Tech Index 2024: Riding the next big wave

Action to counter the threat of cybercrime has had little impact on the levels of attacks we are seeing across the globe.

Cybercrime is becoming both bolder and more brash, with attacks continuing to rise in frequency and sophistication, in part increasingly powered by AI technology which bad actors have harnessed to their advantage.

The threat remains asymmetrical, with criminals able to launch ever more devastating attacks much faster than private and public sector organizations, constrained by budgets and bureaucracy, can build defences against them.

The use of AI by criminals is a major new trend.

It means that the tell-tale signs that once would hint at an email phishing attack – spelling mistakes, frequent typos, for instance – have been eradicated using powerful generative AI models, criminal versions of systems like ChatGPT. We’re also seeing the use of deepfakes in the context of verification calls made in the wake of a phishing attack.

And AI has opened new threat inroads such as data poisoning where bad actors attack the data training the AI being used by organizations, so that whole systems reliant on it can become infected.

With the regulatory environment becoming tighter, bad actors are even turning this to their advantage.

As an added lever to extort a ransom, we’ve seen attackers actively approaching regulators (or threatening to do so) to report companies trying to keep quiet about suffering an attack when it should be promptly declared to the authorities.

In addition, the barriers of entry into this criminal activity have been lowered as ‘ransomware as a service’ becomes more prevalent. You don’t need a team of expert coders to staff an attack. The software can be bought off-the-shelf from other criminals.

In an increasingly tense geopolitical environment, we are also seeing state-sponsored cyberattacks on the increase, whether for the purposes of industrial or military espionage, sanctions busting, or, increasingly, to attack important infrastructure including energy and water utilities, financial institutions and healthcare systems.

Even important regulators are not immune from attack. Canada’s anti-money laundering authority, the Financial Transactions and Reports Analysis Centre (Fintrac) was hacked in March 2024, shutting down its web reporting system. This collects data on millions of suspicious or large transactions providing key intelligence used in blocking money laundering and the financing of terrorists and organized crime.

And the problem is a global concern.

Until two years ago, large-scale cyber incidents were rare in Australia. But that has all changed with high-profile attacks on Optus, the telecoms giant, and Medibank, the private health insurer, both impacting around 9 million individuals. In 2023, Latitude, a financial services provider, also suffered an attack affecting an estimated 14 million current and former customers across Australia and New Zealand, despite some individuals not having dealt with the company for many years previously.

Elsewhere in Asia, we have seen a sudden and massive spike in attacks in recent months with personal data exfiltrated from systems and posted on the dark web to extort a ransom.

Despite the huge potential benefits that can come from monetizing data, our global survey suggests that many organizations remain wary where data monetization is concerned or are just dipping their toes in the water.

Respondents, for instance, rank data monetization at a relatively low level in terms of the potential growth opportunities.

It lies well behind AI, 5G, digital transformation, cybersecurity and the Internet of Things, even though all these are already (and will increasingly become) fundamental to effective data monetization.

AI, 5G, digital transformation and cybersecurity are all seen as key opportunities for future business growth.

It is perhaps not surprising, then, that less than a third of respondents say they are currently making full use of data monetization in their operations.

That figure rises to 38% for respondents in Europe, where data regulation is most mature and increasingly pervasive, but falls as low as 19% in the US and 18% in the Asia Pacific region where regulation is currently less developed and much weaker.

However, the number of organizations making limited use of data monetization is considerably higher, rising to 57% in the US and 54% in AsiaPac, with scores in Latin America and Africa at 51% and 43%, respectively.

This finding is much more in line with what we are seeing in our own practice, where clients are increasingly looking for opportunities to process and repurpose data, both in highly regulated sectors like financial services and life sciences, as well as those where regulation is lighter.

Although adoption may be slow, we believe many organizations do in fact see significant untapped potential in monetizing their data.

Digital transformation has been a buzz word across almost all sectors for many years now, yet relatively few organizations have really grasped the scale of change that real transformation entails.

