8 November 2022 – Forecasts of increased revenue, confidence despite growing regulatory complexity, and a sense of opportunity in ESG are all contributing to an optimistic outlook in the technology sector, reveals the latest Technology Index from international law firm DLA Piper. The biennial Index’s overall scoring for 2022 has grown from 67 to 68 since the report two years prior, and from 54 in its 2018 and 2016 iterations, showing a sustained, if slowing, positive trend.

This sixth iteration of the Index, based on interviews with senior executives from 350 companies based in Europe with revenues ranging from EUR10 million to EUR10 billion, shows a resilience in the sector in the face of a myriad of contemporary economic, geopolitical and regulatory pressures. The overall index score, notably, falls by 4 points when a separate variable question regarding the impact of the current geopolitical landscape is included.

Key findings from the Index include:

- The significance of geopolitics in the sector, with a 4% decrease on the overall score when factored in

- 66% of respondents being confident in some increase in revenue over the coming 12 months

- 40% of respondents (4% increase from 2020) not seeing any benefit from the UK’s leaving the EU

- An increase in respondents seeing the impact of both domestic and European regulatory environments on their business

- 68% of respondents seeing moderate to significant business opportunities in the ESG space

Dr Jan Geert Meents, Managing Director UK and Europe and German Lead for the Technology Sector at DLA Piper, comments: “In what can only be described as a turbulent few years, our Technology Index has proven a fascinating insight into the outlook and opinion of the tech sector against the backdrop of a pandemic, economic downturns and huge geopolitical events. This year’s Index shows that the sector which has historically shown itself as resilient, often finding solutions and opportunities in the face of global challenges, continues to do just that. From innovation to investment, we found respondents to be active and agile in not just securing themselves against ongoing headwinds, but often turning them into opportunities to grow, capitalise and transform.”

DLA Piper’s Technology Index 2022 Report, alongside the full survey findings, includes insight and commentary into the issues facing the sector today such as M&A valuations and drivers, national and cyber security, managing ethical risk, fintech implementation and ESG.

Key findings at a glance:

Revenue:

- 66% respondents expect to see revenue increase in coming 12 months.

- 28% respondents expect to see revenue increase 6-10% in coming 12 months.

- 13% respondents expect to see a decrease in revenue over coming 12 months.

COVID-19:

- 52% respondents see COVID-19 as having a moderate-significant positive impact on supply-side of business in coming 12 months (up from 5% 2 years prior).

- 21% respondents see COVID-19 as having a moderate-significant negative impact on supply side of business in coming 12 months (down from 77% 2 years prior).

- 99% of respondents are still taking actions to mitigate impact of COVID-19 on their business.

- Refining product/service offerings is the most common action, followed by revised pricing, temporary workforce reduction and exploiting technology.

ESG:

- 68% respondents see the ESG agenda as a moderate-significant opportunity, while 24% remain neutral and 7% view as a moderate-significant threat.

- On a scale of 1-10, 46% of respondents rate ESG issues as an 8 and above priority.

- 33% respondents see ESG issues as more of a priority since the beginning of the COVID-19 pandemic.

- Demanding supply chain accountability and carbon neutrality by 2030 remain seen as the two most important actions the sector should be taking in environmental sustainability.

- 41% respondents currently have a board room representative for sustainability issues.

Brexit:

- 44% respondents see Brexit as having had a fairly or very negative business impact (48% two years prior).

- 45% respondents see Brexit as having created no real change for their business (42% two years prior).

- 40% respondents see no benefits from the UK leaving the EU (36% two years prior).

5G:

- 80% of respondents think there is enough provision for the protection of national security in the context of their country’s 5G rollout.

- Of the 20% respondents who do not think there is enough provision for the protection of national security in the context of their country’s 5G rollout, tighter regulatory controls on infrastructure development and implementation, tighter monitoring of supplier risk profiles, and increased state investment in European/domestic suppliers proved the most popular potential measures, in that order.

- Of the 20% respondents who do not think there is enough provision for the protection of national security in the context of their country’s 5G rollout, 39% would see a total ban of the involvement of Chinese manufacturers as an additional measure to be implemented.

- Use cases most cited as being where 5G offers growth potential are smart cities, enabling IoT devices and networks, and financial services implementation.

- Investment, and connectivity costs, are seen as the most and second most challenging aspect of 5G implementation.

Growth opportunities:

- IoT/connectivity is most commonly seen as a high potential growth opportunity in the sector, closely followed by AI/robotics, and cyber security.

M&A in technology:

- Access to new technology is most commonly seen as a most beneficial feature of acquiring an external company, followed by defensive acquisition to prevent competition acquiring assets, and establishing presence in a new market, in that order.

- Integrating incompatible systems is most commonly seen as a biggest drawback in acquiring an external company, followed by requirements to make promised cost savings, and diversion of financial investment from other projects, in that order.

- The key challenges when acquiring an external company most cited by respondents were mitigation of skills/resource, system integration, securing budget to achieve integration objectives, and data management, in that order.

Cyber security:

- 34% of respondents see themselves as extremely secure against cyber threats, with 64% as fairly secure, and only 1% as not very secure.

- 23% of respondents do not have a cyber breach response plan in place.

AI / robotics:

- The most cited key benefit of AI/robotics implementation are flexibility, more efficient processes, and speed of processes, in that order.

- Investment is the most cited drawback to AI/robotics implementation, followed by lack of staff expertise, and cost of implementation/proving ROI, in that order.