Deloitte Finds Uptick in Tech Spending as 72% of Private Company Leaders Look to Reskilling Employees as a Tactic to Win the War for Talent
Mid-market and private companies view talent and emerging technologies as the make-or-break factors to stay competitive, according to a new Deloitte Private 2019 Technology Trends report, “Seizing Opportunity.” This year, respondents are placing a higher premium on artificial intelligence to drive business results; significantly more firms are using AI for analysis automation (48% in 2019 versus 30% in 2018).
In its seventh annual report, Deloitte Private explores the technology trends that drive mid-market and private companies in the US economy. Deloitte surveyed 500 executives in this segment and found that 43% say they are spending more than 5% of their firm’s revenue on technology, a 15-point increase since 2016. This comes as over half of respondents anticipate annual growth rates of 11% or more. Additionally, 68% plan to hire talent that possess the skills needed to operate emerging technology.
“Mid-market and private companies recognize the time for simply observing emerging technology is over,” said Jason Downing, vice chairman of Deloitte LLP and US Deloitte Private leader. “Private company executives are increasing their technology investment to boost the speed of adoption to better compete in the current economic environment.”
Private companies are prioritizing their spend on emerging technologies
Predictive analytics and legacy system modernization top private companies’ investment priorities list. In fact, the number of private companies surveyed using predictive analytics to forecast business results or predictively assess client, customer or business behavior, jumped 65% over the past five years.
The survey notes that investment into emerging technology is also prioritizing information security risks, the adoption of 5G technology, and business innovation over the next 12 months. Moreover, a third (34%) of respondents note that adjusting and redesigning their information technology organizational operating model is a critical component for digital transformation.
Respondents anticipate information security, cloud computing, and technologies tied to AI and machine learning to benefit their customers and workforces in the short term. Furthermore, they believe these technologies will have the most impact on their business over the next 12 months.
Talent remains the cornerstone to navigate digital disruption
When it comes to digital disruption, private companies surveyed anticipate shifts in sales (55%), marketing (50%), and supply chain roles (49%) in the next three to five years. To prepare for this shift, 54% of mid-market and private companies are reskilling employees and 52% are redesigning jobs to seamlessly integrate people and machines. Also, 72% of respondents view internal learning and reskilling as a way to enhance employees’ potential — a tactic that could be key to capitalizing on technology, precluding the high costs of talent acquisition and circumventing pervasive skill shortage concerns. This is a particularly important focus as 22% of respondents expect their workforces to shrink as a result of new technologies.
Nevertheless, mid-market and private companies also are developing strategies to attract new talent while reskilling their current workforce. Over two-thirds (69%) of respondents plan to develop new talent strategies in order to attract, recruit and retain workers with experience in cognitive, analytics, AI and other emerging technologies. Meanwhile, nearly two-thirds (63%) of companies plan to hire for specific technical skill sets.
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Unlike prior year findings, respondents report they were less likely to utilize crowdsourcing and gig economy workers. Only a quarter of respondents (26%) find that contractual workers helped their companies become more agile in leveraging new technologies.
Leaders place a high premium on AI, but worry about potential bias issues
Deloitte Private’s report finds that 32% of private companies surveyed saw potential benefits to machine learning, robotic process automation and other cognitive tools, a 12% uptick from 2018’s survey results.
Although private company executives are seeing greater benefits from AI technologies, more than one-half of respondents (55%) are concerned about the use of AI, particularly when used by HR in decision making. Respondents cite concerns that automated decision making of this nature may not be aligned with regulatory and legal issues as well as a lack of objective business review when AI is used for monitoring and machine learning of human patterns.
“AI is transforming the way in which both private and public companies do business,” said Chris Jackson, Deloitte Private technology leader and managing director with Deloitte Consulting LLP. “However, executives will need to be aware of the potential legal and ethical considerations as they embrace AI and machine learning, especially given the speed of change resulting from the digital disruption occurring across many businesses and sectors.”
Deloitte Private is focused on serving private clients of all sizes and driven to address the opportunities and challenges unique to private businesses. Deloitte Private delivers audit and assurance, tax, consulting, and risk and financial advisory services tailored for private companies, including family businesses, high net worth individuals, private equity funds, portfolio companies, and venture-backed companies.