Sector trends

Tech outlook 2022: six trends in ICT and digital services

Neil Bellamy, Head of Technology, Media, Telecoms (TMT) and Services at NatWest, and Ian Spence, founder and Chairman of Megabuyte, outline the defining trends they expect to see this year in this in-demand subsector of UK tech.

1. Optimism abounds – CEOs need to focus where they have resource

The panel expressed overriding optimism for the ICT and digital services sector as evidently there is no shortage of demand out there. As we emerge from the pandemic, more demand is anticipated, but the panel felt it was important that CEOs avoid chasing too many opportunities and instead cherry-pick the better ones to focus on. The high demand also creates challenges, primary among which is human resource. While falling short of calling it a universal talent war, our panel conceded there were some fierce battles going on in certain segments of the market. Cyber, data and cloud infrastructure skills are key skill gap areas.

2. Hiring and retention is not only about pay

To many CEOs, it feels as though there is always a competitor that is able to pay more for talent. Martin Hess, Managing Director of Telefónica Tech UK&I, shared that for the first time in his career – which dates back to the 1970s – staff are being given a 5% cost-of-living rise.

Wage inflation and talent squeezes naturally go hand in hand, but tech CEOs can try to break the loop by focusing on culture and purpose within their organisation. These need to be communicated clearly and often, and staff want to see genuine impact, especially around a business’s purpose. It’s not all about money, after all.

3. Office spaces are changing for the long term

To increase the feel-good factor and help retain staff, businesses should consider enhancing their office environment by making it attractive for people to engage and collaborate with colleagues. At NatWest, the approach has been to create collaborative spaces to enrich the in-person work experience and veer people away from a full day at their desk. Related to this is moving beyond traditional work patterns of five days a week in the office and instead providing flexibility for employees to adapt. Indeed, as a subsector that helps large organisations create such workplaces, ICT and digital services should see the intrinsic value of this approach.

The panel also suggested that “growing your arms and legs” – by having a greater number of smaller regional offices, perhaps including overseas – can open up pools of talent, sometimes at lower cost, and help colleagues gather in-person more easily.

4. Cloud 2.0 is here and driving convergence of telecoms and technology

The first generation of cloud adoption was a ‘lift and shift’ of computing from on-premises to the cloud. Cloud 2.0 describes the process of moving firms into the cloud, ie making the best of the environment to deliver productivity gains, automation and artificial intelligence (AI). As a result, we’re seeing a convergence of telecoms and technology.

Telco firms are adding tech expertise to tap into Cloud 2.0 opportunities and protect revenue versus the hyperscalers.

Neil Bellamy
Head of TMT and Services, NatWest

An example of this is the dichotomy between the openness and ease of mobile and remote computing on one hand, and the need for cyber-security expertise on the other. It also means that companies that specialise in the cloud are becoming experts in one or two core providers and can no longer claim to be expert in all platforms.

5. Low-code/no-code to become a core demand soon

This phrase is a strong contender for buzzword of the year, but the low-code/no-code approach is here to stay. At its core is the idea that, as part of the cloud computing environment, you’re giving control to the user. This means that users don’t keep having to redesign a system if they wish to put new demands on it – and paying to hire a firm in the process. These environments thrive with a low-code, no-code approach and, like some of Microsoft’s data platforms, allow users to manipulate and use their data how they see fit.

6. M&A is a popular growth strategy – but integrate, don’t bolt on

Tech companies are using mergers and acquisitions not only to deliver accelerated growth but also to acquire new complementary products and talent that’s in hot demand. Following a merger or acquisition, it can be tempting to leave the existing team in place to get on with what they’re good at, but our panel described this as parking a problem for the future. It may take time, but integration of the merged companies’ teams is key: bolt-on acquisitions, by contrast, create additional operating expenses and leave you with a split culture, which never works in the long run. In such cases, companies should consider pursuing partnerships and use of associates in favour of full-time employees.

Conclusion: ICT and digital services key to future tech industry growth

Overall, there is a tremendous amount of optimism on the prospects for ICT and digital services in 2022 and beyond. Businesses do face headwinds – especially around recruitment and costs – but they are well placed to offset these. As it continues to innovate and evolve, the subsector is ideally poised to help the UK both recover and grow. 

Find out about further discussions hosted by Megabuyte.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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