Upload
alex-fitzpatrick
View
217
Download
0
Embed Size (px)
Citation preview
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
1/18
DLA PiPer TechNOLOGY LeADersFOrecAsT surveY FALL 2012
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
2/18
02 | DLA Piper Technology Leaders Forecas t Survey Q1 2012
DLA PiPer TechNOLOGY LeADersFOrecAsT surveY q1 2012
execuTive summArY
In the ace o global economic headwinds and amid a
high-stakes 2012 presidential election, technology
leaders ever ocused on the promise o the uture
are seeking clarityon the economic, regulatory and
political landscape.
This was the per vasive theme throughout DLA Pipers
ith Technology Leaders Forecast survey, which was
developed in conjunction with the irms 2012 Global
Technology Leaders Summit.
Will greater economic cer tainty ollow the outcome o
Novembers election? What is the direction o tax policy?
Will the nex t administration ease regulations or increase
the regulatory burden? How will Chinas role in technology
development and nancing evolve? Will the IPO market
cool down or heat up? What are the most promising and
challenging areas or the technology economy?
These are just a sampling o the issues addressed in
DLA Pipers latest sur vey o the major trends, challenges
and opportunities conronting the technology industr y.By a 3 to 1 margin technology leaders believe
President Obama will be re-elected on Nov. 6th.
However, most are very skeptical that another term under
his administration would be a positive development or
the industry.
In act, hal o technology leaders who think President
Obama will earn re-elec tion think it would be a negative
development or the sector. Most 64 percent believe
that Mitt Romney s e lec tion would be better or the
technology industr y. This st ands in st ark contrast to the
2008 survey when the majority (60 percent) otechnology execut ives signaled that a Barack Obama
victory would be a positive development or the
technology industr y.
These executives and investors, however, have more on
their minds than just pol it ics . There are under lying
concerns about global economic conditions and the
added burden o growing regulation that hinder their
ability to access capital and build new businesses.
Economic uncertainty was listed as the most signiicant
barrier acing the IPO market and was a signiicant actor
in impeding the success and ormation o technology
start-ups.
Despite these challenges, technology leadersexpectations or growth are cautiously optimistic, with
most expecting moderate sales and hiring growth. Most
subscribe to a belie in a new normal or growth
steady, but slow.
Key highlights o the survey include:
Wat wold a ond-t Pdnt Obaa
an fo t t ndty? Most respondents
think voter s will re-elect President Obama, but
60 percent doubt that his policies will impact
the technology indus tr y in a positive way.
Sixty-our percent o respondents think Mitt Romneywould positively impact the technology sector, while
jus t 41 percent o respondents think a second-term
President Obama would positively impact it.
i pat ty dtnd fo o
glaton? A strong majority (78 percent) o
respondents think the 2012 political debate has hurt
the reputation o the pr ivate equity industr y, and
most (65 percent) think it likely will result in more
regulation o the industr y.
Wold fdal ta na t tntnt and al? A majority (60 percent) o
respondents think the expiration o the Bush-era tax
cuts will hurt investments in the technology industry;
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
3/18
www.dlapiper.com | 03
while very ew (seven percent) think it will help.
However, perhaps counter to conventional wisdom, a
signiicant minority (33 percent) think the Bush-era tax
cuts will have no direct impact on investments and
growth in the technology industry.
Wat t otloo on ng and al? Techexecutives still think their companies will experience
sales growth and plan to hire new employees during
the nex t 12 months , albei t at a moderate rate
compared to historical growth. Bigger technologycompanies are even more conservative in estimations
o both their sales and hiring.
Wat a t ot pong oppotntfo t ntpn and nto?
Respondents pegged mobile computing, cloud
computing and big data as the most promising
technologies or inves tor s and entrepreneurs. Venture
capital executives were more likely than other tech
executives to rank big data as promising and
tended to rank gaming a s less promis ing.
sold pay pol b glatd? More than80 percent o technology executives say the
government should not get involved in regulating
privacy policies, with 50 percent saying the industry
should take the lead in developing consensus and
policies on privacy.
can cna tanton to an nnoaton
onoy and pat t global tnology
to? Most respondents observed that China is
tr ans it ioning away rom a produc tion-only economytowards an economy oriented towards both the
production and consumption o goods, including
technology. However, there are continued mixed
signals regarding the countrys ability to evolve into a
hub or innovation and technology development. Only
10 percent o respondents expect China to be a major
contributor to technology development within the
next three years.
