KPMG CEO survey: Pandemic accelerated digitisation of operations and the creation of a next generation business

The COVID-19 pandemic, work from home and social distancing have underscored a new urgency for digital connectivity and innovation— bringing in an era for the Technology Media and Telecom (TMT) sector, that may last well beyond the pandemic. Post COVID-19—TMT is going to be very much at the fore front of everything we do. It will be the competitive differentiator for how all businesses and ecosystems work. The advent of technologies such as AI, IoT, AR and VR, has today brought into reality the feasibility of conducting online business for sectors such as education, healthcare, consulting, retail, all of which were mainly centered around personal interaction.

To understand the impact, the crisis has had on TMT organisations, how they are thriving in what is the “New Reality” and how TMT CEOs are harnessing the next wave of growth empowered by the digital revolution in the nation, KPMG in India in association with IMC (India Mobile Congress) and COAI (Cellular Operators Association of India) today launched a report titled ‘TMT Industry CEO Outlook:  Smart. Secure. Sustainable’ at the India Mobile Congress 2020. The report is based on a survey of 300 TMT CEOs from India – a mix of executives from fortune 500 companies and startups. It captures perspectives and views from CEOs on the challenges and opportunities brought about by digital acceleration as well as how the TMT industry is digitally empowering businesses to ensure future survival and gain a competitive edge on a global scale.

Key highlights from the survey report:

Economic Outlook

• The upsurge in demand from both end-users and businesses during the pandemic has reinforced the surveyed TMT CEOs’ positive outlook on the growth of the sector
• Companies are capitalising on India’s growing digital economy and witnessing increase in revenues as well as private investments
• 52 per cent CEOs seemed very confident about the growth prospects for the TMT sector
• 61 per cent of CEOs reported an earnings outlook of more than 10 per cent over the next three years.
• However, to sustain this momentum and steer it further forward, the government and TMT organisations need to find newer and deeper ways to collaborate

Emerging Risks

The COVID-19 pandemic led to the emergence of specific, historically latent, risk factors that could however pose significant challenges going forward

• Ranking of top three perceived risks over next one year- 1- Supply Chain Risks (57 per cent), 2. Operational Risk (43 per cent) and 3. Cyber Security Risk (30 per cent)
• Ranking of top three perceived risks over next three years- 1- Regulatory Risk (50 per cent), 2. Emerging Technology Risk (43 per cent) and 3. Cyber Security Risk (43 per cent)
• More than 83 per cent of CEOs surveyed had to rethink their global supply chain strategies due to the impact of the pandemic. An estimated 45 per cent of the CEOs surveyed attributed the supply chain realignments to improve resilience against natural disasters
• 40 per cent CEOs wanted to reduce supply chain risk exposure
• TMT organisations recognize that effective cyber security is not only an obligation and an opportunity but also a risk. The urgent and increasingly sophisticated security requirements of enterprise clients and the chance to build end consumers’ trust through secure applications and communications are immediate opportunities for TMT organisations to explore.

Transforming the Life of a Digital Customer

• Six out of ten digital transformation leaders are accelerating initiatives around connecting front, middle, and back offices and the drivers for transformation are largely customer focused. While 42 per cent have a focus to reduce and regain the loss of revenue, 33 per cent of them have also suggested to develop newer channels to serve customers
• 52 per cent of the CEOs surveyed said that initiatives around digitization of operations and the creation of a next generation operating model got acceleration because of the pandemic
• 25 per cent CEOs mentioned lack of lack of insight into future operational scenarios as one of the key challenges faced in accelerating digital transformation
• The pandemic compelled businesses to transition toward full or partial remote working conditions. As a result, several organisations expedited the implementation of digital initiatives that were slated for the next three to five years. This led TMT organisations to examine not just the changing consumer demands and usage patterns but also the best way to meet these service obligations. The result was the creation of next-gen digital business models and revenue streams, enhancing digital customer service experience, and supporting the creation of a new workforce model that supports the adoption of emerging technologies to augment human effort

