Larger economies to lose the digital race to smaller nations

Vantage point: Insights from cutting-edge research

Several Nordic countries, Switzerland and tech-centric South Korea are ahead of the US and Japan, according to a digital economy ranking conducted by researchers at Tufts University in partnership with Mastercard Inc. India is much further down the list at No. 53.  The study places India and China, where “digital economy has been given high priority” by policymakers, in the break out zone. The 8 November demonetisation move nudged Indians towards digital payments, “albeit with mixed results”, says the study. New Zealand has lately been pitching itself to tech entrepreneurs as a safe space to develop away from geopolitical strife. Other countries classified as ‘stand outs’ by the ranking include the UK, whose spend-happy digital consumers and vibrant web economy may give it extra leverage as it negotiates a post-Brexit future.

Factoring in ‘relative digital momentum, the real stars are countries such as New Zealand, Singapore and the United Arab Emirates.

Firms eye higher revenue with automation

The worldwide enterprise software market is forecast to grow 7.6 per cent in 2017, up from 5.3 per cent growth in 2016, says Gartner. As software applications allow more organisations to derive revenue from digital business channels, there will be a stronger need to automate and release new applications and functionality. IT spending increased in 2016, but only two of the top 10 IT vendors posted organic revenue growth. With revenue sources still tied to the Nexus of Forces (the convergence of social, mobility, cloud and information), some of the top 10 vendors will fare better in 2017 due to strength in mobile phone sales. Worldwide spending on devices (PCs, tablets, ultramobiles and mobile phones) is projected to grow 3.8 per cent in 2017, to reach $654 billion. This is up from the previous quarter’s forecast of 1.7 per cent. Mobile phone growth will be driven by increased average selling prices (ASPs) for premium phones in mature markets due to the 10th anniversary of the iPhone.  

Firms ‘future-proofing’ themselves through M&A deals

Global merger and acquisition (M&A) activity in the first half of 2017 increased 8.4 per cent by value, despite 1,117 fewer deals compared with the same period last year. Deal value in the six months to June amounted to $1.49 trillion across 8,052 transactions. In the same period last year, 9,169 M&A transactions worth $1.38 trillion were recorded. Firms  have been looking at ‘future-proofing’ themselves in the backdrop of rapid technological and political changes as they seek to stay ahead of rivals. The first half of the year saw 17 megadeals (greater than $10 billion), versus 14 such deals in the first half of 2016.  

In comparison with the first half of 2016, Asia-Pacific’s outbound deal value declined by 58.1 per cent to $55.7 billion across 268 transactions. Tightened outbound M&A controls imposed by Chinese regulators dampened the deal flow from China (112 deals, $35.5 billion),  impacting large-ticket deals. China, which accounted for 49.1 per cent of Asian deals, saw a drop of 23.8 per cent by value with $134 billion across 675 transactions, compared with $175.9 billion worth of deals (774 transactions) in the first half of 2016 when the country accounted for 59.9 per cent of the region’s M&A activity. Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch, Citigroup Inc. and JPMorgan Chase & Co. lead the M&A league table for the first half of 2017.