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
4/18
04 | DLA Piper Technology Leaders Forecas t Survey Q1 2012
eLecTiON 2012: TechNOLOGY LeADers
cAsT Their vOTe
The DLA Piper Technology Leaders Forecast Sur vey
ound a strong majority, 76 percent, o technology
business leaders think voters will re-elec t
President Obama in November. These results are
echoed by Intrade, a predictions marketplace, which also
has President Obama as roughly a 3-to-1 avorite to
capture re-election.
However, most technology business leaders are very
skeptical that a second term or the Obama
administration would be a positive development.
Almost 60 percent o respondents do not eel
President Obamas re-election would have a positive
impact on the technology economy, and two-thirds o
those executives bel ieve the impact would be negat ive .
By comparison, 64 percent o respondents think
Mitt Romney would positively impact the technology
sector.
The partisan tables have turned since the 2008 election,
when the survey ound that nearly 60 percent otechnology executives bel ieved that, then Senator,
Barack Obama would have a more positive impact on
technology development and investment than would h is
Republican challenger, Senator John McCain.
It is worth noting that, during the US mid-term elections
in 2010, these same technology leaders accurately
predicted the Republican takeover o the House o
Representatives.
Barack Obama
Mitt Romney
76%
W bv w w
t 2012 Pt ct?
24%
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
5/18
www.dlapiper.com | 05
TO WhAT exTeNT DO YOu AGree Or DisAGree WiTh The FOLLOWiNG sTATemeNTs:
0
50
100
150
200
250
46
8
14
55
74
61
40
45
43
46
I President Barack Obama wins a second
term, i t will be a positive development or the
technology industr y.
I Governor Mitt Romney wins the White
House, it will be a positive development or
the technology industr y.
Agree
Somewhat Agree
Neutral
Somewhat Disagree
Disagree
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
6/18
06 | DLA Piper Technology Leaders Forecast Survey Q1 2012
recurriNG cONcerNs ON TAxATiON,
DeFiciTs AND reGuLATiON
Regardless o the elections outcome, it seems clear that
what technology leaders want out o Washington is
greater certainty about regulation and tax policy. Those
concerns, particularly on regulation, suraced repeatedly
throughout the sur vey.
Depending on who controls the White House, and the
composition o Congress, a ter the November elections,
the Bush -era tax cu ts could be extended , made
permanent, or rolled into a broader tax reorm package.
Most respondents, 60 percent, think allowing the
Bush-era tax cuts to expire would negatively impact
investments in the technology sector.
However, perhaps counter to the conventional wisdom,
a notable minority (33 percent) o technology business
leaders think expiration o the Bush-era tax cuts will
have no direct impact on investments and growth in the
techno logy indus tr y. Eight percent think the expiration
would have a positive impact, presumably thinking that it
would positively impact ederal iscal stability and deicitreduction.
In a previous survey, when asked directly, 30 percent o
techno logy execut ives said tha t they bel ieved increased
government revenues generated via the expiration o
these tax cuts would help reduce de ici ts and improve
general economic conidence.
Marginal personal tax rates are not a primary
actor that guide technology investment decisions.
Technology leaders are more concerned with
the l ike ly st abi lity and potentia l o an investment ,
the corporate tax r ate , and the broader economic
and regulatory environment. O course, evaluating
the tax impact does come into the equat ion , but
ultimately people invest in technology companies
because they think they can achieve a positive
return. Pt Atz
Signiicant negative impact
Somewhat negative impact
Neutral/no impact
Somewhat positive impact
Signiicant positive impact
44%
33%
4%3%
15%
Wt pct w t
pt t B-
T Ct v tc
t vtt?
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
7/18
www.dlapiper.com | 07
When given the oppor tunity to comment about the technology environment in general, respondents sounded o
about the burdens brought about by regulation, and the cost o compliance, more than any other issue.
WhaT are The BiggesT legal or regulaTory issues aCing TeChnology ComPanies?:
rt rt rpt rsb s ov-t
T ucttith1B V ivttlwt Ptt T sct
The ollowing verbatim responses illustrate the
regulatory and compliance burden expressed by business
leaders across the technology sector:
Cost o regulatory compliance
Dodd Frank requirements Cost o legislated health care requirements: Too many public reporting requirements Far too high burden o compliance Sarbanes Oxley is still too onerous
The potential o having to manage to various statedata security requirements
A strong majority (78 percent) o respondents also
believe that the presidential campaign dialogue centered
on private equity has damaged the reputation o the
private equity and venture capital industry, and
65 percent predicted this ocus could lead to new
regulation.
