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Study: TMT pandemic recovery rests on capital investment

September 27, 2021

Never has capital investment been more top of mind for technology, media and entertainment and telecommunications (TMT) companies, according to the Global Capital Operations and Innovation Study (COInS) from advisory firm EY.

The survey of 500 global TMT executives reveals that 87 per cent of respondents identified as ‘leaders’ believe recovery from the COVID-19 pandemic rests on maintaining levels of capital investment. This is a matter for concern given that 82 per cent of all survey respondents are unclear who is accountable for delivering results relating to capital investment projects, throwing into question governance practices.

The survey also finds that TMT companies are struggling to meet capital investment objectives. Sixty-three percent of all respondents fail to achieve forecast returns, while 66 per cent agree that costs of their capital programmes escalate as timeframes lapse. When it comes to measuring success, 70 per cent of ‘laggard’ respondents (58 per cent of ‘leaders’) struggle to demonstrate the value their capital investments bring to the business – in large part as a result of data maturity limitations.

“The hyper scaling of content streaming services, the rollout of 5G and the ubiquity of the Internet of things [IoT] all give rise to new business models, customers and revenue streams for TMT companies,” advises Daniel Theander, EY Global Capital Operations and Innovation Suite – Solution Leader. “Taking advantage of these opportunities in a post-pandemic world will be defined by well-executed capital investments, yet the survey unearths a spectrum of shortcomings across the capital life cycle. To recover and thrive, businesses must embed agility into the way they manage capital – driven by trusted data to enable predictability, and active governance to improve accountability through transparent communication.”

Agility is a top priority

Eighty-three percent of all respondents say the COVID-19 pandemic has highlighted the imperative to establish more agile mechanisms for allocating capital. Yet, a third (33 per cent) believe they are still unable to flex to changing market conditions – including major events like the COVID-19 pandemic.

Telecoms companies have the biggest opportunity to improve agility, with 42 per cent of telcos admitting that their approach to capital investment planning is too static and rigid (compared to 38 per cent for media and entertainment companies and just 25 per cent of tech companies). However, at the same time, telcos are the least likely to regularly review and adjust investments (16 per cent compared to 26 per cent of tech and 31 per cent of media and entertainment companies). Furthermore, 38 per cent of telcos struggle to find sufficient data to add credibility to the decision-making process – notably higher than media and entertainment (30 per cent) and tech (28 per cent) respondents.

Talent agenda must keep pace with tech transformation

The survey impresses the importance of cultivating the right skill sets to optimise capital investment, beyond tools and processes alone. Eighty-nine per cent of ‘leaders’ (67 per cent of ‘laggards’) believe they will derive a competitive advantage by maintaining a highly skilled workforce that can manage capital projects.

But as the landscape shifts at pace, a skills gap is emerging as companies rollout new technologies without providing sufficient training to utilise them. According to the survey the top barrier to the adoption of artificial intelligence (AI) analytics is the lack of AI skill sets, while two-thirds (66 per cent) of all respondents say it is difficult to find the necessary skill sets within their organisation today.

“The role of talent in TMT capital projects is changing, driven by remote monitoring and automated response, which is shifting part of the workforce from the field to a virtualised environment,” notes Ludvic Baquié, EY Global Capital Operations and Innovation Suite – Solution Architect and Operations Leader. “This evolution of skill sets has risen to the top of the board agenda, with an emphasis on AI, analytics and remote working. Pivoting the workforce to use emerging tech and become more efficient is mission critical, and companies need to act now to re-skill talent.”

Spotlight on the ESG agenda

As TMT companies look to bolster governance and transparency processes, the survey outlines the importance of including environmental, social and governance (ESG) KPIs to facilitate holistic investments that deliver a more balanced set of objectives. The findings indicate that this should now be a key area of focus for TMT executives, with 62 per cent of all respondents stating that not enough capital investment projects are assessed based on their contribution to environmental or sustainability goals.

“TMT companies increasingly have unique ESG considerations that will drive change across the industry in terms of capital investments,” suggests

Ben Hoban, EY Global Capital Operations and Innovation Suite – Capital Allocation Leader. “As the ESG agenda evolves and intensifies, finding the right balance among all stakeholders – including shareholders – will continue to be a success driver for businesses across the industry.”

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