Technology, Media and Telecom in 2016
- An HSBC Industry View
by Mark Troutman, Managing Director, Global Head of Corporate Sales, Global Liquidity and Cash Management, HSBC
Technology, media, and telecom companies are amongst the industries in which we see the greatest innovation and potential to overturn established ways of communicating, learning and working, and create new lifestyle and enterprise models. Inevitably, however, with periods of rapid industry transformation and increasing competition, there is enormous pressure to invest in innovation and customer relationships to avoid commoditisation and create and maintain competitive advantage.
In this article, and the series that will follow over subsequent editions of TMI, we provide a snapshot of some of the key issues facing treasurers and finance managers of technology, media and telecom (TMT) companies. Inevitably, it is impossible to cover every challenge, and indeed opportunity. Like treasurers in every other sector, treasurers of TMT companies face the difficulties of changing regulations, increasing cost of compliance, macro-economic challenges, and a prolonged period of low or negative interest rates. As we outline in this series, however, there are some issues that are of particular, and in some cases more specific concern to TMT treasurers, particularly around working capital, cash investment and rapid international expansion.
In this first feature, we look at the technology, media and telecom segments in turn and explore some of the challenges and opportunities that these industries are experiencing, and the implications for treasurers. At the same time, there are both collaborative and competitive lines being drawn between these three segments, which also means that treasury strategies are becoming more closely aligned.
Technology: Priorities for treasurers
- Reliable access to financing, whether through traditional or alternative routes;
- Working capital optimisation;
- Centralisation of treasury and finance operations and technology to enable rapid integration or spin-off of new entities, process, cash, transaction and data efficiency, and economies of scale;
- Access to solutions and expertise in expansion markets to facilitate international growth;
- Supporting the business using tools such as distributor financing to increase the resilience of the supply chain;
- Supporting emerging collection methods to facilitate sales;
- Improved cash flow forecasting.
A second industrial revolution?
Every generation claims that it is living through a more exciting era of technological innovation than the last, but the current period is characterised not simply by the speed of innovation, but the way that technology is disrupting and reshaping the way we live and work to an extent we have not seen since the industrial revolution.
While technology innovation has largely been driven by consumer demand in recent years, we are now seeing a strengthening appetite at an enterprise level to build efficiency and competitive advantage. The Internet of Things (IoT) has become a reality, from large scale manufacturing through to retail, with an impact across the supply chain. As a result, demand for technologies to support IoT will continue to grow, from network infrastructure to data analytics. Other new technologies that appeared to be part of a sci-fi imagination until relatively recently, such as Artificial Intelligence (AI), are also playing a growing role in many industries to predict behaviours and convert high volumes of data into more digestible and actionable content.
Some emerging enterprise technologies are an extension of those already prevalent amongst consumers, such as cloud computing. The use of cloud computing at an enterprise level is set to soar from $50bn to more than $250bn between 2014 – 2017 which has major implications for the way that companies adopt, manage and integrate applications and data. Building on cloud computing, everything-as-a-service (Xaas) is one of the most rapidly growing areas, including remote delivery of platforms and infrastructure as well as software, a model that has been successfully embraced by companies such as Amazon, Google, Salesforce.com and Workday.
The changing role, delivery and expectations of technology in both the consumer and enterprise space has important implications for strategists, shareholders and indeed treasurers:
 Jagdish Rebelo, Enterprise Cloud Computing: Future Market Size, Growth and Competitive Landscape, IHS Quarterly, Q2, 2014 as quoted in 2015 Technology Industry Review, Paul Sallomi, Vice Chairman and US Technology Leader, Deloitte Tax LLP