(First of two parts)
With the world now able to control the ongoing pandemic better thanks to vaccines and other health and safety measures, the technology sector will more likely continue to grow as the digitalization of the economy further accelerates. In line with this, EY shares its annual report, Value Realized, ranking the top ten opportunities that technology companies should seize this year. Companies who act on these may find opportunities for growth while navigating volatility and risks in 2022.
In the first part of this article, we discuss the first five opportunities: attracting and retaining more motivated people in a hybrid workplace, strengthening your growth profile with M&A, securing business continuity by de-risking supply chains, embedding security in new activity designs, and leading in environmental, social, and governance (ESG) to strengthen stakeholder relations.
ATTRACT, RETAIN MORE MOTIVATED PEOPLE IN A HYBRID WORKPLACE
Although finding capable talent has always been a challenge and major concern in the tech sector, the pandemic only increased the urgency in addressing this issue. Companies who are investing in growth will need more salespeople to strengthen their salesforce and more engineers in their research centers.
Most tech companies are discussing a partial and staged return to the physical office while trying to balance the preferences and needs of a modern workforce and manage the costs involved. A recent EY survey also cites that nine out of 10 employees demand flexibility in when and where they work and are prepared to resign if this demand isn’t met.
However, although employees have mastered working from home, the hybrid model will pose new challenges related to motivating employees and work culture. Companies will need to be able to optimize flexibility, rewards and experience to present a package that can attract the best talent as well as retain them.
STRENGTHEN GROWTH PROFILE WITH M&A
A little over half of the technology executives surveyed in the 23rd EY Global Capital Confidence Barometer acknowledge that organic growth can be difficult in the near term, with 51% saying that they intend to pursue mergers and acquisitions (M&A) in 2022 to sustain growth. The deal market is expected to stay healthy despite increased financial uncertainty and regulatory scrutiny.
Acquisitions will be able to reignite growth through the addition of technologies, distribution channels, business solutions and end markets to a company portfolio. Moreover, divestments can help companies veer away from solutions that require different capabilities from what the company possesses, as well as from market segments with slower growth. The right M&A strategy will result in a better growth profile, while divesting of non-core businesses will help reshape portfolios out of declining businesses.
SECURE BUSINESS CONTINUITY BY DE-RISKING SUPPLY CHAINS
Supply chains came under massive pressure from geopolitical events and market volatility, with tech companies dealing with two major bottlenecks in the past months: the availability of components and logistics. Though it can be argued that these issues are temporary and have also hit the entire industry, some have managed them better than others.
Tech companies will need to carefully assess and de-risk their supply chains, all the way from the vendors of their vendors down to the customers of their customers. There is no one size solution for this; different risk profiles in the supply chain will require different policies surrounding sourcing contracts and inventories. Issues in logistics can also lead to changes in preferred manufacturing and distribution footprints, but real-time visibility can help identify bottlenecks at an early stage. Furthermore, new technologies such as digital twins, which are virtual representations that serve as real-time digital counterparts of physical objects or processes, and 3D printing could also reduce the degree of disruption.
EMBED SECURITY IN NEW ACTIVITY DESIGNS
Data security and integrity have never been more important than during the pandemic, with more flexible ways of working introducing more sources of risk. A large number of companies had to change their IT structures in rapid response to the pandemic but were not able to sufficiently consider cybersecurity in advance. This resulted in more disruptive attacks and led to increased concerns with regulation compliance.
In order to turn data integrity into a business driver and avoid major disruptions, tech companies must embed security and privacy in the design of any new activities. This includes the cyber team in the startup phase of new projects, realigning business objectives with data security, and reviewing the necessary talent profiles to do so.
LEAD IN ESG TO STRENGTHEN STAKEHOLDER RELATIONS
While tech companies have traditionally focused on sustainability, stakeholders and consumers want more, with rising expectations to drive positive environmental and social outcomes. Employees want to make a meaningful impact, and investors demand sustainable investments. Moreover, enterprise customers look to the technology sector to implement new technologies that can help drive sustainable outcomes of their own.
This is why tech companies should lead by example, drawing up long-term value propositions and communicating them with their stakeholders. This includes ESG commitments supported by transparency, top-down organizational changes, and reporting on relevant key performance indicator (KPIs).
In the second part of this article, we discuss the other five opportunities tech companies can seize in 2022: transforming the business for consumption-based sales, realigning tax organizations with digital business models, streamlining operations and increasing agility, cultivating customer trust to drive digital engagement, and preparing for the shift to 5G.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Rossana A. Fajardo is the EY ASEAN business consulting leader and the consulting service line leader of SGV & Co.