Among private equity managers and venture capitalists
speciically, the concern is even deeper: 93 percent think
the presidentia l race has damaged the reputation o their
industry.
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
8/18
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
9/18
www.dlapiper.com | 09
cONFiDeNT ON The FuNDAmeNTALs,
BusiNess LeADers see sTeADY BuT sLOW
GrOWTh AheAD
Despite the aorementioned concerns, technology
leaders are cautiously optimistic on the undamentals o
their own businesses. The indust ry leaders sur veyed
overwhelmingly expected both sales and hiring to
increase, but generally at verymoderate rates. The wild
gyrations on revenue expectations and sta ing that were
seen in the 2008 and 2010 surveys with technologyleaders are no longer present.
In October 2008, at the very outset o the inancial crisis
and ensuing Great Recession, 75 percent o
respondents reported that their businesses had been
adversely aected by receding economic conditions, and
almost 70 percent o respondents expected revenues to
decline as a result. In October 2010, respondents were
shiting their priorities and expec tations. Guarding
against the harmul eects o recession was quickly
becoming less important. Instead, they were ocusing on
growth amid an environment that was rie with r isks anduncertainty, but also with opportunities upon which to
capitalize.
Now, in the 4th quarter o 2012, respondents seem to
have developed a broad consensus they are settling in
or a period osteadybut slowgrowth.
Seventy-two percent o technology executives expect
their sa les to increase over the nex t 12 months, with
55 percent speciically estimating moderate sales growth.
Another 16 percent reported that they expect no
change in their sales in the next year, which appears to
urther signal the reser ved nature o expectations orgrowth.
Sotware company executives today are the most
optimistic on sales, according to the survey, with
47 percent o them expecting a signiicant sales increase.
Companies o $1 billion or more were more
conservative in their sales orecasts, with 66 percent
expecting only moderate increases.
Revenue expectations, o course, impact staing
decisions. In 2008, almost two-thirds o respondents said
they expec ted their revenues to decline as a resul t o
that year s economic environment . That year,
respondents, especially those rom large companies,
were predicting layos. Since 2010, expectations orhiring have loated at moderate levels. O note, the
percentage o respondents who said their irms planned
no hiring has decreased substantially, while the
percentage o respondents who said their irms plan to
hire moderately ticked upward.
In the 2012 survey, 50 percent o executives report plans
or moderate hiring increases over the next 12 months
and 10 percent are planning or s igni icant increases ,
particularly at smaller enterprise and sotware
companies. Twenty-seven percent expect no notable
changes in their staing levels. Again, larger companieswere more restrained in their plans or hiring.
Forty-nine percent are planning moderate increases in
hiring, and 10 percent are planning moderate decreases
in hiring.
The impact o these moderate expectations in the tech
sector says volumes about job growth in the larger
economy: most net job creation or the past 30 years has
come rom star tup irms.
Star tups arent every thing when it comes to job
growth. They are the only thing. They are theengine o innovation and the tech economy, said
Rich Scudellari, par tner, DLA Piper.
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
10/18
10 | DLA Piper Technology Leaders Forecast Survey Q1 2012
Signiicant increase
Moderate increase
No change
Moderate decrease
Signiicant decrease
Unknown
16%
5%
1%
7%
55%
16%
hw pct
cp t t v
t t 12 t?
2012:
12%5%
70%
Signiicant increase
Moderate increase
No change
Moderate decrease
Signiicant decrease
Unknown
12%
hw pct
cp t t v
t t 12 t?
sp 2012:
Expect strong increase
Expect moderate increase
Expect no change
Expect moderate decrease
Expect strong decrease
55%
23%
5%
16%
hw pct
cp t t v
t t 12 t?
2010:
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
11/18
www.dlapiper.com | 11
1%
50%
Signiicant increase
Moderate increase
No change
Moderate decrease
Signiicant decrease
Unknown
10%5%
27%
8%
hw pct
cp tf/ t
t v t t 12 t?
2012
8%6%3%
59%
Signiicant increase
Moderate increase
No change
Moderate decrease
Signiicant decrease
Unknown
24%
hw pct
cp tf/ t
t v t t 12 t?
sp 2012
Expect strong increase
Expect moderate increase
Expect no change
Expect moderate decrease
Expect strong decrease
41%
43% 9%2%
4%hw pct
cp tf/ t
t v t t 12 t?
