2020 Technology Industry Outlook
State of Cloud: Trends & Predictions
As tech companies pursue growth in the coming year, cybersecurity and the ethics of AI will likely be among their top considerations.
A blog post by Paul Sallomi, Deloitte’s global Technology, Media, and Telecommunications industry leader and global Technology sector leader
While familiar themes such as cloud computing and AI promise to continue dominating technology headlines in the coming year, 2020 could be a breakout year for edge computing. The time is right for companies to explore the advantages of processing data at the edge of their networks, according to Paul Sallomi, Deloitte’s global Technology, Media, and Telecommunications industry leader and global Technology sector leader. In this Q&A, Sallomi discusses some of the top opportunities, strategies, and considerations for technology companies seeking growth in the coming year.
Where do you see opportunities for growth in 2020
Sallomi: As we enter a new decade, one thing is certain: Cloud adoption will continue to rise as companies embrace flexible consumption through both hybrid and multi-cloud environments. For many companies, the hybrid cloud is an interim step in the long process of digital transformation. At the same time, enterprises are increasingly combining cloud services from multiple providers, enabling them to assess the strengths and weaknesses of each before committing for the longer term.
Amid all this growth, ongoing concern about cloud security presents providers with a unique opportunity. In many cases, cloud providers possess far greater security capabilities and expertise than most businesses could ever hope to develop themselves. For this reason, security is a key driver of hybrid cloud adoption, and cloud-based security solutions continue to gain traction across many industries.
As pointed out last year, cloud-based solutions also provide the most popular path for acquiring AI capabilities. Increasingly, enterprises are viewing AI as essential to their continued innovation and growth. As a result, they’re investing in the technology—and getting a return. In fact, 51 percent of respondents to Deloitte’s “Global State of AI in the Enterprise, 2nd Edition” survey expected to boost their AI investments by 10 percent or more in 2019, and 80 percent indicated these investments had driven ROI of 10 percent or more.
The explosion of the internet of things (IoT), meanwhile—combined with the increased portability of computing power and AI-driven tools—means edge computing is poised to experience significant growth. The benefits of edge computing, including reduced latency and lower bandwidth costs, can extend to factories, distribution facilities, autonomous vehicles—essentially any situation where data must be processed locally versus in the cloud or in a data center. We expect to see more and more portable and fixed networks with local high-capacity, low-latency, real-time processing capabilities that embed analytics and AI to transform the customer experience.
Which strategies are tech companies using to facilitate growth?
Last year, we emphasized the growing importance of partnerships as a strategic tool that every technology company should employ. Until recently, strategic discussions typically began with the question, “Should I buy or build?” Heading into 2020, that question should be modified: “Should I buy, build, or partner?”
With fast-paced developments in emerging technologies, partnerships can be critical for tech companies looking to enhance their existing solutions or provide more targeted offerings. After all, why buy an underwhelming asset rather than team with someone who has the specific capabilities you need? Partnering represents a more efficient use of capital and will probably drive better outcomes.
To develop and expand their cloud business, many tech companies are increasingly shifting toward the everything-as-a-service (XaaS) model, which encompasses capabilities such as platform as a service (PaaS), infrastructure as a service (IaaS), and software as a service (SaaS). Tech companies are also offering new solutions like security as a service, data as a service, and device as a service to help deliver XaaS benefits such as operational efficiency and faster innovation.
Of course, mergers, acquisitions, and divestitures will remain viable growth strategies for tech companies, with revenue growth, tech assets, and intellectual property expected to be the top drivers.
Finally, no tech company can afford to overlook the importance of building a diverse workforce. There is empirical evidence that inclusive companies generate up to 30 percent higher revenue per employee, are more profitable than competitors, and are eight times more likely to achieve positive business outcomes.
What should technology businesses keep in mind as they plan for growth?
In 2020, the regulatory arena promises to become even more complex as various jurisdictions continue to develop laws and guidelines. Given the lack of a consistent global regulatory standard, tech companies must closely monitor developments in this space; the price for not doing so can be steep, including potential audits and monetary penalties that may affect brand reputation.
While AI delivers a host of potential benefits, it also brings risks—particularly in the area of ethics. The extent to which companies adopt ethical AI practices and build trust with their customers, partners, and the general public will likely be key differentiators.
Another area of concern for tech companies and enterprises is cybersecurity—including AI-enabled attacks that are becoming more advanced and serious. Adversarial AI can be used to reverse-engineer an algorithm to produce damaging output, for example.
However, AI also has the potential to protect against existing cyber threats and identify new ones. For example, AI applications can create smarter event-monitoring and incident-response systems. Firewalls with embedded machine learning capabilities can identify patterns in network traffic and flag potential threats.
To continue growing, tech companies will need to address skills gaps—particularly for AI. Many companies are also looking beyond technical skills and focusing on attracting or developing business leaders who can interpret and use AI results to make informed decisions.
Last, but certainly not least, is the importance of treating data as a crucial asset. Simply put, you can’t analyze what you can’t see. To thrive in the next decade, companies will likely need to harvest data and visualize its implications across the organization. New ERP systems can help with harvesting “one version of the truth,” but this technology must be complemented by transformed processes that enable consistent access enterprisewide.
This article first appeared on the WSJ.