Until recently, the business environment was one that enabled technology, media and telecom (TMT) companies to focus on growth almost at any cost. In the low interest rate environment that followed the global financial crisis, capital was cheap and readily available, especially for a sector as attractive as TMT.
But with the abrupt change in the environment triggered by the pandemic, the sector came under pressure. At the same time, with lockdowns fuelling a shift to remote working, both consumers and businesses rapidly embraced formats which required investment in digitisation. TMT companies had to adjust quickly to secure the resources needed to meet that demand.
Fast forward to today, and a key question in 2024 will be how TMT companies can meet the pressing need for operational efficiency, while at the same time securing the resources required to invest in future growth and keep pace with technological innovations. Treasurers, who are already playing an increasingly strategic role within their organisations, will need to be agile to support this balancing act.
Balancing cost management and growth
The year ahead will bring both challenges and opportunities for firms in the TMT sector. For one thing, the ongoing challenge of inflation and an elevated interest rate environment is likely to have an impact on consumer behaviour and companies’ IT spending patterns. But despite near-term headwinds and subdued economic momentum, TMT companies will also be looking to take advantage of growth opportunities.
Going for growth
Where growth is concerned, companies will be looking to access “the pockets of growth that are out there,” says Vinai Krishnan, Global Head, Technology, Media and Telecom Banking at Standard Chartered. “Companies are venturing into new markets across ASEAN, the Middle East and Sub-Saharan Africa,” he notes. “This is a trend that Standard Chartered is excited about, and well positioned for.”
The sector will also be shaped by tailwinds, including significant evolution in technology as well as investor optimism. “We are at an inflection point when it comes to adopting new technologies such as 5G on the telecoms side, the continued growth of AI and in the medium term, quantum computing,” says Krishnan.
While AI and machine learning have been around for decades, there is a growing interest in how both consumers and enterprises can use AI to achieve productivity gains. At the same time, says Krishnan, “we are seeing the disruption of traditional business models.” In particular, TMT firms will be seeking to recalibrate their resources efficiently in order to drive innovation and R&D, harness opportunities for M&A as well as diversify their products, services and end markets.
Managing cost pressures
But in this competitive environment, companies will also be facing very real pressures around the need for supply chain resiliency and diversification. Considering the macroeconomic and geopolitical climate, firms will need to focus more closely on streamlining their operations and optimising expenses to remain competitive and invest effectively in emerging technologies.
“Leveraging data analytics and technology such as AI is also going to be key when it comes to driving productivity and efficiency,” says Krishnan. “The firms that are going to win are the ones that can show efficiency on cost and create those operating models – that’s going to be a critical differentiator.”
As such, 2024 is likely to bring a greater focus on the role of the treasurer, as well as on strategic sourcing and procurement. “There will also be a continued focus on liquidity – it’s going to be really critical in the next couple of years to make sure that balance sheets are highly liquid, and that capital is unlocked from all possible sources,” Krishnan predicts.
