As COVID-19 crisis shifts its epicenter to Latin America, companies and soccer teams are both getting back on the field. Times are as uncertain as ever: revenues cannot be accurately predicted, monetary and fiscal stimulus cannot run forever and the workforce is challenged by being forced to work exclusively from home for an extended period. However, for certain sectors of the TMT industry, apparently the time for harvest has arrived. Technologist and entrepreneurs have for years predicted the benefits of cloud computing, digital payments and other technologies to help design robust, resilient, agile and cost-effective organizations. Traditional organizations and industries are now ready to evolve, as they understand that their ability to successfully bounce back will depend on their ability to embrace digital transformation.
Friendly Tech Implementation Environment
In certain countries, we are seeing more implementations of digital signatures and smart contract platform projects in the last two months, than those we have seen in the last two years. Boards and steering committees are finally ready not only to instruct an aggressive migration to cloud solutions, but also to investing in the organization so that it may embark on the unexplored frontiers of artificial intelligence, robotics, and automation, with the aim to improve workforce collaboration, drive revenue and enhance customer engagement. While the hype on tech is not new, this might be the first time that implementation of advanced digital technology appears to be more a tangible reality than a mantra or a promise. Excitement is shared alike among companies, employees, customers and government organizations. Courts are also showing that they are bold enough to migrate to online proceedings, public notaries are pushing legislation for digitizing real estate acquisitions and education authorities are procuring educational apps for remote learning. Notably, concerns about whether it is valid to appear before a court through a video conferencing session, or whether governments should migrate assets and their citizens’ data to public clouds, and whether public schools should run on proprietary software, rather than open source, have apparently disappeared swiftly. This friendly implementation environment presents huge opportunities for the Tech industry, from satellite internet for expanding emergency coverage, to cloud-collaboration software providers, to digital healthcare solutions. Like in all eras where existing architypes melt away, the pace of transformation can certainly present perils too. Implementation frenzy may push companies to purchase solutions that are not solid or that may be inappropriate under different legal regimes, in matters such as privacy, government procurement rules, consumer protection, or information security. From an organizational standpoint, implementation of digitalization projects without due care may lead to frustration. From a privacy standpoint, implementation without appropriate controls may increase surveillance, social control and possibly breach human rights.
Reshoring and Nearshoring – Automation as the big differentiator
Reshoring has been silently growing for years. For many, the steady increase of labor costs in East Asian countries over the last few years, together with the increase of costs associated with more stringent employment laws, have gradually eroded the benefits of the past. While the East Asia region still offers some of the most efficient and productive manufacturing workforce in the world, the COVID19 Crisis has forced a number of tech companies – particularly those in the field of precision and electronic instruments as well as electrical machinery – to realize they had put most or all the eggs in one basket.
National governments, citing national security, are increasingly placing pressure on companies to reshore their manufacture of essential goods such as defense, pharmaceutical, medical, telecommunications or automotive. Since labor markets in home countries may still appear too expensive or unskilled, nearshoring is also rising as a middle-ground option. However, before defining a new location for a manufacturing plant or a key regional supplier, companies should assess their target manufacturing countries willingness to partner with them on a long term basis. Countries with free-trade agreements in place, flexible labor and immigration regimes as well as solid anticorruption and IP enforcement laws should score high as nearshoring options. Another key element for companies may be local governments’ willingness to invest in automation technology, AI and robotics, as a means to improve industrial productivity. Companies will also need to consult with the applicable government(s) to understand how incentives if any, are designed to encourage investment in nearshoring – such arrangements should ideally not only include traditional tax benefits, but also stimulus for investment in R&D. The end result should benefit both the country and the companies involved, as the shared goal should not just be the creation of new jobs, but the developing of an innovative, skilled, sophisticated, smart workforce.
As with any crisis, there are many signs of a brighter future and TMT companies should continue to take a proactive role in modelling such future.
For more information on the impact of and opportunities presented to the TMT sector by COVID-19 please click here to read our recent guide.
