Graham Leonard has spent over two decades helping clients navigate the complexities of current and future accounting standards. Now an Assurance Partner at EY, his wealth of experience in the TMT space grants him a unique perspective on where the sector is heading.
It’s rare to describe a large commercial sector as both ‘mainstream’ and ‘leading edge,’ but this is the line that the field of technology, media and telecommunications (TMT) has forever trodden. Technology evolves, and the media and telecommunications industries are inevitably the first to offer it to the public, pushing both the commercial sector and the public at large forward in the process.
The TMT sector now permeates the lives of individuals and organisations to a degree that it never has before, and thus the changes and developments within this field affect all those around it. In a very real way, the future of TMT is the future of all of us. But what does this future hold?
With the evolution of tech, media and telecoms gathering pace exponentially, 2019 promises to be a watershed year for TMT; the point at which previously nascent and niche technologies and business practices mature and become widespread.
Let’s take a look at these possible developments in a little more detail, and find out how these changes might affect both the commercial sector and the end consumer.
The new tech that will change the face of the TMT industry in 2019
TMT: technology, media and telecommunications. The first T in TMT – tech – drives and underpins everything in media and telecoms, and indeed the rest of the business world. Take self-driving trucks at a BHP site as an example – is this mining or technology? In reality it’s a mix between the two, and likewise, every industry in our modern day economy intersects with and relies upon technology.
There are a number of technologies that look likely to have breakout years in 2019, and in doing so promise to change the way businesses across the commercial sector conduct themselves.
5G networks and the NBN
Thanks to the telecom industry, getting information from A to B will take a significant leap forward in 2019. The NBN will near completion, and 5G wireless networks will begin to be rolled out across Australia. With greater bandwidth on offer (the NBN already has offered gigabit connections to wholesale providers for over five years, and the predicted real world peak speeds of 5G are 20Gbps) organisations will be able to reach consumers with heavy data products and content, opening up incredible opportunities.
The ability of these organisations to capitalise on said opportunities will depend less on their access to the tech, which will be available to organisation and consumer alike, and more on their inherent agility, and willingness to adapt. But we’ll investigate how businesses might maximise these opportunities later.
AI and machine learning
AI is something that separates the biggest players – the Googles, Amazons and Apples of the world – from the chasing pack. Traditionally, access to AI and machine learning technology has been restricted to those with the billion dollar budgets required to develop such tech, allowing the largest corporations to power ahead and reap the rewards of driving innovation in this revolutionary technology.
But 2019 is set to change things.
This year, we’ll see AI brought to the masses, with artificial intelligence being offered as a service, similar to SaaS. A number of companies are now developing AI as a service, and it’s likely that small to medium businesses will soon have access to artificial intelligence on a subscription basis. This tech may initially be integrated within SaaS or other large ERP systems and data centres, but before long we’ll see the industrialisation of AI as a standalone product, which is incredibly exciting for any organisation that appreciates the potential of the tech. And with the world’s finest meat and bone intelligence finally gaining access to the world’s finest artificial intelligence, who knows what developments we might see?
3D printing (additive manufacturing)
While it feels as though 3D printing technology has been around for a while, it has struggled to penetrate the mainstream. It could be argued that it was overhyped in its early years, sold as the answer to all our problems, and a new dawn for the global economy – a factory in every home, they said. But despite the hopeful predictions, the growth of 3D printing was stuck in single figures for years. Between 2015 and 2016, for example, revenues rose by only 5.1%.
But after seeing 12.5% growth last year, 2019 looks set to accelerate this upward curve. Armed with a more reasonable expectation of what 3D printing technology can offer, the commercial sector is now far better at recognising where additive manufacturing will work well. It’s more expensive and takes longer than traditional forms of manufacturing, but there are certain things that can only be created through this method, and an increased demand for these items will drive growth and development in the tech in 2019.
The risks and opportunities for TMT organisations in 2019
The business activity within TMT is every bit as dynamic as the technology the sector develops, utilises and delivers. Whether 2019 is a good year or a bad year for an organisation within the TMT industry will depend on how it responds to and acts upon the risks and opportunities that this year may bring.
TMT M&A: Convergence of companies and sectors
In Australia I see the landscape of TMT in 2019 being vastly different to that of 2018. The recent relaxation of media laws has brought the first wave of consolidation in the sector – most notably Nine and Fairfax coming together – which will give Australian companies the opportunity to compete with multinational giants like Amazon, Netflix and Google.
Convergence won’t just be seen between companies, but across sectors too. Telcos are now attempting to penetrate the traditional media landscape, with Optus and Telstra’s entrance into the sports streaming market a prime example. This will continue, and I see these Telcos making huge inroads into the traditional media space by better identifying new opportunities – keep an eye on the burgeoning eSports market in 2019. The convergence of companies and sectors will lead to a convergence of customers, and the power that this offers to the organisations who do it best has the potential to produce a monumental change in the TMT landscape in 2019.
Divesting and focusing on core functions
There’s a flipside to all this convergence and M&A activity that is less spoken about: the divestments that come from combining such large organisations and industries. When two companies are combined, there are inevitably non-synergistic elements within both. As investors look to realise a return, non-synergistic and underperforming assets are sold off to fund the convergence or further merger and acquisition activity.
Divestment is really about focusing in on an organisation’s core function, then giving it the wherewithal to reinvest in that core. Where TMT in 2018 was about spreading the net wide through convergence, 2019 will see more and more merged corporations trading that net for a divestment harpoon.
Agility and access to capital
Five years ago I saw a wealth of Australian tech businesses with revenues of around $10 million and valuations of $20 – $30 million. Today, most that I come across have revenues of $100+ million and valuations of $70 – $100 million. In short, the market has matured. Where previously it was attracting angel investors and VCs, it’s now attracting more sophisticated, less speculative investors.
2019 looks set to be the year that private equity comes into its own. This is excellent news for firms that have ready access to this type of capital, and challenging news for those that don’t. But where access to private equity might be lacking, a commitment to agility could prove just as important. In such a technologically momentous year as 2019, any organisation nimble enough to capitalise on the opportunities offered by broader bandwidth, artificial intelligence, 3D printing and blockchain is likely to see success.
The emerging business model for 2019 is one that covers both bases: nimble, agile and adaptable, with unfettered access to private equity.
Cyber risk and security management
The overarching theme in TMT in 2018 was a lack of trust in cybersecurity. While attitudes to cyber have matured in Australia, we’re still well behind the likes of the US and Europe. The prevailing attitude here is if you haven’t had an attack, you must be doing a good job. Overseas, however, the view is if you haven’t had an attack you’re either not sophisticated enough to know that you’ve had one, or you just got lucky. In 2019, TMT organisations must build processes that increase their security, and thus the public’s trust in them.
Blockchain could play a leading role in this effort, gaining a foothold anywhere that trust is perceived to be lacking. Digital marketing in a prime example. After Facebook spectacularly broke the public’s trust in 2018, the focus was on the authentication of impressions and views – those often intangible pieces of data that digital media companies base their entire revenue structures around. Blockchain offers a way to shore up those processes and guarantee that people are getting exactly what they pay for.
Read more about this:
- Ten opportunities and threats for media and entertainment companies | 2019
- Telecommunication companies| 2019 Is risk still risky when you see it coming?
A year unlike any other
No matter which way you look at it, 2019 promises to be a momentous year for TMT. We’ll see the industrialisation of maturing technologies, and the development of new ones. We’ll see a transformation of the TMT landscape, with traditional battle lines entirely redrawn. And, we’ll likely see things that none of us could ever have imagined.
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