Technology is strong and continues to expand in the region
The technology sector has undergone a series of substantial and dynamic changes in the past decade and the coming years are likely to continue to reflect the fast-growing nature of the industry.
The constantly-evolving character of the technology sector imposes a threat for companies unable to adjust to an ever-changing environment. Conversely, these changes create opportunities for growth that can rarely be seen in other sectors. The technology sector will continue to expand for the foreseeable future with a predicted domestic year-on-year growth rate of 6% between 2012 and 2016.
Many Solent-based companies are taking advantage of the opportunities and are expanding rapidly, some achieving 100% growth year-on-year, in spite of the difficult economic climate and national and global slowdown. The success within the sector is reflected in the number of companies within the technology industry making an appearance on this year’s Solent 250 list, including names such as Bell Microsystems, Novatech and Aap3.
A further testimony of the good shape of the Solent technology sector is its strong position on the national stage. Four Solent technology companies were featured in The Sunday Times Microsoft Tech Track 100 this year – the league table of Britain’s fastest-growing private technology, telecoms and digital media companies.
Underpinned by the government’s support for research and development in Information and Communication Technologies (ITC), the future of technology companies in the UK and in the Solent region looks promising. ICT is a key sector in the UK, providing employment for skilled staff and stimulating innovation to the benefit of the wider economy. We foresee some truly exciting opportunities and innovations taking place in the Solent.
Apps for growth
With over 60% of the world’s population owning a mobile phone, there has been an increase in the use of mobiles to transmit the data rather than voice. Mobile applications have created an area of fast growth, but also fierce competition. Those companies that are able to stay ahead of the game through research and development will be best-placed to take advantage of this growing market.
The future lies in selling software as a service
There will be further opportunities for expansion in the cloud computing market. The cloud is already a rapidly-growing segment within the IT infrastructure and has been a dominant technology in the mainstream markets in 2011. As businesses of all sizes are looking into different ways of cutting costs, Solent companies with a cloud offering will see great opportunities. The top five ICT predictions for the next decade outlined in Grant Thornton’s recent report included a further rapid growth in cloud computing globally and increase in IT spend at a higher rate than average.
Mergers and acquisitions
Look out for investment opportunities and strategic acquisition from overseas. There is growing optimism in M&A activity in the sector where transactions are continuing because the fundamental drivers of investment in technology remain strong. This is underpinned by other themes such as strong strategic focus, an improved financing environment and the fact that the industry continues to experience a high rate of globalisation. The average price for UK deals over the past few years was £80 million.
Difficult local market conditions have led many firms to seek international expansion either through organic or acquisition growth strategies. Emerging markets continue to attract many technology businesses with China, in particular, pulling out the stops to attract international high-technology enterprises. In looking to position China as a hi-tech manufacturer, the Chinese government has suggested that it will be willing to spend RMB 4 trillion – approximately £387.67 billion – in the next five years on industries that are technology-led. In addition, the Enterprise Income Tax Law provides incentives that benefit certain hi-tech enterprises. These include good opportunities for UK companies to access lower tax rates, potential tax holidays and exemptions from Chinese business tax.
With greater competition coming from within the UK and other countries such as India and China, the key for the future success of technology companies in the south, particularly or smaller and medium-sized businesses, will be developing a clear point of difference. An ability to offer flexible, niche and unique products and services can be the key.
Growing importance of green ITC
Green ICT embraces the whole life-cycle approach from manufacturing, through use and recycling together with smarter ways of using and procuring ITC. In the present economic climate, the green ITC agenda is being advanced primarily by the public sector, with the corporate community currently reassessing their business priorities. However, over the longer term we expect the use of green criteria in making business decisions to sit comfortably alongside commercial and financial criteria.
For more information on the technology sector in this region and throughout the UK, contact:
Grant Thornton website