network infrastructure, such as remote desktop protocols (“RDPs”). A recent analysis by Reposify indicates an increase of 127% in exposed RDPs since the start of the pandemic.(3) Targeted attacks have appeared in many forms. As of March 26, the number of coronavirus–related phishing attacks rose 667% compared to the prior month.(4) Cyber criminals attempt to gain access to employee credentials or other sensitive information through clickbait that tempts the employee to follow a link for more information. Another commonly used method for cyber-attacks has been the creation of fake COVID-19 informational websites. Over 100,000 domains have been created since the start of the crisis, many of which are aimed at preying on people who desire real-time updates on the pandemic.(5)

Despite a short-term IT spending spree required to enable working remotely and defend against cyber attacks, companies are expected to pull back on overall IT spending as a cost-cutting measure to combat the economic slowdown resulting from the pandemic. Forrester has revised its forecast of 2020 IT spending to be down nearly 10% between March and April alone.(6) While providers of IT products will be hit hardest, IT managed service providers (“MSPs”) that are particularly well equipped to enable remote workforces and provide cyber-security solutions are expected to fare better than other industry participants during the downturn. The necessity of increased investments and the need for third-party assistance to build and secure remote work capabilities were quickly realized once the nation was ordered to work from home. In a recent survey of channel companies conducted by CompTIA, approximately 75% of the firms reported an increase in business opportunities since the onset of the pandemic, primarily due to the shift from on-premise infrastructure to cloud-based infrastructure and the need for enhanced cyber-security solutions.(7)

Moving forward, although overall IT spending will be down for a period of time, MHT Partners expects pure-play MSPs and IT services companies with significant revenue derived from cloud and security expertise will continue to be sought-after acquisition targets, as these firms will fare better in the downturn and be in the best position for accelerated growth as the economy recovers.

MHT Partners, a leading technology investment bank, welcomes the opportunity to discuss how the IT services market will continue to evolve in a post-pandemic world. Please contact Kevin Jolley (kjolley@mhtpartners.com) or Mike McGill (mmcgill@mhtpartners.com) to start a conversation.

(1) https://www.netskope.com/blog/remote-work-increasing-exponentially-due-to-covid-19
(2) https://www.infosecurity-magazine.com/news/internet-spiked-double/
(3) https://www.us-cert.gov/ncas/alerts/aa20-099a
(4) https://pitchbook.com/news/articles/privitar-lands-80m-as-cybersecurity-interest-grows-amid-covid-19
(5) https://www.weforum.org/agenda/2020/03/covid-19-cyberattacks-working-from-home/
(6) https://www.wsj.com/articles/it-spending-forecasts-take-a-hit-as-coronavirus-slams-global-markets-11583963714?mod=article_inline
(7) https://www.comptia.org/blog/tech-business-covid-19

1 Comments

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  1. Kevin and Mike,

    I’m hoping to connect regarding http://www.cyndx.com, an AI driven investment search platform utilized by bankers to streamline mandate workflow and identify opportunities. Cyndx maps sector landscapes tracking over 10M companies (99% private) and ~125K investors including family offices. Cyndx is differentiated in that the platform applies algorithms and predictive analytics to the data base to bubbles up prospective targets and relevant acquirers or can output companies projected to be raising capital in the next 6-12 months.
    When would the MHT team have availability to see Cyndx capabilities?

    Best regards,
    Demetrios