- Tech executives are increasingly concerned about pricing and cost pressures but less concerned about staying on top of emerging technologies
- Cloud, mobile and data and analytics will continue to be revenue drivers, survey predicts
- Security/privacy governance remains biggest challenge for businesses in adopting social media, cloud and mobile technologies
An increasing number of US based technology companies are looking outside the US, China and India for revenue growth with countries such as Brazil, Mexico and Canada most often cited as the most likely future growth markets, according to KPMG’s latest Technology Business Outlook Survey.* The research also reveals that technology companies are increasingly concerned about labour costs and pricing pressures caused by low-cost producers. On the other hand executives seem less concerned about lack of customer demand or staying on top of emerging technologies than they were two years ago.
Asked which geographic markets will have the highest revenue growth for their companies during the next 12 to 24 months, respondents continued to cite the US and China most often, but the numbers are down. 68 percent said the US will have the highest percentage of their company’s revenue growth, down from 75 percent in 2012 and 77 percent in 2011. About half of respondents (53 percent) chose China, two percentage points above the 2012 figure, yet five percent below 2011. Respondents were also bearish about India with only 27 percent believing it will be a source of revenue growth compared to 43 percent just two years ago.
Several countries are becoming more important for tech revenue growth rate. One-third cited Brazil for growth over the next two years, compared to 29 percent last year; a quarter (26 percent) cited Canada, 15 percent Mexico and 14 percent South Korea. The figures for the latter three countries are up five to six percentage points compared to last year, the second consecutive year of increases.
Tudor Aw, KPMG’s Head of Technology Europe, comments: “While the US and China remain key markets for US Tech companies, it is clear that there is a sense that they are levelling off in terms of importance and focus is being turned to other markets such as Brazil, Mexico and Canada. This reflects a combination of factors such as underlying economic growth rates, infrastructure investment and increasing technology adoption.”
Revenue Drivers: Cloud, Mobile, and Data and Analytics
Cloud and mobile computing (including mobile devices) are projected to be the biggest revenue drivers for technology companies in the next one to three years, according to the survey although expectations are much lower than in previous years. Whereas two years ago, 65 percent of executives said cloud computing will be their biggest driver of revenue growth, this year’s survey found only 38 percent sharing such an optimistic outlook. In 2012, 48 percent of respondents suggest mobile computing would be their biggest driver of revenue growth, but this year the figure fell to 38 percent.
Asked to identify key revenue drivers, respondents suggested that advanced data and analytics will play a major role in the coming 12 months. From just 19 percent in the last survey, the proportion of respondents focusing on Big Data as a revenue generator jumped to 33 percent. Executives also believe that customer acquisition (37 percent), operational excellence (34 percent) and competitive intelligence (30 percent) represent the best use of data and analytics insights.
Eddie Short, Partner and UK/EMA Leader for Data and Analytics in KPMG, says: “We expected to see a jump in the importance attached to data and analytics, but with nearly half of the companies involved in the survey claiming to have improved their data and analytics literacy, the levels of growth are a welcome surprise. Many, of course, have some way to go to really to drive improved business performance through analytics, but they are certainly moving in the right direction.”
Price Pressures and Labour Costs seen as most significant growth barrier but less concerns over emerging technology
38 percent of executives say pricing pressures are the most significant growth barrier facing technology companies. Respondents are also increasingly concerned about labour costs; 24 percent of those surveyed cite this is an issue, compared to 20 percent last year and 16 percent the year before. Interestingly, staying on top of emerging technologies is of less concern than in previous years – 24 percent vs. 34 percent in 2012 and 36 percent in 2011. And one in five (22 percent) say regulatory and legislative pressures presents the most significant growth barrier over the next one to two years.
Tudor Aw comments: “It is clear that Tech Execs are most worried about pricing and cost pressures, particularly from low cost providers, a story we see in most sectors – from televisions to mobile phones to laptops. The fact that respondents were less concerned about staying on top of emerging technologies is of no comfort as the Tech industry needs genuinely new and exciting technology to break the pricing pressures. The lack of wow factor products at the latest Consumer Electronics Show in Las Vegas and Mobile World Congress in Barcelona is a worrying trend.”
Technology Adoption: Tech Knows Cloud
More than half (57 percent) of the executives say their organizations have adopted cloud and found little or no challenges integrating it into their business strategy and operations, and 12 percent say their organizations plan to adopt cloud and believe they will easily integrate it. Only 15 percent have found major challenges in integrating cloud.
Security/Privacy governance remains biggest challenge in adopting social media, cloud and mobile technologies
Executives most often cited security/privacy governance and corporate culture/change management as the biggest challenges for businesses in adopting social media, cloud, and mobile technologies in the next three years. Looking at cloud, almost half say security/privacy governance and 30 percent corporate culture/change management. For social media, nearly 40 percent say security/privacy governance and 30 percent say corporate culture/change management. Regarding mobile technologies, about one-third say security/privacy governance and 24 percent say corporate culture/change management and technology complexity.
Mergers and Acquisitions Drivers
Nearly two-thirds of the tech executives say their companies are somewhat likely or very likely to be involved in mergers and acquisitions as a buyer or seller over the next year. The majority (56 percent) says access to new technology and products will be the most important driver, followed by access to new geographic markets (39 percent), product synergies (37 percent), labour cost pressures (23 percent), access to employees with new skills and expertise (21 percent) and production cost pressures (19 percent).
Note to editors:
KPMG Technology Industry Business Outlook Survey
The KPMG survey was conducted in the U.S. in February 2013 and reflects the responses of 102 primarily C-level and senior executives in the technology industry. Of the 102 respondents, whose companies may be based in the U.S. or other countries, 59 percent are in companies with revenues exceeding $1 billion and 41 percent are companies with revenues in the $100 million-$1 billion range.
Katrin Boettger, Senior PR Manager
Tel: +44 207 896 4232 / 0782 4475168
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.