Tech Execs Say Cloud and Mobile Revenue Exceeding Forecasts: KPMG Survey

Leap in Data and Analytics Expectation as Top Revenue Driver; Higher Growth Expectations for Security; Internet of Things Positioned for Rapid Rise


SANTA CLARA, Calif., May 21, 2014 (GLOBE NEWSWIRE) -- Mobile and Cloud revenues are surging, according to the results of the annual Technology Business Outlook survey of U.S.-based technology executives conducted by KPMG LLP, the U.S. audit, tax and advisory firm. The industry leaders also expect data and analytics (D&A) to be the top revenue growth driver over the next two years, as their expectations have skyrocketed. At the same time, security is projected to become a larger revenue growth driver than before.

Of the technology executives citing Mobile or Cloud as their leading revenue driver, 53 percent say mobile revenues exceeded 2013 forecasts compared to 26 percent in last year's survey and 46 percent say Cloud revenues exceeded their 2013 forecasts, compared to 28 percent a year ago.

"We are witnessing a convergence of technologies and business opportunity that is producing a flood of revenue in Cloud and Mobile," says Gary Matuszak, Global Chair, KPMG Technology, Media and Telecommunications practice. "Also, technology companies are leveraging Cloud to transform their business to become more efficient, smarter and flexible."

Significantly, many more respondents believe D&A will be the biggest revenue growth driver for their companies in the next 24 months compared to previous surveys. D&A leaped to the top of the list with 51 percent in the 2014 survey, compared to 33 percent in 2013, and 19 percent two years ago. Mobile (41 percent) and Cloud (40 percent) are projected to be the next biggest revenue drivers, followed by security (28 percent), Internet of Things (19 percent), and Consumerization of IT (19 percent).

"The jump in expectations for data and analytics growth is due in large part to growth in Cloud- and Mobile-based services that produce massive amounts of data and a competitive advantage for those who can mine the data for actionable insights," says Matuszak. "Security is another growing market, moving from sixth to fourth on the list of revenue drivers. This makes sense given that security remains the biggest challenge to adoption of Cloud, Mobile and social media technologies and will be a key challenge as the Internet of Things gains market momentum."

Matuszak adds that the Internet of Things has emerged potentially the next big revenue driver due to rapid technology innovation and new business model opportunities, across industries, as companies seek to differentiate from competitors.

Need to innovate driving business transformation

Tech executives' insight about business transformation, mergers and acquisitions (M&A) and risk highlight the need for rapid innovation to succeed in a hyper-competitive industry.

Most (86 percent) of the executives say that technology innovation to create competitive differentiation will be the top driver of transformation for their business over the next three to five years and almost three-quarters (72 percent) say customer demand – changes in customer focus, buying patterns and preferences.

Companies are involved in M&A for technology, customers, talent or to block a competitors' access to a key asset, according to respondents. Access to new technology and products (65 percent) is the most important M&A driver, followed by access to new customers/users (49 percent), access to engineering and other talent (31 percent), and control over strategic assets to defend against competition (28 percent).

The need to innovate, disruptive technologies and lack of visionary leaders are among the top risks to a tech company's growth. More than two-thirds of the tech executives cite the speed of the economic recovery, with slowing growth in international markets (38 percent), disruptive technologies (36 percent) and the inability to find visionary leadership (28 percent) rounding out the top four risks.

"It's no surprise that tech executives see a shortage of visionary leaders as a greater risk to growth than new regulations, lack of a qualified workforce, and cyber threats," says Matuszak. "Ultimately it's all about how tech companies develop succession plans, find and retain visionary leaders who can to drive value and monetize new business models resulting from emerging technologies."

Considering innovation and opportunity in auto, health care, crowd sourcing

Nearly 60 percent of those surveyed say their company plans to invest in automotive technology, with most focused on communications convergence/connected car.

Meanwhile, 42 percent believe that technology innovation in preventive care will be the biggest contribution to improve medical care. Almost 40 percent say innovation in electronic medical records will be the biggest contributor. (Infographic)

At the same time, only 25 percent plan to invest in crowd sourcing platforms and programs, while 55 percent do not and 20 percent are unsure. The findings may reflect uncertainty in the value of crowd sourcing to enterprises and the challenge calculating return on investment.

Signs of possible slowing revenue growth and R&D spending rates

Even as the technology industry by nearly all accounts continues to be a robust economic and innovation engine, there are some signs of possible slowing found in tech executives outlook for revenue and research and development (R&D). About 8 out of 10 survey respondents say their company's revenue will grow in the next 12 months, with 49 percent (compared to 38 percent last year) projecting a 1 to 5 percent increase and 33 percent (compared to 41 percent a year ago) expecting an increase of 6 percent or greater.  In regard to R&D, 6 out of 10 anticipate an increase in spending, with 37 percent (compared to 30 percent last year) expecting a 1 to 5 percent gain, and 24 percent (compared to 37 percent a year ago) projecting an increase of 6 percent or greater.

Security challenge, breaches, and spending                       

While technology executives continue to believe that security is the biggest challenge to businesses adopting Cloud, Mobile or social media technologies and applications, 85 percent of them say their company has not suffered a security breach in the past 12 months. Still, almost two-thirds expect their company to spend one to five percent of their revenue on information security over the next 12 months.

Projected top tech revenue growth markets

Tech executives are most bullish on revenue growth rate in the U.S., China and the United Kingdom. Please see a separate KPMG news release for more details.

KPMG Technology Industry Business Outlook Survey

The KPMG survey was conducted in the U.S. in March 2014 and reflects the responses of 100 primarily C-level and senior executives in the technology industry. Of the 100 respondents, whose companies may be based in the U.S. or other countries, 74 percent are in companies with revenues of $1 billion or more and 26 percent are companies with revenues in the $100 million to less than $1 billion range.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.


            

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