2010:
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
12/18
12 | DLA Piper Technology Leaders Forecas t Survey Q1 2012
exAmiNiNG chALLeNGes TO TechNOLOGY
sTArTuPs AND The iPO mArkeT
According to a report by the US Census Bureau, the
business startup r ate has allen to a low o eight percent.
Thats down rom a high o 13 percent in the 1980s and
a rate o 11 percent as recently as 2006. The study also
ound that irms rom one to ive years old now account
or 35 percent o all businesses, as compared to
approximately 50 percent in the 1980s.
In the span o a decade, rom the bursting o the
Dot-com Bubble through the Great Recession and
into this subsequent period o tepid economic growth,
the oper ating environment or st ar tup tech companies
and their investors has changed.
Recent DLA Piper surveys have shown a solidiying
opinion among technology leaders that there is a
New Normal in the model or building and investing in
star tup technology companies. Approximately two-thirds
o executives surveyed believe the operating
environment has been permanently altered in some
signiicant way. Helping to drive that change are changes
in the IPO market.
In DLA Pipers April 2012 survey, nearly 75 percent o
technology, venture capi ta l and private equi ty leaders
stated that they believe the IPO market will not return
to the histor ica l highs o the 1990s and 2000s.
The reduction in IPOs has broader implications, reducing
the number o dramat ic home runs or venture cap ital
investors and lowering overall returns. Fewer IPOs also
means ewer small- and medium-size public technology
companies which traditionally have been the acquirers
or other technology companies, urther diminishing exit
opportunities and returns.
More than 60 percent o technology executives said the
tr adi tional venture capi ta l model had been permanently
altered as a result o these and other actors.
Directly to this point, in the 2012 survey, when asked to
assess the greatest challenges acing technology st artups,
respondents ranked access to capital as the primary
challenge. Fit y-one percent ranked access to capital as a
major concern, and only six percent did not see it as one
o the major challenges. Concerns about the overall
tepid economic environment and the avai lab ili ty o
quality and experienced talent rounded out the top
challenges or technology star tups.
Entrepreneurs were more likely to rate access to
capital as the top challenge, whereas the venture capital
and private equity communities were more likely todescribe the economic environment and
demonstrating business value as the biggest challenges.
Obviously, these barriers oten east on one another.
Capital can be diicult to access precisely because o
economic uncert ainty, and IPOs and venture investments
can go awry when tough economic conditions prevail.
rANk The BiGGesT chALLeNGe FAciNG
TechNOLOGY sTArTuPs:
1. Access to capital: 2.492. Economic outlook: 2.56
3. Access to quality talent: 2.98
4. Uncertainties regarding patent/IP enorcement: 4.23
5. Need to demonstrate valid business model: 2.74
rANk The BiGGesT chALLeNGe FAciNG
The us iPO mArkeT:
1. Uncertain economic conditions: 2.37
2. Recent lackluster perormance o major IPOs: 2.433. More attractive M&A exits: 3.44
4. Over regulation: 3.90
5. Monetization challenges or Social Media and Mobile
companies: 3.95
6. Competition rom non-US exchanges: 4.91
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
13/18
www.dlapiper.com | 13
The BiG OPPOrTuNiTies: cLOuD
cOmPuTiNG, mOBiLe cOmPuTiNG AND
BiG DATA
Despite challenges, technology leaders are optimistic and
orward-looking by nature constantly seeking the next
big idea, the nex t big innovation.
When asked what technology sectors hold the most
promise or entrepreneurs and investors in the near-
ter m u ture, respondents ranked (1) mobile computingand (2) cloud computing as the most promising, ollowed
by (3) big data.
When asked to look ur ther out on the hor izon, and
comment on the most promising under the radar
techno logies , business leaders mos t o ten mentioned
mobile computing and technologies, big data, green
energy technologies, security sotware and technologies,
and nanotechnology.
WhAT AreAs OF The Tech ecONOmY Are
mOsT PrOmisiNG FOr eNTrePreNeurs AND
iNvesTOrs?
