Consumer & Entertainment Services, Content Marketing, Digita...
Welcome to our 2019 Research Agenda which sets out the topics and themes our 150 strong analyst and consultant team will be focusing on in the coming year.
Donald Trump's unexpected victory in the US election has, irrespective of political affiliation, caused a sense of shock both domestically and internationally in a way that mirrors the aftermath of the UK's referendum on Brexit. In the immediate post-election environment, there are inevitably a range of strong, short-term reactions from individuals, enterprises, and markets. While experience suggests that the medium-term reality tends not to be as polarized as these initial views suggest, there are a number of implications for the technology, media, and telecoms (TMT) sector that leadership teams must consider in the coming days and months.
In the short term, there will be a general slowdown of major decisions in capital and investment by US and international firms as they wait to get a better understanding of the new administration's trade, tax, immigration, and foreign policy. The presidential inauguration is not for a further 100 days (January 20, 2017), but the uncertainty will last for at least the next six months, and it won't be until mid-2017 that Trump starts to share more about these topics and proposed changes to policy. The president-elect will also need this time to fill his cabinet and start to share where his initial priorities will lie. During this period, Trump will also be testing the waters to understand what he can and cannot change, within the checks and balances of the US political system. Trump made statements about proposed changes that are beyond the authority and control of the president alone, for example, proposing policies that would suggest increased trade restrictions, immigration protectionism, and the promotion of domestic manufacturing. While the president has some executive authority, many of these changes would require several months of debate and congressional approval.
Trump's candidacy was defined in part by its anti-globalization message, even though how that would actually manifest itself remained mostly undefined throughout the campaign. Although it remains too early to tell just what a Trump administration will bring, an anti-globalization position has the potential to bring significant disruption to IT services providers that depend on globally dispersed delivery models, and a range of regional talent in nearshore and offshore locations, to serve their clients. US enterprises will also need to review how and from where their services are delivered – whether infrastructure, applications, or business process outsourcing – and how new policies could impact current and future engagements.
All service providers will be affected if more restrictive policies on trade and talent impose limits on where providers are able to source, hire, and train delivery personnel. This runs the risk of impacting service delivery quality for customers. Providers differentiate themselves, in part, on their ability to access and leverage offshore talent wherever it's needed. A massive curtailing of H-1B visas, for example, will mean providers will need to make immediate shifts in what they're able to offer customers locally, unless or until they're able to compensate with talent. This situation could be especially pronounced for the India-based vendors (a number of which were specifically cited by Trump during the campaign), who have looked at the US for new and continued revenue growth opportunities using their offshore models as a core differentiator, and providers that have invested in Mexico, Central America, and South America to provide more nearshore capabilities to US-based clients.
The advances the US government has made in adopting technology to support its transformation objectives are unlikely to be undone, no matter what the direction policy takes. Within a tight fiscal operating environment, extra spending can only come from doing things differently and more efficiently. Opening up healthcare and education markets will require investment at the federal and service provider level. Federal agencies with investment plans in place may have to revise those plans, but those that have made the investment to move to more flexible deployment models will be best placed to react. For the others, this should be an opportunity to review and revise their IT plans.
For healthcare, this will mean undoing Obamacare, which has proven to be popular with those on low incomes who had previously struggled with paying for healthcare, but unpopular with those who pay for healthcare coverage and who have seen their premiums increase. Trump has said he wants to move away from state funding to a savings model and increase competition by allowing healthcare insurers to sell coverage across state lines. Any change will have implications on the insurer side, which will be tasked with helping to implement the scheme.
Trump will also aim to shrink the size of the bureaucracy in Washington, DC. As others have found, shrinking the leviathan is not an easy task and one that cannot be accomplished within election timetables such as four years. So what can he do? He has already said he will focus on stopping the revolving door policy of hiring recent ex-federal staff as consultants. However, this could do more harm than good. If there is a large exodus of high-caliber and skilled staff, how will departments fill the gap. It also raises the question of funding for programs aimed at modernizing tech in the federal government such as F18 and FedRAMP. Trump might reduce the barriers to swapping out tech and push down expenditure that way. Certainly, the high cost and length of time taken to get Authority To Operate (ATO) under FedRAMP has been a blocker to uptake.
In the context of a relatively light-touch approach to regulation, it is very likely that Trump's victory will mean that the gap is widened between the US and other developed markets, such as the EU, in terms of regulating communications. The FCC has never implemented most of the processes used by European regulators, which regularly review markets and impose remedies including price controls – mainly on wholesale markets – on operators found to have significant market power.
Of particular note is Trump's stance on net neutrality, which appears to be in stark contrast with the previous administration. The reclassification of broadband as a telecoms service, which was necessary to minimize the likelihood of legal challenges to the Open Internet Rules of 2015, opens up the possibility for more regulation for broadband. Advocates for a repeal of the reclassification have not gone quiet since the FCC's decision in 2015 and could take the opportunity to deal with a regulator that is more willing to listen to their arguments.
