Digital transformation

Tech trends in 2020 and beyond

Published on 22nd Jan 2020

As technological innovation and digital transformation continue at a ferocious pace, a joint Osborne Clarke / Deloitte event, held at OC in London, identified some of the trends we expect to see in 2020 and beyond.


Event video produced by Alex Pirnak

Opening the event in London, Osborne Clarke partner Charlie Wedin commented: "There's a huge amount going on in the tech space right now, and unprecedented challenges raising a range of associated legal issues. Digital transformation is creating new opportunities for businesses that are able to adapt, but some of these technologies raise novel legal, regulatory and broader ethical considerations for society."

Deloitte's TMT predictions 2020

Cornelia Calugar-Pop, lead technology, media and telecoms researcher at Deloitte, presented Deloitte's TMT predictions for the coming year, which include the following:

The "smartphone multiplier"

Cornelia explained that the economy of products and services associated with smartphones, called the smartphone multiplier, is predicted to grow by 15% to $459 million in 2020. This growth doesn’t come from smartphone sales themselves, but instead from revenue streams including advertising, apps and accessories.

She added: "There are no established devices yet that can compete with smartphones. Devices such as smart speakers and watches utilise the smartphone for configuration or for management - and orbit the smartphone market. You can't have a smart watch or speaker without a smartphone. While these are distinct devices in their own right, their utility is highly reliant on smartphones."

The growing importance of industrial 5G

Next generation connectivity, and in particular 5G, is set to take major leaps over the next 12 months. Cornelia observed that the launch of 5G by all four network operators in the UK in 2019 will make smart phones even more relevant. "Improved network speed and reliability will only make the device more useful."

But it is the adoption of 5G to enhance industrial processes that is expected to undergo the most dramatic growth for 2020. Deloitte expects 100-plus companies worldwide by the end of 2020 will be testing 5G deployment, collectively investing a few hundred million dollars in equipment and labour, with significant growth in the following years.

In the short-term, 5G is expected to sit alongside cable-based connections, but over the next few decades it is set to become the connectivity of choice for anything from factories to hospitals.

Cornelia also discussed: the rise in the use of robots for services tasks; e-bikes; podcasts; and advertising video-on-demand.

Deloitte's full TMT predictions for 2020 can be found here.

Osborne Clarke's trends for 2020

Following on from Deloitte's predictions, Osborne Clarke speakers provided insights on some important areas of technology where the law is developing:

AI as a service

John Buyers predicted that one of the major trends over the coming year will be the development of as-a-service (aaS) models for AI. The advance of cloud computing and commoditisation of managed services are driving this development. John said: "AI falls neatly into this and we're talking to businesses that are going to structure those services. It is effectively pre-packaged AI in the cloud."

"Big tech providers are already setting up their offering for SMEs to develop their own AI-aaS with pre-packaged data sets that can be used to train your own developed machine-learning model." For example, they might offer extensive libraries of thousands of facial images if a business want to train its own automated facial recognition application.

Aside from all the technical issues of rolling out machine learning, there are considerable legal issues on the horizon around the development of AI-aaS, which add to the already complex concerns generally around the use of AI.

Blockchain applied

Mark Taylor noted that while blockchain has attracted breathless attention over recent years, businesses continue to grapple with the question of the practical application of blockchain for their business.

 Reminder: Blockchain is a distributed ledger between multiple parties, with each of these holding an equally valid copy of the "truth", that can only be updated once the parties reach consensus. The point is that this removes the need for one central point of authority and puts the trust and power back out into that network.

Although blockchain is recognised as a "powerful concept", Mark explained that there has been a lot of hype that is only just starting to settle down. "We are over the "peak of inflated expectations" and we are moving towards how businesses can actually benefit, with smaller-scale projects that are realistic and can be delivered."

One area of development is the tokenisation of assets. This is the process of issuing a blockchain token that digitally represents a real-world tradeable asset.

"This provides a new class of interacting with assets and representing or trading assets. But it raises legal issues. Will the tokens constitute a security? Will it run into financial services regulatory issues – for small-scale assets and applications that is an issue.

Tech trends in M&A

Amid these developments, private equity (PE) investors continue to be among the most active buyers of tech businesses. With more opportunities for PE as tech companies mature and meet more of PE's investment criteria, Mathias Loertscher noted that overall M&A activity in tech was buoyant last year, despite not reaching the volume or value of 2018.

"The overall volume of M&A is still very high by historic standards," noted Mathias. This is despite various geopolitical headwinds, including increased tensions in US-China trade talks and Brexit in the UK (which, although creating some uncertainty, gave rise to a weaker pound that helped attract US interest in the UK). “The expectation for 2020, with more certainty around Brexit, is for a fairly healthy number of deals coming through."

"PE are amongst the most active and pervasive tech buyers across the mid-market, and there have been large acquisitions by PE houses in the upper end too", he added. "In 2018, more tech deals were announced by PE buyer or portfolio companies than listed acquirers. That trend continued in 2019." With the amount of cash held by PE, it is expected that 2020 will be no different.

Non-tech acquirers are also increasingly looking to M&A to assist in the process of rapid digital transformation. While such businesses often try to digitise their businesses via in-house R&D, investing into technology companies through corporate venture capital, and setting up their own incubator and accelerator programmes, these are often medium to long term plays and don't necessarily allow them to transform themselves materially in a short period of time. M&A remains a rapid way of reinventing and transforming a business for today's digital economy.

Tech regulation

All of these developments require a regulatory framework that reflects the speed of innovation and transformation. Catherine Hammon observed that there is a "sweet spot" between innovation and regulation, as "a regulation-free zone is risky and can make it difficult to get the investment you need. Funders don’t like the risk that regulators could later come along and say that they don't like the way things are going, particularly in relation to AI."

Last year the Department for Business, Energy & Industrial Strategy, in its White Paper on Regulation for the Fourth Industrial Revolution, identified the powerful influence that regulation can have on innovation. BEIS talks about principles-based rather than prescriptive regulation with an emphasis on improving outcomes for innovators.

In our Insight on the impact of digital transformation on the regulatory agenda, OC's regulatory team discuss how different regulators are meeting the challenge of regulating new technologies – and incorporating new tech into their own enforcement toolkits.

Osborne Clarke will be running this tech predictions event every January, giving clients and contacts all that they need to be ready for the coming year. Sign up to receive Insights and event invites that match your interests.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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