In that sense the term digital transformation has become somewhat overused and misses the point – that organizations are on a continuous journey of deep digitalization, with the power to fundamentally change their business models, particularly with the introduction of advanced AI technologies.

After all, it’s not long since the advent of blockchain technologies, which some believed would be equally transformative, but which are still finding their homes in business processes. Not all organizations have fully grasped the potential of cloud computing, and the Internet of Things is still in its relative infancy. Now we are beginning to glimpse the possibilities that AI can bring and next it will be quantum computing.

It’s a case, therefore, of digital evolution rather than digital transformation and companies need to rethink their approach to becoming a technology and data-centric enterprise and be nimble enough to change and adapt to exploit the opportunities that new and improved technologies will present. That approach must embrace that true transformation is really an evolutionary journey.

Incremental change

For many companies, digital transformation tends to remain focused around discreet projects, with start and end dates and budgets allocated accordingly.

Generally, this approach results in particular systems and processes being optimized using digital technology rather than transforming the entirety of the enterprise to operate in a radically different way, becoming more digital-centric and, over time, more AI-centric.

Our Tech Index survey in many ways reflects this current state of play.

When asked about the greatest benefits of digital transformation our respondents highlight incremental improvements to the business consistent with a project-based approach to digital transformation.

For instance, achieving greater flexibility and agility to meet business needs is cited by a third of respondents. Having more streamlined processes ranks at the same level in most regions, although it is highest in North America.

Improved competitive edge, better information flows and speeding up the deployment of new technologies all come in at around the same level, although reducing IT costs were seen as a greater benefit in Africa than elsewhere.

Greatest benefits of digital transformation

A range of benefits from digital transformation are recognized, including increased flexibility (particularly important in LATAM), more streamlined processes (particularly important in North America), improved competitive edge and improved information flows. Again, cost reductions are seen as an important benefit in Africa.

A similar picture emerges around what are perceived as the greatest challenges of digital transformation.

Here, exposure to greater security risks ranked highest, especially in Latin America. The cost of disruption to the existing business were cited by 40% of respondents globally, as did the integration of new and legacy systems – the latter highlighted by over half our respondents in Africa.

Nearly four in ten expressed concerns about the levels of investment required while finding the right technology partner was the biggest concern in the Asia Pacific region.

Given the economic and political uncertainty of recent years, you'd be forgiven for thinking sustainability and ESG issues would have fallen down boardroom agendas.

That was a trend in past moments of economic turbulence, with companies retreating from commitments on the environment and social responsibility made in more prosperous times. One example is the immediate aftermath of the global financial crisis of 2008.

But our global survey of attitudes to ESG show a clear trend in the opposite direction. These issues have grown as priority areas for action right across the world and in most sectors.

Changes in prioritization of ESG issues in the last two years

Just under half of organizations said ESG issues have grown in importance compared with other concerns, with 67% of respondents in Africa taking that position. That is significantly ahead of other regions, but unsurprising given the devastating impacts of climate change already felt across the continent.

Globally, a quarter reported no change in the importance they attach to this topic, and only 26% said ESG issues were now less of a priority.

These findings match our client work across many jurisdictions. This is most often driven by recent or emerging regulation and growing stakeholder pressure as the world looks for solutions to tackle urgent environmental and social challenges, including climate change.

Companies most directly affected by regulation are increasingly engaged with sustainability. But many others in regions where regulation is less mature are still taking action, often driven by strong stakeholder pressure to prepare for potentially even stricter requirements by the time they are implemented.

But in some sectors have deprioritized sustainability and ESG issues, particularly where the short-term focus has been on battling through a cost-of-living crisis and a high inflation environment.

After two years of severe turbulence, a sense of calmness and confidence appears to be gradually returning to the Fintech sector for innovators and investors alike.

Our survey finds that Fintech features as one of the key areas for potential business growth although it ranks in sixth place, well behind AI, 5G, digital transformation, cybersecurity and the Internet of Things.

