Deloitte predicts top trends for 2011 in technology, media, telecoms sector

The Technology, Media and Telecommunications (TMT) practice at Deloitte today announced its 2011 predictions for the TMT sector.

A key trend over the last 10 years has been convergence, where we see that the technology, media and telecommunications sectors are now more interconnected and interdependent than ever before.

Consequently, developments in each sector are inextricably linked.

Deloitte predicts that more than 50% of all computing devices sold globally will not be PCs and that 25% of all tablet computers will be bought by enterprises; that figure is likely to increase in 2012 and beyond.

While PCs will still be the workhorse computing platform, in a relatively short period of time, tablets will replace computers for executives who are mobile. Security of data on the move will then be a serious consideration on the risk management menu.

Also, as tablets are small and portable, they are a popular target so there are likely to be a host of security-based solutions emerging to protect company and personal data. Business will soon realise that this item is appearing on their 'grocery' list, increasing their IT costs due to the variety of different architectures and operating systems to support.

The volume of data uploaded or downloaded from portable devices via public WiFi networks will grow at a much faster rate (25% to 50%) than the volume carried over cellular broadband networks.

The growth in WiFi-only devices sales will outstrip that of 3G devices. The bulk of this growth will be video data, with WiFi likely to become the default network for video applications. This could undermine the data revenue model of mobile and wireline operators. The answer is to 'own' all the channels (landline, mobile, WiFi, and TV) to the customer, which follow the lifestyle of the user versus fulfilling a primary technology function only.

It is also likely that South Africa will follow the trend in the USA, where big retailers will begin offering free in-store WiFi access to shoppers to enable in-store online comparison shopping. This will increase revenue, keep them in the store longer, guide them in the store, answer their questions and collect data about them. Retailers must understand and stay abreast of regulatory changes and shifting public sensitivities about online tracking practices, so as to strike a balance between maximising revenue and respecting customer privacy.

With access to broadband, Deloitte predicts that we will see significant growth in gaming. Consumers will surely have noticed how much more space in toy shops is now occupied by electronic media. The age profile for gaming also varies across the range, with the older users having access to disposable income and the younger profile users influencing purchasing spend.

We are also likely to see a decline in gaming hardware sales of almost 20%, but an increase of gaming software revenue of 6%.

An increasingly large percentage of games revenue is likely to come from monthly subscriptions, peripherals, fees for services and in-game purchases and advertising in the free-to-play (F2P) and 'Freemium' markets.

The games industry appears to be following in the footsteps of the enterprise software market. Two decades ago, 90% of enterprise software revenue was one-time licence sales - equivalent to buying a game disc - and there were virtually no follow-on revenues or service fees. Today, many software companies derive more than half of their revenue from services and subscriptions, and licence fees are much less critical.

Although this change was disruptive to the industry, most enterprise software companies found that after the transformation they were still able to grow profitably while enjoying less revenue volatility. The games industry might be able to learn from their experience, leveraging best practices from the enterprise software industry, while developing new best practices of its own.

With this increase, technology platforms for games are also likely to proliferate further as the smartphone market share grows in South Africa.

Deloitte's view is that the advertising revenue from social networks are likely to be very significant: total industry revenue of $5 billion and year-on-year growth of 40% are impressive numbers.

Yet revenue on a per-subscriber basis is unlikely to match search or traditional media in the next year or two. Also, advertising rates are likely to remain low compared to other forms of online advertising as well as traditional media.

Nevertheless, owing to their low cost base, social networks might still achieve impressive gross margins despite their relatively low revenue-per-user, particularly when compared to the traditional media companies against which they are competing. A social network's cost of content is close to zero since it merely provides the infrastructure, while its users and third party application developers provide all the content.

Notes to editors:

For a full copy of the report with all of the Deloitte predictions, please e-mail: Laurel Holmes on laurel@corpcom.co.za.

The 2011 series of predictions has drawn on internal and external inputs from conversations with member firm clients, contributions from Deloitte member firms' 7 000 partners and managers specialising in TMT, and discussions with industry analysts as well as interviews with leading executives from around the world.