5G

• According to our survey findings, industrial manufacturing, retail, and automotive are the top three industries expected to have the highest potential in terms of 5G technology adoption and number of use cases
• A comprehensive network reach, increasing affordability of smartphones and mobile data services, and change in the viewing habits, are currently driving data usage in India
• High speed data requirements propelled by the pandemic, are expected to drive 5G efforts in India
• 4G/LTE is expected to remain the dominant mobile network technology by 2025, in the context of mobile subscriptions, 5G mobile subscriptions are expected to increase to 18 per cent by 2025. This is likely to be driven by an expected increase of nearly 410 million smartphone users in India by 2025.
• Although telecom players are inking strategic deals with network infrastructure providers to bolster their ability to deliver 5G technology, the high price of 5G spectrum, significant infrastructure investment requirements, and regulatory policy concerns are impeding its commercial launch
• While India may not be among the front-runners globally for 5G adoption considering the current COVID-19 situation, elongated 4G monetization period and a hyper price sensitive market, the country can potentially stand to benefit from a delayed adoption through the availability of more mature business use cases, numerous prototypes and a collaborative environment to ensure profitable and sustainable 5G deployment on a large scale.

Other emerging technologies

• With the acceleration of digital transformation initiatives across industries due to the pandemic, businesses are assessing the potential of emerging technologies to enhance their business and operational processes. Prior to COVID-19, investments and business priorities related to emerging technologies were fragmented
• However, enterprises are now focused on aligning their emerging technology strategies with the overall business objectives to ensure not just future survival but also simultaneously gain a competitive edge
• The survey also tried to identify those technologies generating the most impact and ones seeing maximum investment. The survey revealed that while India Inc.’s current table stakes are on data analytics and cloud, it is IoT, blockchain and AI that are projected to be strategic investments with robotics and AR/VR emerging as the future stars.

Satya Easwaran, Partner and National Sector Leader, Telecom, Media and Technology, KPMG in India, said,” COVID-19 has brought about a fundamental shift in the way businesses operate. As a result, the TMT sector is experiencing a new wave of innovation and invention. Convergence in the role of telecom and technology companies, increase in strategic partnerships, as well as government-led initiatives, are expected to assist the industry in catering to the changing needs of the customers.”

Sharing his views, Lt. Gen. Dr. SP Kochhar, Director General, Cellular Operators Association of India , added, “To transform the digital vision into a reality, all stakeholders from established and emerging technology companies, telecom players and the government need to come together to ideate and collaborate. Telecom players must continue with their efforts to create a robust high-speed network infrastructure. Start-ups working on emerging technologies could help enable digital transformation initiatives for businesses. Importantly, the government should continue to act as a catalyst by providing supportive regulations such as incentives for domestic manufacturing, national cybersecurity framework and viable 5G spectrum policies.”

K G Purushothaman, Partner and National Sector Leader – Telecom, KPMG in India, said, “With the growing maturity of emerging technologies, such as AI, IoT, big data, edge computing etc., 5G is expected to bring about a tectonic shift in the TMT industry and present a range of economic opportunities in the next three to five years. Advancements in AI and connected device technologies are driving the need for high bandwidth support, while ensuring the performance of the underlying applications is not impacted. This is where the potential of 5G lies: in supporting high bandwidth and low latency use cases and applications thereby offering near real-time decision support to both humans and machines”

Commenting on the theme of the report, P Ramakrishna, CEO, India Mobile Congress, said, “The theme for this year’s event resonates with the current industry scenario, highlighting the disruption in business operations caused by COVID-19 and the emergence of the TMT industry as a key propeller for businesses to pivot to the new normal. The use of smartphone devices and data usage has soared with the pandemic, unlocking previously untapped demand streams relating to emerging technologies. This has in fact turned out to be a silver lining for the TMT industry.”