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How companies can leverage 2024's top 10 tech opportunities
In this episode of the Tech Connect podcast, the speakers discuss AI, sustainability and the edge economy as the driving forces for tech companies in 2024.
Join us as we take a closer look at a few of the most intriguing topics from the EY article Top 10 Opportunities for Technology Companies in 2024. Dive into this fascinating discussion in the latest EY Tech Connect podcast episode. Listen as we discuss some of the key areas of positive impact that tech companies should be exploring in the coming year, including generative AI (GenAI)-centric strategies, the essential role of digital infrastructure, and the evolving risks in this ever-changing market landscape.
Our host, Tracy Watt, alongside Ken Englund and Olivier Wolf, delves into the impact of the AI revolution, the crucial influence of energy resources in shaping business models and the eminent role of sustainability in today’s corporate strategies. Tune in as they discuss the great strides made in the digital transformation journey and the potential of tech companies to create significant competitive advantages with informed decision-making models and strategic investment choices. Don’t miss this engaging discussion filled with valuable insights and perspectives.
Hear insights from:
Ken Englund, EY Americas TMT Industry Markets Leader
Tracy Watt, EY Global TMT Sector Strategy, Operations and Solutions Leader
Olivier Wolf, EY-Parthenon Global TMT Sector Leader
Key takeaways:
The vital role of emerging tech, including GenAI, in shaping future business strategies and the rise of the edge economy
The increasing need for sustainability initiatives, focusing primarily on energy demand due to the surge in data centers, and the significant impact of efficient investments in digital infrastructure is essential in capturing the potential of GenAI environments
The importance of proactive measures in addressing emerging risks and underlines the vast growth opportunities in 2024 for tech firms
For your convenience, full text transcript of this podcast is also available.
Welcome to the EYTech Connect podcast, where we have candid conversation about the most pressing priorities facing tech, media and telecommunication companies and provide strategic insights on the key issues that matter to them. As industry ecosystems evolve in new directions, we use these discussions to reflect on how companies can not only take advantage of new opportunities but also tackle emerging challenges.
Tracy Watt
Hello and welcome to the EYTech Connect podcast. I’m your host for today, Tracy Watt global strategy, operations and solutions leader for TMT.
If you’re new to our series, welcome and thank you for joining us. Today we’ll be discussing some of the key areas we think technology companies should be focusing on in the coming year, as outlined in our annual report titled Top 10 Opportunities for Tech Companies in 2024.
We won’t cover all of them today, but we’ll focus on a few of the top ones that seem most relevant to the market right now. This is our second annual podcast to supplement our report, and I’m again joined by two of my colleagues, Ken Englund, EY Americas TMT industry market leader based in the Bay Area, and Olivier Wolf, global TMT strategy leader from EY-Parthenon, based in London. Thank you, gentlemen, for joining us on EY Tech Connect.
Ken Englund
Thanks for having us.
Olivier Wolf
And hi, Tracy and Ken.
Watt
During 2023, technology companies successfully navigated global economic headwinds and rising geopolitical tensions while also generating widespread optimism, excitement and expectation around the potential of emerging technology, especially artificial intelligence. Tech companies knew AI-centered strategies triggered a rebound in investor confidence, despite a range of macro challenges that are continuing to affect the industry. It’s against this backdrop that EY explored 10 key opportunities for tech companies in 2024. Our examination aimed to provide a balanced view of the potential actions for tech companies across various operational processes and different subsectors. Today, I’ll be chatting with Ken and Olivier about several of the central opportunities we believe tech companies should seize to enable them to focus on what they do best, innovating, developing breakthrough technologies and bringing new service offerings to market. As we’re moving into 2024, the conversation in boardrooms and across the tech landscape is being dominated by artificial intelligence and GenAI in particular. Ken, there is clearly no shortage of opportunities in this space, but what do you see as the most important or most pressing actions tech companies can take today? Where should companies act now in order to get ahead of their competition?
