Embracing innovation: how MSPs are preparing for 2020

13 December 2019

Embracing innovation: how MSPs are preparing for 2020

The final event of Evolution Capital’s Technology Entrepreneurs Events Programme featured lunch at Mosimann’s, in its unique setting in Belgravia. It was the perfect environment to host a lively discussion for our TMT entrepreneurs about the technology megatrends of 2020 and was a fitting way to end what has been a jam-packed programme of events in 2019, which included a series of insightful business seminars, luncheons with expert speakers and various sporting events from golf, to rugby to a day at the exhilarating Goodwood Festival of Speed.

Indeed our national networking programme has attracted over 2000 IT & Telecommunications business owners since the programme was launched in 2005. At Evolution Capital we are firm believers that face-to-face networking is the best way to do business and we are proud of the relationships (and many deals) that have been forged through our events programme.

This month’s theme – the technology megatrends that are likely to shape our industry in 2020 and beyond – sparked plenty of debate amongst our guests. Although the last three years of political machinations have not provided the ideal ecosystem for growth, the technology business owners who attended the event had all continued to prosper. What was self-evident was the unanimous acceptance that as an industry we need to embrace change and utilise the plethora of technology innovation that is rapidly gaining traction.

Megatrends – and how to make money from them

Many business owners are wondering just how artificial intelligence (AI), virtual and augmented Reality (VR/AR) or 5G technologies can be adopted within our businesses to enable growth.  There are clearly several issues to be addressed before these technologies can be incorporated successfully. Essentially: How does a business make money from these trends, what are the products and services that will be sold and what are the skills needed to thrive?

Reviewing where we have been enables businesses to forge a path going forward. Nigel Cook, Evolution Capital’s founder and managing director, reviewed the market for 2019. He reminded us that market liquidity has been severely reduced and, in particular, London’s junior trading exchange AIM has suffered accordingly, causing investors to shy away from thinly traded shares. A major cause was the collapse of Neil Woodford’s small-cap investment fund. Sam Smith, CEO of Finncap, has labeled the disintegration of Woodford Investment Management as “a nail in the coffin of an already difficult trading environment” for AIM.

The potential for current fundraising in UK markets is also in decline, with only £650 million raised this quarter, a fall of 42% on the previous quarter. However, M&A activity is increasing and the outlook is bullish.

Cook added: “With attractive valuations and a weak pound the TMT sector is well placed for mergers and acquisitions over the next year. On the assumption that Brexit and its implications become clearer, we can look forward to an increase in demand with deals becoming more attractive to investors.”

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Photo: Marcus Spiske

The business case for some of the new megatrends and their adoption is both compelling and clear. However, some benefits are less obvious.

Artificial Intelligence

It may seem light-years away before robots can replicate the androids depicted in HBO’s Westworld but the reality is much closer than many might think. There are key aspects of AI that are already mainstream and delivering on their initial promise with no shortage of early adopters. It is already powering an increasing raft of smarter gadgets, homes, factories and cars. Through these enabling technologies like machine learning, IoT companies (the internet of things) are rapidly augmenting their portfolios of services and products, from communications to financial services to customer self-service. The automotive industry has been pioneering a great deal of AI applications, none more so than in the area of driverless cars.

Kevin Timms, MD of EACS said: “There is much progress in driverless cars or autonomous vehicles. We are still quite a long way off the goal of a fully driverless car that can go anywhere at any time, but applications like geo-fenced taxis and intelligent driver aids that are here now are showing that a lot of companies are scrambling to fill in the gaps very quickly.”

How do TMT providers monetise this space? Indirect monetisation is enabled by building in capabilities to a company’s products and services to contribute to an offerings overall value. However, this will require training and acquisition to properly capitalise on the opportunity. AI as a service (AIaaS) allows businesses to acquire sophisticated capabilities through subscription-based services.

Salesforce already provides such a service through a recent offering called Einstein. IBM delivers a similar model for its Watson platform which understands human speech and can solve complex problems within seconds. AI is a broad church and comes in many different categories, for example, machine learning.

Machine Learning as a Service (MLaaS) is currently provided by Amazon on rental in a market place that is expected to hit $20 billion by 2025. With lower price points for AI development tools and services, mid-market companies are now able to incorporate the technology within their business.

5G

5G is already upon us and making waves. The potential for TMT suppliers in this market is huge, and as has been proven by the uptake of predecessors 3G and 4G, there is a very healthy precedent for first-mover advantage. 5G has arrived faster than expected and by October of 2019, there were 40 carriers in more than 20 countries supporting 136 different 5G-enabled headsets. Growth is expected to increase exponentially and as it does, so will the associated services and products provided by mid-market suppliers.

Huawei Deputy Chairman Ken Hu has said that “5G is not just faster 4G”. Indeed, “it will play a completely different role in our lives, so as an industry, we all need to have a fresh mindset to drive its future development”.

There will be a host of new, as yet undefined, service propositions and they will be created quickly and scaled to meet demand. This will mean mid-market organisations will be able to develop and test concepts and bring them to market very quickly. Given that end-users will (probably) have a multitude of connected devices it is expected that there will be plenty of supporting applications and services.

5G will enable home broadband to be on-demand and new providers will disrupt traditional legacy cable and fixed-line providers with digital-only-propositions. No contracts, enhanced app-based support and quick delivery will be some of the spin-off benefits for the consumer. The ability to get download speeds of up 100 times higher than 4G networks will open the market to a rich quality of service, low latency and bandwidth controls that will engender an environment for delivering enterprise-level applications. These applications will include everything from cloud-based gaming to remote home care, and everything in between. For example, the emerging consumer demand for remote health as public and private health-as-a-service models can be met by the enhanced capabilities of 5G.

Virtual and augmented Reality

Once almost exclusively reserved for developers and gamers the potential of this market can now be realised by others, particularly in the mid-market. It has always been a promising if underachieving technology ‘stack’ and sceptics have often referred to it in terms of the abortive early 3D/TV attempts. Due to a sluggish early adoption cycle, the jury is still out on whether 2020 will be the year when this megatrend will go mainstream. The challenge that has held this technology back has been lack of traction by failing to attain a critical mass. However, a recent report by PWC (Seeing is Believing, 2019), states that VR and AR could add as much as $1.5 trillion, or 1.8% GDP, to the global economy by 2030

Mainstream adoption, and critically the monetisation of the technologies has been stunted by a variety of factors such as high price points, lack of good accessories (i.e. headsets) and a dearth of quality content. Whilst VR/AR video content or virtual hangouts may previously have achieved niche participation, the technology is ideal for many practical applications like industrial design, surgical training and education where it has gained strong traction. Selling and marketing products and services can be significantly enhanced by 360º VR promotional videos to create virtual experiences.

Companies designing hardware and software products can utilise integrated (with VR) 3D modelling tools and techniques to understand the development project better and to check for design errors before going into full production. Adding VR/AR capabilities to a business’s product portfolio can potentially reduce costs, achieve a higher return on investment (ROI) and improve operations’ performance for many internal projects as well as delivering more competitive edge. The increased number of major suppliers who now provide these technologies as a service, make creating applications easy and cost-effective for mid-market suppliers.

The next decade will clearly prove to be pivotal for our industry.

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