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As economic conditions evolve and interest in artificial intelligence intensifies, technology companies are realigning their strategies.
We examine the emerging technology sector trends driving how these businesses focus, grow and optimise their operations.
RSM’s experienced technology sector team has identified four key trends shaping the industry, which should be top of mind for executives.
1. Scaling your tech company and navigating capital markets
For growing technology companies, there is no straight route to scaling up. Each stage of growth brings significant opportunities, along with challenges and numerous ways to tackle them.
While the talent market has recently eased and wages have stagnated, there is still an immediate need for talent to meet the constant demand for innovation while also managing capital appropriately. Companies focused on scaling up must be especially ready to tackle these challenges.
Various ways exist for a tech business to scale, including:
- Build-versus-buy strategies
- Capital markets
- Managing cash flow while driving growth
Choosing the best approach requires a thorough assessment of your business.
With interest rates at their highest point in over a decade, capital efficiency is also crucial. When it comes to investment decisions, technology businesses need to strike a balance between risk and innovation - fostering innovation amid leaner operations.
2. Global expansion options
The increase in remote work has brought many technology companies new global expansion possibilities. Those who decide to leverage this to broaden their operations or workforce to new countries need to do so strategically. It is important to consider not only technological scalability but also international regulations and other factors that may apply.
On the regulatory front, some of the factors to consider include:
- Foreign in-country tax and audit requirements
- International tax concerns (including transfer pricing)
- Labour and employment laws
- Intellectual property use
Numerous pros and cons are likely to arise. In the workforce, expansion allows access to a larger talent pool. However, it also brings cultural differences and more competition for that talent.
Because Australia is still quite a small economy, understandably, many technology companies look to scale by entering overseas markets – the USA being a popular destination. However, many embarking on expansion to the USA fail to do it methodically. While you may believe you have a TAM (total accessible market), how to penetrate that market becomes crucial. It is essential to build a strong sales and marketing team with people who understand your product and the market, and have connections to those who would want it.
3. Artificial intelligence
AI is a widely discussed topic, with opinions ranging from positive to negative. The adoption of AI-related tools has seen a significant increase.
How the tech sector in Australia can benefit from AI
The middle market is poised to benefit from advancements in natural language processing, as the barriers to entry are being reduced.
Technology companies can use AI-powered data analytics to improve business and customer insights and drive a more tailored user experience.
Key concerns for using AI in the technology sector
At the same time, leadership teams need to develop guidelines for ethical AI governance and educate on the drawbacks related to AI. The policy for the responsible use of AI in government is a recent example of setting guidelines to enable the government to take a leading role in adopting AI for the benefit of Australians. This includes ensuring that AI is used in a safe, ethical, and responsible manner that aligns with community expectations.
Unsurprisingly, malicious actors are using AI to refine their methods of carrying out cyberattacks. Tech companies need to counter this by:
- Investing more in preventing cyberattacks
- Bolstering employee training
- Preparing an incident response plan
Companies also need to understand the energy implications of growing AI use, including power grid capacity. AI systems, especially those that use advanced machine learning models, require extensive computational resources, including high-powered processors.
While the Australian Energy Market Operator (AEMO) forecasts show the maximum demand for electricity from data centres is expected to grow at a slower rate than was forecasted a year ago, it does expect demand to triple. This would see an increase from almost 3 TWh now – from a total demand of 175 TWh – to about 10 TWh by 2034 when total demand is estimated at 196 TWh. This signals that data centres’ share of total demand will rise from about 1.7 per cent to more than 5 per cent.
A spokesperson for the AEMO pointed to on-site generation and flexible demand as a way to reduce this impact:
“Accelerating investment in data centres to cater for the projected demand for streaming services, cloud storage and artificial intelligence applications is emerging as a significant contributor to forecast demand. While data centres will increase annual consumption, the potential flexibility of these loads and/or the provision of on-site generation means that their impact on maximum demand is uncertain.”
To maximise efficiency and not overpower the grid, the onus will be on tech companies to work with the energy sector and be creative.
4. Cybersecurity and data privacy
Cybersecurity is imperative for any business, but especially for technology companies, as they provide foundational infrastructure for so many aspects of our lives.
Recent cyber incidents, such as the Medisecure data breach, highlight the growing vulnerability of technology companies to security breaches and the need to strengthen their cybersecurity measures.
With Australia’s Privacy Act currently under review, regardless of when or if legislative changes are enacted, technology companies must prioritise substantial investments in cybersecurity solutions to:
- Protect company operations
- Safeguard consumer privacy
- Build and maintain consumer and investor confidence
FOR MORE INFORMATION
To learn more, please contact one of RSM’s specialist technology teams.