Englund
Tracy, AI and GenAI is certainly the news headline, across the board. For me, there’s probably two or three things that I would think about a tech executive or a boardroom should really focus on. I think the first piece is kind of an interesting paradox. If you think about it, most of these tech companies have been working on digital transformation for years. But we’re really at an inflection point, where AI is moving from proofs of concept and pilots into production. All of these companies have spent hundreds of millions of dollars transforming, are going to now need to think about how AI is infused into the roadmap. So, our first point is every company will be revisiting their digital transformation roadmaps. The second piece that’s really interesting is if you are a late adopter of digital transformation, you may not have already made all those digital investments down the road. You potentially have a chance to leapfrog your competitors to infuse it right from day one. So, it really is going to make an interesting opportunity, potentially for companies to reshuffle of their order in terms of how AI influences that. I think the second thing that we are strongly advocating and seeing is we describe it as an AI control tower. So, if you think about a mix of business executive, other key executives, chief digital officers, chief data officers, or even what we’re seeing now are new titles around chief AI officers, is really setting a governance for how AI will be deployed in a company. And really what we think is most important of all of that is human needs to be at center of all of these activities. There’s both optimization, productivity, but there’s trust and safety that needs to be a real priority in these companies as it relates to corporate policies and just making sure the entire company has an awareness campaign. What I like to say is “speed is a good problem, but it’s still a problem.” And we’re definitely seeing that around AI.
Watt
Fantastic. Thanks, Ken. Olivier, how should companies think about revamping their business models in order to capture value in GenAI environments?
Wolf
Obviously quite a lot to do. So let me cover two, two aspects. One is specifically the business model. And second aspect I’ll cover will be more around the deal strategy and impact on the business model. So, from a business model perspective, platform business models are central to the GenAI revolution. So, tech companies are going to market with GenAI platforms, but also going the other way, they integrated externally developed GenAI capabilities into their internal operations. So let me give you a couple of examples. LLM developers are using platform models to support their offering widespread use. Looking at the hardware and semiconductor manufacturing side, they are forming platform partnerships to build and deploy the infrastructure needed for the wide-scale use of GenAI. And then another example is companies at the forefront of enterprise use of
GenAI are including internal intelligent assistants are revamping their platform strategies to deliver these capabilities safely and effectively to their users. Covering the point of deal strategy, I personally believe the optimal way to expand AI through M&A is a mix actually of small and medium-sized acquisitions, but also partnerships. The acquisitions will have companies access intellectual property and the talent and skills needed to develop new propositions quickly. And the partnerships will deliver immediate access to data sets, services and markets needed to pursue new opportunities.
Watt
Thanks, Olivia. I appreciate your insights there. Maybe if we pivot now from AI and talk about sustainability? It’s one of these issues that still remains top of mind for tech companies, especially given new regulations that are coming out around the world. Olivier, tell us a little bit about what you see as the key elements of the sustainability agenda that tech companies should prioritize as we go into 2024.
Wolf
Yes, Tracy. So, I mean, there are quite a few sustainability priorities for tech companies, right? They could look at reducing waste, recycling, replacing toxic chemicals or reducing water pollutions. They can all deliver benefits, right? And they were worthy goals. But for this year what I would argue is tech companies should focus specifically on energy efficiency and user sustainable energy. And the reason for that is simple, right, is, as we know, data center capacity and number of data centers has massively expanded in recent years just through digital transformation, cloud migration, increasing use of edge devices and social media. But what’s happening now is there’s an even bigger acceleration in that growth in data centers and the energy usage required by artificial intelligence, particularly training LLMs, or running intelligent systems is really very substantial. Just to give you an example, various forecasts show that by 2027, AI could be consuming as much electricity as a country of the size of Netherlands. And that demand will, will keep expanding. So clearly, energy and sustainable energy is the top priority here.
Watt
With companies looking to industrialize rapidly advancing technologies like AI, what types of investments should they be making in digital infrastructure?
Olivier and Tracy maybe I’d add a couple things. So I, Olivier, totally agree with you, sustainability, very broad topic. I actually think energy should be the primary focus or at least one of the two primary focuses of tech companies. I mean, if you think about just the massive amount of compute that these LLMs are driving, the amount of energy is incredible. And if you don’t live in the Netherlands, maybe a different way to look at this and just timely that came out at COP28 this week. The International Energy Agency believes that between a percent, a percent and a of half of all energy will be consumed by data centers.
And also, if you look at a worst-case scenario, Swiss researchers said that could move up to 20%. And about 5.5% of all carbon emissions. So, like if you’re a tech company, clearly looking at how we’re going to bend the curve on energy consumption is truly important. And then, as we all know, energy that isn’t generated doesn’t have to be decarbonized. So, if I was going to make one area in sustainability, I’d make a big focus around energy and just reducing the compute-intensive demands.
Watt
Fantastic. Thanks both. I appreciate the insights and how the journey for sustainability is changing as, as we focus more on AI as well. Olivier, as we’re looking to industrialize these technologies like AI, what type of investment should they be making in digital infrastructure?
