The UK tech sector: renewal and reinvention
Digital disruption, new market entrants and more sophisticated consumers are transforming how businesses operate and create value. Today, the UK tech sector is highly complex and increasingly agile.
The speed of progress has been meteoric, with COVID propelling many organisations further along the tech adoption curve. As a result, companies are reimagining not just their products and services, but their structures and business models, balancing opportunity and risk to keep pace in an environment that’s perpetually changing.
For the latest in our series of "Future of the UK tech sector" articles, we discuss this constant need for renewal with Aaron Harris, Global Chief Technology Officer at Sage, and Graeme Watt, Chief Executive Officer at Softcat.
Customers set the agenda
The pandemic sparked a transformation in consumer behaviour with global e-commerce growth reaching between 16% and 19%, and that shift from physical to virtual impacted almost everything, from online banking to telemedicine and food subscription services. And it appears there’s no going back – two in five consumers have said they are more likely to spend money with a business that makes it easy to interact online. But whether they stay loyal to their usual brands will depend on their experience.
This is mirrored in Deloitte's 2022 Global Marketing Trends survey, which explores what companies can learn from their highest-growth counterparts to thrive. The answer? Customer-centricity. Firms need to put the people they serve at the centre. This is a necessity.
A personalised approach is required for how organisations engage with customers, not just in terms of experience, but from a data collection and privacy perspective, too. Consumers remain sceptical about how their information is used. In Deloitte’s 2021 Experience Evolution survey, 52% of respondents were not comfortable with companies using their online buying and browsing history to offer more relevant products, showing that firms need to build trust.
Both Softcat and Sage have embraced this changing landscape. “We don’t set the technology agenda, our vendors and customers do,” says Watt, "and it’s our customers who determine our success. We’re always investing in tomorrow’s growth – spending money on people, systems etc. We sell more to existing customers, and use insight from them to acquire new ones."
“It’s our customers who determine our success.”
Harris defined the tech strategy for Sage when he arrived, with customers and data both vital facets. “Whatever system our customers are on – cloud or on-prem – we can help them consume capabilities that were not there before the digital era,” he explains. “The cloud part of Sage is growing fast, but the older part is still where the majority of customers are, and it’s a treasure trove of data. We tap into that. With accounting and ERP software, change can be a 15-year cycle, but there may be a more urgent need to digitise their customer relationships, or pay online, or use online banking. We’re saying, ‘we value you and we won’t make you change, but you can become part of a network that gives you more options.’
“And the burden is on us to make the tech easy to use. Technology has led the design of software, but now user experience leads.”
Rethinking and improving the customer experience is no easy feat. It requires a holistic approach, across all business areas. This not only impacts how an organisation operates, it demands company-wide collaboration.
The death of the silo
Traditional top-down business models are being replaced with more empowered teams and greater integration. Innovation happens by design rather than by accident. It is no longer a bolt-on; companies are embedding it into the everyday.
Infrastructure and services provider Softcat is no stranger to adaptation. Set up 29 years ago, it once sold Microsoft software via catalogues – hence the name – but is now the industry leader in its space, with 10,000 customers from an available 50,000. The company established its Office of the CTO to track tech trends.
“This is a group of people who take a deep look into the market and at what vendors are doing, making sure they are up to speed and in a good position to talk – internally and externally – to customers about what’s coming,” says Watt. “Everything we do is an evolution; there’s no revolution. We know when things feel right, and we do it.”
In 2019, when Harris was appointed CTO of software solutions provider Sage, he set out to change perceptions of the company, becoming an evangelist for the innovation already happening. It now has a community of 1,000 in-house innovators. “We want to embed a culture of training, experimentation and learning from failures,” he explains. “Our innovators can be in finance, HR or product development, but they are driving a culture transformation.
"We want to embed a culture of training, experimentation and learning from failures."
“In every evolution of technology, the business model, commercial model and strategy become more aligned,” Harris continues. “When the commercial model is digital, the whole business has to participate – your marketing team has to work with sales and with legal, for example. From on-premise to SaaS to digital, there is no longer a disintegrated organisation where you have big corporate functions that only do their jobs; it has to be tightly integrated. Now, everyone thinks about how to innovate – it’s the death of the silo.”
From customers to colleagues, doing the right thing is at the heart of this transformation. And there’s another ‘C’ to factor in – conscience.
Purpose, people and planet
Changing public sentiment has created a seismic shift toward purpose and the broader ESG agenda. Following the pandemic, and with growing awareness of the need for climate action, how companies operate, and how that impacts people and our planet, has become more important. Consumers, shareholders and wider stakeholder communities want to know that the brands they back are acting responsibly. And while that is nothing new, the urgency is.
Doing the right thing makes good business sense. According to the Harvard Business Review’s The Power of Purpose, 58% of companies with a clearly articulated purpose have superior growth and 84% of executives believe that those with a shared purpose will be more successful in their transformation. Sustainability is also highlighted by CIO magazine as a top priority for tech leaders in 2022.
Softcat is the first IT company in Europe – and one of only 35 worldwide – to have its net zero goals approved by the Science Based Targets Initiative. Watt explains, “We are powered by renewable energy, we have an electric car fleet and salary sacrifice to encourage employees to go electric, and we have hybrid working. We need to reduce our carbon footprint, and not just through offsetting. We do not plant trees but hedgerows, which grow quicker and create more biodiversity, and we contribute to initiatives that protect against deforestation. We are helping our teams and vendors to make responsible choices and are having conversations with customers, too.”
“We have never seen sustainability as a check-the-box action,” Watt continues, “it is important to people in the company and to our customers. When it comes to matters of ESG, we know what we want our future to look like. With tech, it is harder to define. But it is exciting, says Watt.”
“We have never seen sustainability as a check-the-box action, it is important to people in the company and to our customers.”
The future looks bright
Challenging times often force accelerated innovation, as we have seen with Deloitte's Fast 50 winners – the UK’s tech companies recording the most rapid growth. The government has provided a range of incentives to support investment in R&D, for example, which enabled these firms to create new products and services, improve existing market offerings and rethink channel strategies to engage with their customers.
It will be interesting to see what role the government chooses to play going forward.
Harris says, “I see a lot of start-ups in the UK and there are some really exciting things happening, especially in fintech. On balance, the government is helping; it’s driving standardisation of data, open banking and open finance, and the UK is working on a digital ID, which is totally disruptive. Governments can be helpful but sometimes they rush into creating new regulation when we are not quite ready and we don’t understand the implications. Thankfully, GDPR has now evolved and we are getting closer to a working regulation. The government has to make the right kinds of investments to get the economy back to a low-interest, low-inflation state. And there is still lots of venture capital out there.”
Meanwhile, Watt predicts that the future will bring a data explosion, greater evolution around remote working and collaboration, and automation augmenting rather than replacing customer relationships.
Against this backdrop, both leaders are confident that their brands are set up to continue innovating, serving their customer base and seizing opportunities as the tech sector keeps evolving.
Key Contact
Milan Sallaba
Technology Sector Leader for the UK