What's on the technology horizon? Six perspectives—Part 2 - Business of Technology

Computer Technology Review, June, 2003

Six leading industry experts weigh in on what's on the horizon for technology, media and telecommunications (TMT) companies. Half the panelists shared their thoughts on the next wave of killer apps in Part 1 (see May 2003 issue of CTR), and the other half shed light on business issues that will confront TMT companies in the coming months in Part 2. The panelists sit on the Advisory Board for Deloitte & Touche's TMT Trends publication.

Q: What will be the most pressing business issues confronting TMT companies in the next 12 months?

Igal Brightman, Deloitte Touche Tohmatsu

The marketplace for TMT companies has changed dramatically. The global economy has weakened and the market capitalization of companies is shrinking, along with the consumers' appetite to purchase goods and services. To cope with these new developments and to adjust to the new era, TMT companies will have to review their business models and objectives.

How will companies need to change? Technology companies traditionally have developed products based on the assumption that consumers will adopt and eventually learn the value of the products. But what has to happen now in the marketplace is the other way around: Companies need to introduce products that customers are willing to use, not products that customers have to educate themselves to use. For example, interactive TV and micropayments feature wonderful technologies, but their marketplace acceptance and success will require consumers to understand the value and benefits of these products. What will succeed? Products with applications in homeland security, information security and software solutions that add significant return-on-investment. You will find customers for these products because they fit the current economic and political situation.

CEOs will need to do more market research into what customers want before introducing products. They will also need to adopt scenario planning to introduce the right product at the right time. In this business climate, time-to-market is extremely significant. It's a difficult lesson to learn, but in a market where cash is king, and where it's very complicated to raise funds and establish credit lines, you no longer enjoy the luxury of a lengthy time-to-market.

Many companies are already re-evaluating their business models. They are shifting from business models that are designed to achieve volume market share, to those that will help them achieve profitability. Today, more than ever, companies need to generate income and cash flow.

An important consideration in the effort to improve cost savings is contract life cycle management. This means ensuring consistency in the way a company does business, including the contract planning, negotiation, and reflection of the company's policy, document creation, and best practices. Today, the average Global 2000 company manages between 20,000 and 40,000 contracts annually, worth billions of dollars. This dramatic increase in the volume and complexity of contracts has overwhelmed the ability of entities to effectively manage expenditures and costs. By focusing on this area of management operations, CEOs can discover

expenses that are hidden "between the lines" and take actions to enhance the cost savings that will improve their bottom line.

Another issue that impacts results far beyond the short term is investing in human capital. Employees are the true growth engine, and now is the time to fuel that engine by recruiting top talent and putting programs in place to retain top talent. They are a resource that will be in short supply when the market improves. Smart and innovative CEOs who have made long-range planning a priority will recruit that talent today. This is one exception to the point I made earlier about the importance of having a cost savings strategy, cash flow and profitability. That is because talent should be viewed by CEOs not as an expense, but as an investment.

Finally, TMT companies, regardless of their business sector, should pay more attention to managing their intellectual property and royalty rights. A company whose software is used all over the world should make sure all users are identified and licensed. It's an important source of cash that is too often overlooked. As with recruiting top talent, managing your intellectual property will help your bottom line and cash flow over the long term.

Mike Malone, ABCNews.com's "Silicon Insider"

The biggest challenge facing the high tech business community over the next 12 months is the unavailability of capital. It's not a shortage; there is an immense amount of money--more than $100 billion--right now sitting inside investment banks and venture capital firms. But until a fertile market for new company IPOs reappears, that money is essentially locked up. Few VCs these days are willing to put their money in even the most exciting, high potential startup--not when there is no visible exit strategy.

I personally know of at least a dozen young companies--all of them viable and successfully selling their products and services--in which VCs have traditionally loved to make later round investments. Yet, most have failed to find any of the capital they need to grow. The few that have found money have taken months to locate it, accepted it from obscure offshore sources and paid dearly in terms of valuation.