2020’s disruptions accelerated digital transformation across all industries. For continued growth, here are the top tech trends to watch in 2021 according to David Padmos, EY Americas TMT Leader.
- More than ever, technology leaders need to look past the “now” and “next” traditional issues and competitors to imagine and assess opportunities — as well as threats — in the “beyond.”
- Success for tech companies has never been more closely linked to the customer’s successful use of the product.
New technology is not the sole driver of disruption, but technology is often the critical enabler allowing companies to benefit from the opportunity the disruption exposes. Geopolitical tensions, global pandemics, environmental changes or cultural instability can be catalysts for disruption, often creating a crisis. In fact, the case for change is often strongest when leaders are adapting to a crisis.
In 2020, technology enablement resulted in some tech industry sub-sectors experiencing a sharp uptick in demand, as it empowered many organizations to not just survive during the COVID-19 pandemic but to thrive. Others, for example, software companies serving real estate and hospitality markets, reported significant negative impacts. To really understand the “boom,” we need to consider the fact that the technology industry has been a tremendous enabler. It has allowed millions of employees, students and families to shift to working, studying and connecting from home while also accelerating the somewhat elusive digital transformation of many industries and organizations.
More than ever, technology leaders need to look past the “now” and “next” traditional issues and competitors to imagine and assess opportunities — as well as threats — in the “beyond.” To assist tech executives in doing that, here are some critical trends to watch in 2021.
1. Use of consumption business models will increase
The industry-wide migration from traditional to consumption-based sales models for technology companies will continue to accelerate. This is a win-win, as it allows customers to remain current in technology, reducing up-front and switching costs while only paying for what they consume. Technology companies will gain sustainable, recurring revenue streams that generate cash flows to invest in new offerings. Consumption business models are morphing into different forms, including volume, time, pay-as-you-go and event-based fee structures, and the market will continue to evolve in 2021.
2. Sales and marketing will transform to support new sales models
A consumption business model requires much stronger collaboration between sales, marketing, external partners and the back office due to the stronger role of data-driven lead generation. While most companies are moving or have moved to consumption models, according to EY research, only 56% of their leaders think their marketing teams are prepared for digital go-to-market activity. To adopt a consumption-based business model effectively, enterprises will retune their sales and marketing functions and transform processes, such as lead-to-cash, financial planning and analysis, revenue recognition and the digital supply chain.
Likewise, sales organizations will rethink how they go to market. We’ll see a movement away from a transactional sales model toward ongoing relationship management that is focused on long-term customer success, continued adoption and new partnerships to promote and potentially add value. Success for tech companies has never been more closely linked to the customer’s successful use of the product.
3. SaaS product and sales leaders will stop leaving money on the table
It is critical for SaaS product and sales leaders to develop and offer packages with the same rigor as they develop their software. SaaS companies have lost sales because of poorly conceived bundling strategies. The urgent imperative to create better packaging emerged as a prevalent theme in a recent EY global study of 700 tech companies. Respondents from software companies said their top three challenges in activating a shift to subscription-based sales were adapting pricing models, defining solutions or integrated services and communicating a compelling value proposition to customers. All three of these challenges revolve around having a packaging design that can reinforce value propositions to meet buyers’ needs. In 2021, companies will better identify opportunities to improve revenue performance by preparing a case for package-market fit. Retraining of sales teams will continue to be an ongoing need as these products and offerings continue to be refined.
4. Investments in cloud will accelerate — and evolve
According to pre-COVID-19 EY research, 60% of corporations said cloud accounted for the largest share of their technology investments in 2018 and 2019, and 53% said cloud will likely account for the largest share of investment over the next two years. During the COVID-19 crisis, with work from home becoming the new normal, IT spending on technologies supporting remote work and investments in cloud is seeing a steep increase. Evolving cloud services present challenges for even mature digital companies to efficiently manage cloud spend while continuing to optimize cost. Cloud is no longer a cutting-edge experiment. It is, in fact, a business requirement, fueling better economics and more innovation at greater speed. Next, enterprises will be looking for cloud-enabled capabilities, such as data analytics, artificial intelligence and robotic software, to cut costs or generate revenues from new services.
5. Supply chain rapid response will be mission-critical
The pandemic taught us that it’s crucial that supply chains be as resilient as possible or face the consequences. To understand what a fully transformed supply chain might look like — and the technology needed to support it — more companies will assemble supply chain rapid response teams (RRTs). RRTs will envision multiple scenarios to prepare for disruptions to manufacturing, transportation, parts and components, and decreased or increased demand.
The imperative to reduce supply chain costs will likely be the most pressing concern for companies in 2021. To reduce costs, tech companies will rationalize and optimize their sourcing strategies, product complexity mix, and manufacturing and distribution footprints, transforming a rigid, linear supply chain into an agile, networked ecosystem. Highly scalable scenario planning will become essential to supply chain operators.
Additionally, 5G will enable and enhance a variety of smart factory solutions, including maintenance, quality control, and inventory tracking and replacement. For example, companies can use a network of sensors that leverages continuous data inputs to monitor each item from transit through the production process to allow management to better understand hidden downtime risks and improve logistics and yield.
6. Data protection — and disposition — will grow in importance
There has never been a time when IT security has been more important, and concerns over data privacy and security will only increase in 2021. Even when using websites they know and trust, 75% of consumers surveyed by EY remain cautious about disclosing personal details and financial information. However, 40% of users are unaware of recent data privacy regulations and their impacts. In the coming year, data collection and storage won’t be the only factors under a microscope. Data disposition will become increasingly critical to an enterprise’s overall governance efforts.
Building a robust and holistic data disposition program requires strategic decision-making and considerations, as well as input and integrations with a variety of key stakeholders. Disposing of data requires data owners, compliance, legal, IT and cybersecurity to work together to develop a strategy that enables the business while simultaneously meeting data disposition and retention requirements.
7. Data processing platforms will take center stage
All companies will need to address big data, a term coined in the 80s that has now come home to roost. The cost of keeping and storing data is becoming trivial; however, the complexity introduced when attempting to understand and utilize data is often the largest impediment to completing a successful digital transformation. Plain and simple, most companies have neglected their data, thereby introducing complexity — not just in managing and understanding the data itself but actually introducing complexity in the underlying, multifaceted systems built to process the data.
The untapped value of data in legacy businesses is made evermore obvious by recent startups emerging as multibillion-dollar entities. Ironically, these startups are providing infrastructure, applications and tools to analyze and gain insight into complex sets, pools and lakes of data on behalf of those legacy businesses.
Moving forward, companies will need to more clearly understand the relationship between their data, business processes and systems. The need for data-specific platforms to provide cost-effective and efficient solutions to enable ecosystems, derive analytics and insights, or even deliver automation and new technologies (e.g., machine learning and blockchain) will be accomplished by architecting efficient data processing platforms and solutions.