EY: Top 10 opportunities for technology companies in 2022
Increased volatility rising out of the evolving COVID-19 pandemic has led to a reshuffling of priorities for the global technology industry. Emerging as the top opportunity for the year ahead, up from fourth last year, is the imperative to attract and retain a motivated workforce.
This is according to the annual EY report, Top 10 opportunities for technology companies in 2022, which ranks the biggest industry success drivers based on EY analysis.
Overcoming supply chain logistics challenges continues to be critical to business continuity while implementing cybersecurity measures is now urgent. New in the top five this year is a call from stakeholders for tech companies to lead on ESG issues.
1. Attract and retain talent in a hybrid working environment
Securing talent has always been an issue in tech, but the pandemic has accelerated the need to address this. Most tech firms are discussing a staged and partial return to the office in a bid to balance the needs and desires of a modern workforce with costs. A recent survey from EY shows that 9 out of 10 employees demand flexibility in where they work and when they work and are prepared to quit if they don’t get it. However, the hybrid model poses new challenges with regards employee experience and culture. Employers must optimise rewards, flexibility and experience to create a package that attracts and retains the best talent.
2. Leverage M&A to strengthen growth profile
Just over half of all technology execs acknowledge that organic growth could be difficult in the short term, according to EY research. To sustain growth, they plan to pursue M&A in 2022. Despite increased regulatory scrutiny and financial uncertainty, the deal market is expected to remain healthy. Acquisitions will reignite growth by adding solutions, technologies, end markets and distribution channels to a company’s portfolio. Similarly, divestments could help firms steer away from slower growth market segments or solutions that require capabilities different from those the company possesses.
3. De-risk the supply chain to secure business continuity
Supply chains have come under huge pressure. Two major bottlenecks for tech firms recently have been logistics and the availability of components. Tech companies need to carefully review and de-risk their supply chains. Different risk profiles in the supply chain require different policies around inventories and sourcing contracts. Logistics issues could lead to changes in preferred manufacturing and distribution footprints. Real-time visibility will help identify bottlenecks at an early stage, while new technologies such as digital twins and 3D printing could reduce the degree of disruption.
4. Embed security into the design of new activities
The importance of data security and integrity has increased exponentially during the pandemic. More business is now conducted online, but what’s more key is that so many companies have changed IT structures and processes in response to the pandemic without considering cybersecurity. This has led to more disruptive attacks and added to worries around regulatory compliance. To turn data integrity into a business driver and to avoid major disruptions, tech firms should embed security and privacy into the design of new activities. That includes realigning data security with the business objectives, reviewing the talent needed to do that and including the cyber team in the start-up phase of new projects.
5. Lead in ESG to strengthen stakeholder relations
Tech companies have traditionally focused on environmental sustainability, but stakeholders are demanding more: consumers expect companies to drive positive social and environmental outcomes; employees want to make a difference; investors demand sustainable investment options. And enterprise customers look to the sector to implement new technologies to help drive their own sustainable outcomes. Tech companies should be leading by example, engaging with their stakeholders and drawing up a long-term value proposition. This includes environmental and social commitments supported by top-down organisational changes, transparency and reporting on relevant KPIs.
6. Transform business to excel in consumption-based sales
During the pandemic, consumption-based business models offered better protection against economic volatility and a higher valuation from investors than traditional one-off payments. As customers increasingly prefer the flexibility of cloud-based services and software, subscription payments are expected to replace the traditional license payments at a rapid pace over the next five years. To enable this shift, tech firms need to transform their sales organisation, change their pricing tools, adopt new incentive schemes, track different performance indicators and realign their major business processes. This will reward companies with recurring revenues, more time to build customer relations, and a chance to generate higher revenues per user from cross-selling and upselling.
7. Realign tax organisation with digital business models
The tech sector has increasingly become a key target for legislation and taxation changes across the globe. Governments are looking to shift the taxation base to capture more value from the growing share that digital services contribute to the economy. Steep and sudden changes are caused by trade disputes and by governments looking to strengthen or protect their key industries, which more often than not include the tech segments. With their large global footprints and their large base of material and immaterial assets, tech firms need a robust approach to taxation and global trade, built on real-time insights, early planning and an agile operating model.
8. Streamline operations to increase agility
The pandemic has exposed the world to a new level of volatility and economic uncertainty. Customer preferences can shift overnight, causing large swings in demand, especially in the tech sector. With supply chains stretched and trade increasingly influenced by geopolitical factors, the risk profiles in the sector have changed. This has increased the need to transform the organisation. To retain a competitive edge, tech companies need to match the agility of their operations with the future levels of volatility in their business. They can achieve this through simplification; streamlining business processes; leveraging cloud capabilities, data analytics and automation tools.
9. Instil customer trust to drive digital engagement
For digital companies, trust is essential because trust is what drives customers to visit, interact and share data needed to create a business and drive growth. And with alternatives only one click away, a lack of trust could send customers elsewhere in the blink of an eye. Research from EY has shown that the main drivers of trust — or distrust — include security, transparency, ethics, content and regulatory compliance. To gain trust, companies need to prioritise the protection of customer data and have clear policies about how to deal with issues such as fake content, online abuse and discrimination.
10. Prepare for adoption of 5G
The rollout of 5G is driving revenues across the entire technology stack, as the industry is gearing up for large-scale implementation. An EY survey found that 52% of enterprises are now more interested in 5G than pre-pandemic. It’s not just a new connectivity standard, it will change how objects and devices interact and how data analytics and machine learning can improve logistics, reshape customer interaction or identify bottlenecks in the supply chain. Three out of four enterprises believe that 5G will be integrated into their business processes over the next five years. For that to happen, tech companies need to prepare use cases and adoption road maps to stay ahead of the competition.