Deloitte 2017 Technology Industry Outlook

What trends could affect tech marketers as they seek to connect with customers this year? Enterprise digital transformations, interindustry collaboration, and a global war for talent could play a significant role.

The technology industry's growth story has traditionally focused on the consumer—and that story continues. But as enterprises in every industry sector look to technology to facilitate their own transformations, the opportunities for tech companies have broadened considerably. That's according to Paul Sallomi, Global Technology, Media, and Telecommunications Industry leader and U.S. and Global Technology Sector leader with Deloitte Tax LLP. Here, Sallomi shares his perspectives on what's ahead for the tech industry in the year to come.

Where do you see opportunities for growth in 2017?

The race for competitive advantage has led businesses everywhere to embrace the new and the cutting-edge. Many technologies, including robotics, virtual and augmented reality, 3-D printing, and artificial intelligence (AI), are now coming into their own as power and speed increase while the cost of delivery goes down. They're also opening significant areas of opportunity. A few show particular promise:

• Machine learning has the capacity to enhance a wide array of applications, particularly those involving classification, prediction, anomaly detection, and personalization.
• Blockchain, the foundation for the digital currency bitcoin, is a very early stage platform that is gaining considerable traction. A distributed database of transaction blocks, it has enormous implications not only for the financial services industry, but potentially for many other companies as well.
• Digital transformation is opening whole new markets, creating ecosystems that often extend across multiple sectors. Connected and autonomous vehicles, e-medicine, fintech, e-tail, and smart cities are all enabled by connectivity, growth in storage and bandwidth, advances in cognitive technologies, and increasingly sophisticated data analytics. While it may be overhyped on some fronts, the emerging internet of things (IoT) has only just begun to reveal its promise.
• Cloud adoption is also still in its early stages, and more "anything as a service" offerings that allow usage-based consumption are likely to emerge. This development will give small- to medium-sized enterprises access to sophisticated capabilities once available only to huge multinationals, creating a virtuous cycle of demand for more products and services.
• Cybersecurity products and services are another area with a bright future, at least in part because the success of cloud offerings relies heavily on companies' ability to secure their environments.

What strategies are tech companies using to facilitate growth?

The transformation of an enterprise is a complex undertaking, and the digital solutions needed don't come neatly bundled. Rather, they are combinations of hardware, software, networking, data storage, analytics, and cognitive technologies, and the complexity involved requires deep expertise in a wide array of areas. This is causing a historic wave of collaboration across different industries, such as technology and automotive. Another important strategy involves partnering for the purpose of advancing a particular field or building end-to-end customer solutions. A case in point is the recently launched partnership between IBM and Cisco. Focused on growing revenues in emerging fields like AI and IoT to offset declining sales in more traditional areas, the deal leverages the cognitive and business analytics capabilities of IBM Watson's IoT platform and Cisco's expertise in hyperdistributed IoT networks and edge analytics.

Finally, over the past decade, many of the major tech players have grown rapidly into conglomerates with multiple areas of expertise. This has often placed them at a disadvantage when competing in a space that rewards agility and focus. The pressure to be nimble—to be able to turn on a dime—has led many of these companies to pursue a "shrink to grow" strategy. Consequently, we have seen continued activity in both divestitures and acquisitions, as tech companies choose to focus on what they do best and shed the rest.

What should businesses consider as they plan for growth?

One of the most significant success factors for tech firms is how quickly they can transform their own business models to accommodate shifting customer demands. We are seeing a rising tide of requests from enterprise customers for solutions sold using a pay-per-use or "flexible consumption" model. This trend began with cloud-based software-as-a-service offerings, and it continues today. It is important not to underestimate the depth of this shift: It will change how a company trains, motivates, and compensates its salesforce; how it designs its IT infrastructure, including security features; how it handles revenue recognition and taxation; how it distributes and bills for its offerings; how it markets and brands the enterprise; and how it manages equity stakeholder expectations.

To maintain the competitive pace of innovation, companies are also engaged in a global war for talent. Winning means finding ways to tap a resource pool that goes beyond the boundaries of their organizations and creating ecosystems that foster collaboration with entrepreneurs, startups, academia, and even competitors. The rise of the "gig economy" is making more flexible, project-based arrangements an acceptable alternative. We also expect to see businesses become increasingly amenable to non-traditional ways of working that allow people to be productive in less structured, often untethered or mobile environments.

Among the challenges facing tech companies is increasingly burdensome global regulation. Each local market has its own rules governing privacy, security, and the handling of data crossing or within borders. There are also competing regional and country views regarding how an enterprise ought to be taxed and how it should treat incentive programs. Organizations will need the tools and resources to address both new and existing rules, especially as they expand internationally. The need to address continually evolving and maturing cyber threats will continue to be a prominent area of focus as well.

Ultimately, the warp speed with which the technology space is changing makes it nearly impossible to anticipate every new development. But there is little doubt that technology's integral role in nearly every aspect of business and life will keep those developments coming.

Information Technology Lodging Industry Markets & Performance