1. Mobile computing: 2.32
2. Cloud computing: 2.51
3. Big data : 3.10
4. Enterprise sotware: 3.91
5. Social media: 4.49
6. Gaming: 4.64
WhaT under- reCognized TeChnology areas are like ly To haVe The BiggesT imPaCT on The
TeChnology seCTor in The nexT iVe years?:
B dt mb Cct dvcg e etp stw
l scc ntc
Pctv atc st sct
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
14/18
14 | DLA Piper Technology Leaders Forecas t Survey Q1 2012
chiNAs PrOGressiON As A suPer POWer
iN The GLOBAL TechNOLOGY iNDusTrY
Recent DLA Piper surveys have uncovered a growing
uncertainty about how easily the Chinese economy can
successully transition beyond a strong manuacturing-
oriented economy to include a strong technology and
innovation economy. In 2012, 41 percent o execu tives
predicted that China will have diiculty transitioning to a
technology and innovation economy, up rom only just
18 percent two years ago.
Technology leaders view China as indispensable to the
manuacturing o technologies (91 percent reporting); as
a key market or technology sales (81 percent reporting);
and increasingly as a source or inancing technologies
(45 percent reporting).
However, respondents were less decisive on Chinas role
as an innovator and developer o new technologies: 35
percent said within the nex t ew years China would have
a somewhat important impact on global technology
innovation and development, while 27 percent said they
did not expect China to have any meaningul impact in
the sec tor in the near-term. Only one in ten bus iness
leaders expect China to be a major contributor to
technology development and innovation within the nex t
ew years.
From the respondents perspective, s tronger intellectual
property protections (83 percent reporting) and a morerobust inrastructure that supports entrepreneurship
(43 percent reporting) are needed or China to spur the
growth o it s technology sector.
Chinas greatest assets to the development o an
innovation economy are its sheer market size, large
amounts o capital and a large, skilled workorce,
according to these same leaders.
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
15/18
www.dlapiper.com | 15
WhAT imPAcT WiLL chiNA hAve ON The GLOBAL TechNOLOGY iNDusTrY iN The NexT
FeW YeArs WiTh resPecT TO:
0
50
100
150
200
250
132
65
13
3
24
73
57
53
6
19
91
62
36
4
75
102
26
6
2
Manuacturing Development o new
technologies
Financing o technology
companies
Market or technology
products and services
Very Important
Somewhat Important
Neutral
Not Very Important
Not at all Important
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
16/18
16 | DLA Piper Technology Leaders Forecas t Survey Q1 2012
Global
economic
conditions
Competition
rom the US
Concerns
regarding
intellectual
propertyprotection
Perceptions o
Chinese
technology
Technical
prociency o
local talent
Inrastructure
that osters
entrepreneurship
Free fow o
capital
WhAT Are The BiGGesT ThreATs TO GrOWTh OF The TechNOLOGY secTOr iN chiNA?
(check ALL ThAT APPLY.)
0
20
40
60
80
100
44
20
83
43 4439
17
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
17/18
www.dlapiper.com | 17
meThODOLOGY
In late September and early October 2012, DLA Piper,
the inte rnational law irm, dis tr ibuted its Technology
Leaders Forecast Survey via e-mail to a group o
thousands o senior execut ives and advisors in the
technology industr y, including CEOs, CFOs and other
company oicers at technology companies, as well as to
venture capitalists, entrepreneurs and consultants.
The 2012 survey is the ith such technology marketanalysis developed by DLA Piper, with the last
survey issued in the Spring o 2012 and the inaugural
survey issued just prior to the recession in
October 2008.
Respondents were asked a series o questions and
provided multiple possible responses; they were also
given the opportunity to elaborate on their answers with
direct commentary.
Due to rounding, all percentages used in some questions
may not add up to 100 percent. Percentages in some
questions may not add up to 100 percent because
respondents were asked to check all answers that
applied. A ew minor edits were made to verbatim
responses to correct spelling mistakes, verb tense, andpunctuation.
For urther inormation on the study and its
methodology, please contact [contact].
7/31/2019 DLA Piper Tech Leaders Forecast Survey, October 2012
18/18
www.pp.c
ABOuT us
DLA Piper is a global law irm with lawyers across
the Americas, As ia Paci ic, Europe and the Middle Eas t.
From the quality o our legal advice and business insight
to the e iciency o our legal teams, we bel ieve that
when it comes to the way we ser ve and interact with
our clients, every thing matters.
FOr mOre iNFOrmATiON
To learn more about DLA Piper, visit www.dlapiper.com
or contact:
Pt Atz
T +1 650 833 2036
DLA Piper is a global law rm operating through DL A PiperLLP (US) and aliated entities. For ur ther inormation please reer to www.dlapiper.com. Note past results are not guarantees