Wolf
Let me set the context of digital infrastructure here. We have GenAI, robotics and a number of other rapidly emerging technologies that rely on ultra-fast data collection and computation. So given the proliferation of these technologies and the use, number of use cases requiring ultra-fast processing at the edge, it’s imperative that tech companies optimize their investments in digital infrastructure to support reliable connectivity and rapid compute capabilities. Now new types of digital infrastructure, high-speed connectivity with low-latency computing. And they are the foundational requirements for a wide range of opportunities. So as the edge economy gains pace and scale, companies that manage to balance the competing objectives of activating the next generation digital infrastructure and staying within increasingly tight capital constraints will stand to win out.
Englund
Yeah. Olivia, I’m really excited that you focused on sort of the edge economy in this space, and that I think it’s always been about edge. If you think about mainframes, to client servers, open systems, distributed systems, cloud, IoT, and now AI, compute always will get optimized in tech. And I think we’re along that curve. And I think I’m really excited about how that occurs and where our focus will be in investment around network and bandwidth and latency. It all comes together. And then lastly, I would just say what I’m interested in, maybe it’s another, future podcast for us, but we talk a lot about large language models. But I actually think small language models are going to be really an interesting item. And how those get platformed in sort of the digital infrastructure.
Watt
I agree with you Ken a whole other podcast, look forward to it as well. While this conversation is all about opportunities, we can’t lose sight of the risks tech companies could face in the coming year. We’re all optimistic for 2024, but at the same time, cyber threats are accelerating and evolving, geopolitical conflicts and tensions continue around the globe, and there’s always the potential for another black swan event. Ken, how can companies be proactive in addressing and mitigating these emerging risks and turn the potential for disruption into an opportunity that will then allow them to differentiate themselves from competitors?
Englund
Yeah, Tracy, I think it wouldn’t be a top 10 without a risk item in it, right? So, I, I think for me it’s a little bit an order of magnitude of the discussion. We all have very strong memories of what’s happened over the last few years, so these emerging, or I’ll say re-emerging, risks are sort of top of mind for most tech leaders. It includes things that we think are very tech specific, whether it’s geopolitical, trade, taxation, legislation, government intervention, data protection. And I certainly would say cyber is very much at the top of the list. And then if you add to that, for a tech executive, all the cross-industry items, climate, financial risk, pandemics, and just keeping up with your competitors, that’s a huge set of items. And I think what we’re seeing is very traditional scenario planning, tabletop exercises clearly can’t keep pace with just the compounding of all these scenarios together. And in fact, what we think this is a clear area where AI will be tremendously important from a scenario planning perspective. The way I look at it is if our tech executives are really equipped with a full understanding, which means a clear understanding of risk, they will be the best equipped to make risk-adjusted decisions, and that will put them at the forefront, and they will absolutely be glad that they made those investments.
Watt
And feel comfortable doing so too, right? If they get it right?
Englund
Yes, absolutely.
Watt
All right. As we bring the podcast to a close here, Ken and Olivier, I’d love to pass over to you guys just to get your closing comments on the opportunities for 2024, in the year ahead. Do you want to start with you, Ken?
Englund
Yeah, sure. I always say today will be the slowest a tech moves going forward. And I think I say it every year. And I’ll say it again now, open AI is a year old, plus or minus a couple of days. And we would have not even have thought of that about 365 days ago. So, I really think it’s a time of abundance, resource technology and capital. We are all a little bit concerned about interest rates, but there are a vast number of new ideas and new opportunities for tech executives to take advantage of. So, you know, what we believe is having a clear strategy and really a crystal-clear decision-making model will set everybody up for long-term success.
Wolf
From my point of view, Ken, you’ve talked about the risks. We’ve both talked about some of the very challenging aspects of the move to
GenAI, that the investment requirements, the difficult choices to be made. I mean, the tech industry, firstly, has always been innovative and, secondly, has suffered, if anything, from, a shortage of skills so that the productivity gains that AI will be able to give to the tech industry will benefit the industry, perhaps more than any other sector.
Watt
Thanks, Olivier. I appreciate that. So, thank you, Ken and Olivier for joining me today. It was an engaging and interesting discussion, as always. Clearly, there’s a lot of opportunity out there for tech companies despite the current state of the market. We look forward to seeing what 2024 will bring.
If you’re interested in reading Top 10 Opportunities for Technology Companies in 2024, you can find it on ey.com/tmt. Thank you for joining us on the EY Tech Connect podcast. For more thought-leading perspectives visit ey.com/tmt. You can also follow us on X @ey_TMT. Don’t forget to leave a review and subscribe to our series. Thank you.
