Change is the only constant in the tech world. And today, this change is happening at light speeds in the form of cutting edge technologies and applications. It is no surprise, then, that transformative technology – both internally driven innovation and disruption – is among the top challenges facing Asia’s TMT companies. 89% of TMT executives expect their industry to be disrupted in the next two years. From AI to blockchain, it is difficult to pinpoint where exactly the digital upheaval will come from – and various other threats (cybersecurity) and uncertainties (regulatory change, including data protection and localization requirements) are adding to the list of challenges.
Sentiments toward transformative technology as the leading complexity for their businesses are strongest among TMT executives: 78% toward innovation and 72% toward disruption. However, adopting the latest technology is easier said than done. As respondents mention, the cost of innovation is often significant when considering compliance and shrinking margins. Yet, the cost of doing nothing can be far greater. On the upside, while costly to the bottom line, respondents point out that investment in innovation – upgrading digital infrastructure or turning to advances like AI and big data – can actually help reduce other costs across the organization if managed properly.
TMT executives say cybersecurity is the second-greatest complexity in their industry. As Internet use surges across Asia, so too does the threat of Internet-based attacks. Equally, respondents realize that as attacks from cyberspace become more complicated and creative, reinforcing their defenses must be a priority. Indeed, while corporate resources are often earmarked for R&D, the economic impact of a cyberattack and importance of upgrading IT infrastructure must not be overlooked. A recent report by Lloyd’s insurance estimates losses from such attacks and data breaches can be as costly as those from major natural disasters. A further cost challenge is emerging cybersecurity regulation. Several jurisdictions have or are developing new laws that will impose cybersecurity protection obligations, and businesses face challenges in understanding if and how they will be regulated and the cost of compliance.
Regulatory change will be among the top focus areas for TMT executives, according to 66% of respondents (Figure 2). Among recent developments, new data laws in China require foreign corporations to store domestically generated user data within the country. While some multinationals have opened data centers, many companies may be shut out under these rules. Smaller firms could exit China altogether as they lack the funds to meet compliance costs. Another issue executives raise involves regulatory "sandboxes". In some jurisdictions across Asia, regulators, as part of their support for innovation such as fintech, have allowed businesses the opportunity to trial tech solutions that would usually be prohibited or heavily restricted under normal regulation. The question executives are asking is: What happens after the "sandbox" trials are complete? In choosing whether to invest in a "sandbox" project, businesses need some guidance from regulators on the parameters for policies being changed to allow the product to be effectively taken to market.
The larger the tech companies become and the more their products are available regionally and globally, the more they have to stay ahead of changes and variations in the law from jurisdiction to jurisdiction.”
Adrian Lawrence, Partner, Sydney and Asia Pacific Head of Technology, Media and Telecommunications, Baker McKenzie
What else does Adrian Lawrence have to say?
To unravel the complexities of the different regulatory regimes across Asia Pacific, tech companies expanding their geographical spread should rank and prioritize their target jurisdictions. They should expand operations in one jurisdiction after another, prioritizing jurisdictions with more transparent regulatory frameworks, instead of opening in too many places at once.”
Anne Petterd, Associate Principal, Singapore, Baker McKenzie Wong & Leow
What else does Anne Petterd have to say?
Innovating and adapting to disruption are the leading challenges for technology, media and telecommunications (TMT) corporations. Preparing adequate and inventive defenses is necessary to prevent heavy losses from cyberattacks. Regulatory change on data protection and storage and other digital innovations will be a priority in the year ahead.
of respondents feel doing business in the TMT sector is becoming more complex.
Figure 2: Which areas do you think will be a major focus for your industry in the next two years?
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