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Australian corporates pin survival on disruptive technology

COVID-19 has sent industries reeling and businesses are still a long way from coming out the other side and knowing what the world will look like. While the pandemic has caused many organisations to halt investment in technology, it has also served as an impetus for others to accelerate their digital transformation initiatives.

Australian companies are specifically prioritising investments in artificial intelligence (AI), cloud, blockchain and edge computing, according to new KPMG International and HFS research that surveyed 900 technology executives. Australian respondents are driven to emerging technology because it is seen as essential to business survival, at least compared to global data.

Cost reduction was a secondary driver for investment for Australian respondents. They are instead driven by a desire to improve decision making and customer experience. It’s not a dramatic shift but it is an acceleration on current tech strategies.

Differences compared to the global picture

Globally, 57% of executives surveyed report that COVID-19 has significantly changed their organisation’s strategic priorities. Some 59% say that COVID-19 has created an impetus to accelerate their digital transformation initiatives, yet approximately four in 10 say they will halt investment in emerging technology altogether as a result of COVID-19. Executives have shifted their focus to must-have technologies, and 56% of those surveyed say cloud migration has become an absolute necessity due to COVID-19.

The biggest issues preventing technology initiatives delivering value in Australia are predominantly not technical. They are related to organisational culture, commitment to the expected benefits and worries about the risk of failure. One in five (20%) Australian executives reported challenges with changing the culture of their organisation, far higher than globally (12%). Australian respondents are also further away from seeing value from emerging technologies, particularly in 5G and edge computing compared with organisations in the rest of the world.

Australian clients have a more variable approach to cloud technologies, with lower maturity for containerisation and hybrid cloud, but a greater focus on building micro services. The results also indicates the majority of organisations will continue to focus on uplifting the maturity of data platforms and analytics - 73% of respondents stated the need for further investment in enterprise data platforms.

The role of emerging technologies

Emerging technologies and new ways of working can play a significant role in the transformation to a more digital economy. These technologies are helping Australian organisations build customer, citizen and stakeholder trust, keep remote workforces connected, increase business resilience and build a strong foundation for future product and service innovation.

Organisations making the highest investments see greater returns than those making the smallest; in fact, those in the highest quartile of investments were significantly more likely to say they have already realised tangible value.

The COVID pandemic isn’t affecting all industries equally, but for many of the industries facing crisis, managing the transition to a digital business model is imperative. However, doing so is made more complicated in a time where investments are critical but cash must be preserved. Now, more than ever, organisations need to make smart investments in emerging technologies if they are to prevail in the medium- to long-term. Those who don’t risk threatening their own survival.

Renewed restrictions hit business activity

The KPMG and HFS research follows the latest Commonwealth Bank ‘Flash’ Purchasing Managers’ Index (PMI), which indicates Australia’s private sector economy reversed recent gains in August following the re-introduction of lockdowns and border restrictions in some parts of the country.

Australian business activity fell in August, primarily due to declining activity in the services sector, which experienced solid falls in demand amid renewed coronavirus restrictions in parts of Australia. While services sector activity declined for the first time in three months, activity in Australia’s manufacturing sector improved modestly in August. External demand for manufacturers continued to weaken, with new export orders declining for the seventh consecutive month and at a steep rate.

“The decline in business activity over August is hardly surprising given the lockdown measures in Victoria," said Gareth Aird, head of Australian Economics at CBA. "With the August composite flash PMI showing only modest contraction it is highly likely that outside of Victoria private output in the rest of Australia continued to expand over the month."

The headline Commonwealth Bank Flash PMI Index in August was 48.8, down from 57.8 in July. Readings below 50.0 signal a deterioration in business activity on the previous month, while readings above 50.0 show improvement. Readings for the services sector fell from 58.2 in July to 48.1, while the manufacturing sector remained largely unchanged at 53.9, down from 54.0 in July.

Workforce numbers continued to fall across the services and manufacturing sectors as Australian businesses continued to cut back on staff. “The fall in employment is the inevitable consequence of shutting down large parts of the Victorian economy,” said Aird.

Staying positive

Sentiment regarding the year ahead remained positive with optimism remaining across both sectors, although not as strong as seen in July. Firms continued to expect further recovery from the coronavirus downturn over the next 12 months.

“Encouragingly, firms collectively retain an optimistic view on the outlook despite the setback in Victoria," Aird added. "Ongoing fiscal support for households and businesses remains critical to ensuring that optimism is not misplaced.” 

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