Deloitte prepares for the 5G revolution
5G represents a turning point for enterprise technology and digital transformation. As the industrial and corporate worlds teeter on the brink of this new frontier, a panel of communications and technology experts from Deloitte has come together to explain why advanced connectivity is a game changer.
Rob Kasegrande is a managing director in Deloitte’s Technology, Media and Telecommunications (TMT) practice and leads Deloitte's 5G and Edge Computing practice. “We are in a period of hyperconnectivity,” he says. “There’s tremendous focus on digital transformation in enterprise. Our clients are looking at advanced connectivity solutions as a way to gain advantage whether it's by creating new revenue models or creating innovative efficiencies in their operations, or just operating with a more agile and digital infrastructure.
Jack Fritz is a principal in Deloitte’s TMT practice and also leads the 5G and Edge Computing practice. He adds, “We recognize our clients from commercial enterprises to government organizations are all in different phases of their connectivity journey. We work with clients to help them understand the opportunities and potential risks associated with 5G and edge computing. And then we help them design, build, and operate their solutions, including the underlying infrastructure with our ecosystem partners, and ultimately realize value for their organization.”
And, Kasegrande adds, “An ecosystem is not a ‘nice to have’, it's really a necessity. Our intention is to create opportunities for collaboration, for co-development of solutions and insights that really bring all these pieces together.”
Deloitte is working with SAP to bring frictionless ecosystems to businesses. Jerry Hoberman, a principal and Americas SAP practice leader at Deloitte, says, “We're spending a lot of time with SAP to both architect and engineer industry cloud solutions. The success of those solutions is really dependent on having a clean ERP and, more importantly, being able to unlock industry-specific edge solutions and microservices to where the value is. And with 5G, we can get higher speeds and more secure data transfer, which means that we can actually make and process deeper insights. Ultimately, it means we can take better actions to engage the customer, to have more responsive supply chains and even to improve how we engage with employees and make them more productive.”
A Deloitte survey found that four in five technology leaders thought advanced wireless technologies would transform their industries. “These are the kinds of responses that we would expect from new or emerging technologies, but not from a fifth or sixth generation release,” admits Fritz. “In fact, these expectations are even higher than we saw in a recent AI study.” Nine out of 10 thought they would gain competitive edge from employing next-gen connectivity, with 80 percent believing it would be “a force multiplier that is critical to them unlocking the full potential of things like edge computing, AI, IoT and other emerging technologies.”
It’s a tectonic shift, agrees Kasegrande. “When we talk about 5G, what we're really talking about is advanced connectivity: 5G, Wi-Fi 6, enhanced LTE. But the difference is 5G is going to bring the ability to connect millions of devices at the same time and guarantee a certain level of service. It's going to be able to consume massive amounts of data and, with edge, process that data for real time response. The way enterprises tried to use technology in the past was somewhat limiting. Now, in manufacturing you can automate quality sensing and preventative maintenance. In retail, you can have real-time personalization and pricing while your customer is standing in an aisle.”.”
For Fritz, it’s this use case diversity that presents opportunities. “The way that 5G is architected is far more modular than in the past. Some organizations will need massive device density, some will need low latency, and the way in which you architect, design and deploy the network to meet these needs may vary. And that allows enterprises to take a much more active role in that design and the architecture, and ultimately potentially in the ownership and management of the network itself.”
Frictionless, is Hoberman’s keyword for the 5G revolution. “Frictionless commerce results in faster results and greater value through speed, reliability, edge, modularity and security. It's all bundled into the promise of what 5G offers.”
M&A activity key lever for future tech sector growth
Despite the continuing uncertainty of the pandemic, the tech sector has witnessed soaring dealmaking activity over the past year, rocketing in the second half of 2020, with the last quarter of 2020 a record one for M&A activity, and momentum continuing into 2021.
Dealmaking in tech sector soars in past year
And the latest figures bear this out with the number of technology M&A deals totalling US$208.44bn globally in Q1 2021, according to GlobalData. While the US holds top spot both in volume of deals (1034) and total value (US$140.61bn), Europe ranked next with 649 deals (US$44.49bn) with the UK continuing its reign as Europe’s biggest M&A market with 204 deals.
In particular, megadeals – those valued at US$5bn or more – soared in 2020 representing 59% of all global technology sector deal value in 2020, up from 47% in 2019, according to the latest edition of the EY Technology Global Capital Confidence Barometer.
This tech sector trend towards megadeals is backed up by EY’s CCB data, with 16% of tech sector respondents planning to pursue transformative deals valued at US$5bn or more in the near-term.
While technology deal activity “all but stopped at the beginning of 2020 after fluctuating between historic highs and lows, companies pivoted quickly and tech M&A exploded in the second half of the year”, says Barak Ravid, EY Global TMT Leader for Strategy and Transactions.
M&A activity level for tech sector growth
Looking ahead to the future, technology executives are optimistic, with nearly half (47%) expecting profitability to fully rebound this year, according to CCB data, compared to 23% across all sectors, and with more than half (51%) planning to pursue M&A in the next year in order to sustain growth.
According to Ravid, M&A activity is increasingly becoming a key lever for growth as businesses look to recover.
“To position themselves for future revenue growth, tech companies are now adjusting their M&A strategy to focus more on a target’s business resilience, digital technology alignment and to gain market share through consolidation,” says Ravid.
However, with an increasingly competitive deal market and ongoing geopolitical tensions, the majority of tech execs expect to see more competition in the bidding process for assets over the next year, primarily from private capital.