EY Study: Technology, Media and Entertainment and Telecommunications recovery from pandemic rests on capital investment

• 87% of TMT leaders surveyed say capital investment is critical to recovery
  
  
• Telcos have the biggest opportunity to improve agility when allocating capital
  
  
• Telcos have the biggest opportunity to improve agility when allocating capital

Never has capital investment been more top of mind for technology, media and entertainment and telecommunications (TMT) companies, according to the EY Global Capital Operations and Innovation Study (COInS), based on the responses of 500 global TMT executives. Based on the analysis of the maturity level of the respondents in relation to each stage of the capital life cycle, the study divides into two categories: "leaders", those inclined to the coherent use of advanced tools, techniques and processes at the level of the entire company, and "laggards", those with a low level of adoption.

87% of respondents identified as “leaders” believe recovery from the COVID-19 pandemic rests on maintaining levels of capital investment. This is a matter for concern given that 82% of all survey respondents are unclear who is accountable for delivering results relating to capital investment projects, throwing into question governance practices.

The survey also finds that TMT companies are struggling to meet capital investment objectives. Sixty-three percent of all respondents fail to achieve forecast returns, while 66% agree that costs of their capital programs escalate as timeframes lapse. When it comes to measuring success, 70% of “laggard” respondents (58% of “leaders”) struggle to demonstrate the value their capital investments bring to the business – in large part due to data maturity limitations.

Agility is a top priority

Eighty-three percent of all respondents say the COVID-19 pandemic has highlighted the imperative to establish more agile mechanisms for allocating capital. Yet, a third (33%) believe they are still unable to flex to changing market conditions – including major events like the COVID-19 pandemic.

Telecoms companies have the biggest opportunity to improve agility, with 42% of telcos admitting that their approach to capital investment planning is too static and rigid (compared to 38% for media and entertainment companies and just 25% of tech companies). However, at the same time, telcos are the least likely to regularly review and adjust investments (16% compared to 26% of tech and 31% of media and entertainment companies). Furthermore, 38% of telcos struggle to find sufficient data to add credibility to the decision-making process – notably higher than media and entertainment (30%) and tech (28%) respondents.  

Talent agenda must keep pace with tech transformation

The survey impresses the importance of cultivating the right skill sets to optimize capital investment, beyond tools and processes alone. Eighty-nine percent of “leaders” (67% of “laggards”) believe they will derive a competitive advantage by maintaining a highly skilled workforce that can manage capital projects.

But as the landscape shifts at pace, a skills gap is emerging as companies rollout new technologies without providing sufficient training to utilize them. According to the survey the top barrier to the adoption of artificial intelligence (AI) analytics is the lack of AI skill sets, while two-thirds (66%) of all respondents say it is difficult to find the necessary skill sets within their organization today.

Spotlight on the ESG agenda

As TMT companies look to bolster governance and transparency processes, the survey outlines the importance of including environmental, social and governance (ESG) KPIs to facilitate holistic investments that deliver a more balanced set of objectives. The findings indicate that this should now be a key area of focus for TMT executives, with 62% of all respondents stating that not enough capital investment projects are assessed based on their contribution to environmental or sustainability goals.

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About the EY Global Capital Operations and Innovation Study

Between March 2021 and April 2021, the EY organization surveyed 500 global TMT executives at companies with annual revenues of between US$250m and more than US$5b, to understand how they allocate and deploy capital.

Defining “leaders” and “laggards”: Respondents were presented with a scenario for each step of the capital life cycle and asked to select their level of maturity against how they: strategize and target; align and allocate; plan and forecast; execute and deploy; operate and maintain; and measure and optimize capital. Using statistical analytics, two clear segments of respondents were identified:

• _{Leaders (representing 60% of respondents): those with a propensity for consistent “and” / “or” enterprise-wide use of advanced tools, techniques and processes}
• _{Laggards (representing 40% of respondents): those with more nascent capabilities}