2000

Electronics, telecoms and computing sectors face competitive invasion - research from PA Consulting Group on technological convergence - 05 March 2000

New research confirms that convergence in the telecommunications, consumer electronics and computing sectors is creating a competitive minefield. According to research published today by PA Consulting Group, the competition will increasingly come from companies operating in previously unrelated sectors. It is the telecoms and semiconductor sectors that are the most mindful of convergence, but forty per cent of the businesses in the research are already facing competition from outside their own sectors.

Chris Lewis, technology consultant at PA Consulting Group, commented:

"Convergence allows companies to compete for business in new market sectors, which, for the unwary, can mean the sudden emergence of a strong competitor in their sector. This is further fuelled by the fact that the majority of new products are not dependent on the discovery of new technology but are built from combinations of already existing technology – and this also allows new players to enter the market easily."

PA’s research highlights a shortening of product development and life-cycle times as a result of increased competition and an accelerating pace of change. Businesses will need to change the way they develop products and track market developments if they are to compete in this high-speed world. The survey shows that new working practices are already beginning to emerge:

• Working in partnership with others to reduce the time to market by getting faster access to technology – 80 per cent of R&D managers do not develop all their product technology in-house.
• Re-using technology from previous designs to improve the time to market by reducing development time. Over 50 per cent of respondents design at least half their technology for re-use from one product to the next.
• Increasing use of software as a vital product component because it is re-usable and leads to added-value features.
• Teams of specialists, not generalists, in R&D departments because of the need to develop products in the shortest time possible.
• Cross-team working between the commercial and technical areas – 75 per cent of respondents say that development processes are now being driven jointly by the marketing and R&D groups.

Chris Lewis concluded:

While most of the companies in our research are aware of the issues closest to them, they need to take a broader view of the way convergence may affect them. The increasing pace of change and the threat of unexpected competition will demand new ways of working. Successful players in the new markets are more likely to have an entrepreneurial attitude to risk-taking, with the corporate agility to enter (and exit) new markets and technologies quickly and easily."

Jamie Urquhart, Chief Operating Officer, Arm Ltd, a semiconductor manufacturer and participant in the survey, commented:

"Convergence levels the playing field and rewards agility and speed."

A summary of the research, Technology-driven convergence – responding to the challenge of the Information Appliance, is available on 01763-261222.

For more information, please contact:

Heather Smith PA Consulting Group 123 Buckingham Palace Road London SW1W 9SR United Kingdom Tel: +44 20 7312 4975 Fax: +44 20 7312 4639 E-mail: heather.smith@paconsulting.com

Notes to editors

1. Examples of convergence in telecoms, consumer electronics, computing.
   Products beginning to emerge include:

• Internet TVs – A television that offers web access as part of an enhanced TV service
• Wireless PDA – A personal digital assistant (diary, phonebook, etc) that has an in-built wireless connection to enable email to be received while on the move
• Screenphones – A fixed telephone terminal that incorporates a screen to view text information such as telephone directories. Lower-cost videophones are likely to follow.
  

1. About the survey
   This survey was carried out in order to:

• Understand how the converging competitive landscape is being perceived by the various market players in telecoms, consumer electronics and computing.
• Begin to determine what actions businesses should take to achieve sustainable competitive advantage under these new conditions.

The survey covered around 50 businesses in a variety of sectors that are likely to be impacted by the emergence of Information Appliances and the knock-on effects in related markets. The organisations include BT, Cable & Wireless, Fujitsu, ICL, Siemens and Mitel. Questions ranged from the general effects of convergence through to specific issues such as R&D working practices, brand management and technology sourcing.

3. Survey methodology
   PA surveyed industry players in a variety of relevant business and consumer sectors. Data was gathered through a mixture of telephone interviews and written questionnaires. The sectors covered by the survey were computing products and services, telecommunications products and services, consumer electronics, semiconductors, Internet, media and others such as computer games providers, banks and document processing companies.
   
   
4. Definitions
   The term ‘convergence’ has been used in the information industries for 15 years or more. It was originally used to describe both the impact of digitalisation on telecommunications and the coming together of telecommunications and computing, given the use of common digital technologies. Since then, it has been used to describe many other phenomena, covering various aspects of IT, telecommunications and broadcasting.

   The latest manifestation of convergence, and the one that this survey addresses, is concerned fundamentally with products rather than services – although there are knock-on effects into the services markets. Specifically, PA’s survey examines the technology-driven convergence of a wide range of business and consumer terminal equipment and the implications that this convergence will have.

5. PA Consulting Group
   PA Consulting Group is a leading management, systems and technology consultancy, with a unique commitment to the integration of these capabilities. Established almost 60 years ago, and operating worldwide from over 30 offices in some 20 countries, PA draws on the knowledge and experience of about 2,700 employees, whose skills span the initial generation of ideas and insights all the way through to detailed implementation, including:

• Strategic management, and managing for shareholder value
• Accelerating business growth, especially through innovation and technology
• Improving business design and performance, including customer relationship management, enterprise-wide systems for the supply chain, and full e-business solutions
• Mobilising human resources
• Delivering change effectively, including projects and programmes.

PA focuses on creating benefits for clients rather than merely proposing them, and this focus is supported by an outstanding implementation track record in every major industry and for governments around the world. PA also develops leading-edge technology both for its clients and within its own portfolio of venture companies in areas ranging from software to wireless technology to life sciences.

• A highly commercial approach to clients’ problems and opportunities
• A technologically sophisticated view of both the industry sectors we serve and the solutions we deliver
• A culture of respect, collaboration and flexibility in working with our clients to achieve their aims.
  

We are proud that our clients say "PA makes it happen".

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