Donald Trump has, at times, defined the Open Internet rules as an "attack on the Internet" by the current administration, and expressed fear that the rules would be used to target conservative media. However, proponents of a new approach will have to come up with convincing arguments to back up their stance. US consumers will be reluctant to see their level of protection decreased, particularly if the recently approved measures on privacy and transparency prove to be successful and popular.
Question marks will also apply to significant cross-market mergers, such as the ongoing deal between AT&T and Time Warner. Donald Trump explicitly stated that he would not approve the deal, and opposed further consolidation in the media industry, stating that he would favor a breakup of the likes of Comcast and NBC. Nonetheless, it remains to be seen whether such statements will end up reflecting the stance of an administration once it takes power. Also, the AT&T–Time Warner merger is likely to fall within the powers of the FCC because Time Warner holds some broadcasting licenses.
Entertainment content has historically been one of the US's most significant exports, not just for the revenues it generates, but for the "soft power" it represents. Moreover, non-US revenues for these sectors now exceed domestic ones. The ascendancy of President-elect Trump, however, could spell trouble for the media and entertainment industry in the US and beyond. Ambivalence, or even hostility, toward the US, and US influence among both audiences and legislators, will continue to limit the expansion of US content and services into both mature and developing markets.
Trump's rhetoric on ripping up trade deals may not cut it with the tough negotiators US content providers must deal with outside the US and could yet jeopardize the carefully negotiated deals that Hollywood has built in China, for example. The further opening (or not) of the Chinese market looks set to be a major story of the next five years and US content providers will be anxious to ensure that doors remain open amid wider trade talks.
US technology leaders such as Apple, Amazon, and Google will be faced with increasing challenges to their business models and policy stances over the coming years. In public pronouncements, Trump has challenged providers over their stance on privacy and whether they are doing enough to assist federal law enforcement on national security issues. In addition, he has raised the specter of antitrust actions and challenged hardware manufacturers to do more of their manufacturing in the US. As with many of Trump's pronouncements, it remains unclear as to what degree his words will be followed by actions. However, companies may choose to make selected accommodations (such as shifting some jobs back to the US), while continuing to lobby in the background.
More generally, Trump has tapped into a growing unease among a large part of the electorate that some of the most trumpeted technology innovations (such as driverless taxis and trucks) will lead to significant blue collar job losses. Regulatory approval for these services may not be so forthcoming.
The picture in the UK since the June 2016 referendum decision has been a complex one, with considerable political upheaval and economic swings, but also a sense that individuals and businesses have little choice but to adjust to the new reality and that life goes on. It has also underlined the obstacles involved in moving from a policy position to execution, with considerable debate on the UK government's Brexit negotiating position, including legal challenges to the constitutional process of triggering Article 50 in order to leave the EU.
Although President-elect Trump may well face similar complications and impediments as he looks to put some of the policy positions espoused during his candidacy into effect, what is different in the US situation is that the Republicans now control Congress. While the detail of his policy positions may be unclear, they are likely to move from conception to passage far faster than has been experienced in the US public sector for some time; however, the Republican Party is far from unified. Therefore, TMT companies should be prepared for a more dynamic market, for at least the early part of Trump's administration.
One factor that has been particularly noticeable in the UK has been the strong stance taken by big business, including the TMT sector, toward mitigating some of the extremes of Brexit, with intense lobbying for what is referred to as a "soft" Brexit, which involves maintaining access to the single European market and is more liberal with regard to the movement of people, particularly skilled workers. In a similar vein, while Trump has been broadly pro-business in his outlook, it can still be expected that large US corporations will follow a similar pattern and lobby heavily against any policy extremes that might significantly disadvantage them.
With global digital information services, ubiquitous smart devices, and powerful communication networks, individuals have enormous sway over what products and services they want and expect. And regardless of election outcome, the need to focus on meeting end-user needs remains unchanged. However, given how wrong the polls were for the US election and Brexit referendum, companies must be vigilant with their assessment of how well they know the preferences and needs of their markets and users. Better and more representative research and segmentation are clearly required in addition to near continuous innovation and development with more robust analytical techniques. While we are in a period of profound disruption, what remains certain is that the companies that have the agility and insights to find new segments and develop and quickly execute compelling propositions will continue to profit from the connected digital economy.
While there is much uncertainty ahead, Ovum, with its 30 years of experience, 150+ global analysts and consultants, and proprietary data tools and forecasts, is well equipped to guide our customers through the specific business challenges and opportunities that will emerge. We look forward to working with you to help you continue to profit from the connected digital economy.
Consumer & Entertainment Services, Content Marketing, Digita...
Consumer & Entertainment Services
By Charlotte Palfrey 25 Jun 2019
With its recent RCS announcement, Google is making a last-ditch attempt to successfully develop an enhanced messaging app for the Android ecosystem.
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