This suggests that uncertainty still lingers over the sector, although it’s worth noting that respondents in North America, the Asia Pacific region and Latin America all see greater growth potential in the sector than in other regions.

Two factors in particular rocked the sector in 2022, with the impact persisting through most of 2023 – uncertainties over the future direction of regulation and valuations of early stage and even more mature Fintech businesses which had sky-rocketed and become unsustainable.

Against that backdrop there was a sharp correction, with many of these businesses either extending funding runways or forced into down rounds, often having to accept a significant valuation haircut, and with backers pressurizing start-ups to cut costs and staff.

Funding remains constrained in 2024, but we are seeing valuations improving with multiples strengthening and settling at more sustainable levels.

There is also a continuing trend for established financial services companies to partner with tech innovators rather than acquire them, if they do not have the capability to develop systems in-house.

Given the turbulence of recent years, our expectation is that we will see a flight to safety, with customers increasingly looking to established financial services players who have successfully adopted digital banking technologies rather than relying on pure Fintech operators.

Concerns about the financial strength of Fintech providers continues to score almost as highly in our 2024 findings as in our last survey two years ago. But, as the chart shows, other issues rank higher as perceived drawbacks from Fintech investment.

Disruption to the existing business, concerns around security, the difficult of integrating new technology with legacy systems and lack of skilled staff all rank higher.

Benefits of Fintech

Key benefits of Fintech are seen to be better functionality and increased speed/ agility. Flexibility is particularly important in Africa and the ability to better meet regulatory requirements is particularly important in Europe and APAC. Reduced operations costs and the ability to be more customer centric are of greater importance in North America compared with other regions

Private and public sector organizations across the world are beginning to find an increasingly wide range of ways to deploy Internet of Things (IoT) technology, powered by super-fast connectivity.

But these are still relatively early days for IoT applications, and the variety and scale of use cases is only likely to multiply in the years ahead, particularly as they become enhanced by AI.

They may not catch the headlines, but industrial settings have already become a rich proving ground for IoT devices using and processing huge amounts of previously uncollectable data to fine-tune the efficiency of production lines and supply chain management. Systems in this setting, as in others, are becoming more accurate and reliable thanks to advances in technology, including error-correcting back propagation learning.

Manufacturers are also using IoT solutions to improve the performance of their products. The auto industry is a case in point, where a growing number of sensors are being built into car models to collect data, otherwise impossible for humans to understand and interpret, and process it in real-time to improve vehicle performance and increase safety.

High-end luxury cars can, for instance, scan the road ahead to detect potholes, quickly adjusting the vehicle’s suspension, with incredibly fast connectivity allowing real-time data processing that only a few years ago would have been rudimentary. Devices can also act as virtual personal assistants, for instance managing routine maintenance, even up to the point of booking a service when it becomes due.

Airlines are looking to deploy IoT in innovative ways, for instance enabling real-time maintenance reporting while planes are in flight so that engineering crews are ready to respond on landing. Some are also looking at creating intelligent labels linked to ticketing information to ensure luggage goes to the right destination.

Governments and local authorities are putting the technology to growing use to enable smart cities, processing much deeper data to plan traffic management systems and new roads and railway lines. In regions increasingly prone to extreme natural events, such as floods and earthquakes, IoT technology is playing an increasingly powerful role in predicting and recovering from disasters. Energy and water utilities are using it to better manage grid and pipeline capacity.

Although some sectors, like financial services, may struggle to find many use cases for IoT devices, that’s not true of all. Much more accurate health-tech devices, such as wearables, are able not only to send data to healthcare professionals but also to insurers with health, wellbeing and lifestyle readings affecting the premiums individuals pay.

Acquisitions appear to be back on the agenda for many of the companies we surveyed across the world after one of the steepest downturns in M&A activity we have seen in decades. The decline in the volume and value of deals since the extraordinary bull run of dealmaking ended abruptly in 2022, has seen an 18-month period where the market was idling in the doldrums. In some markets the decline in activity has been even more severe than the downturn we witnessed after the dot-com bubble burst in the early 2000s and in the wake of the 2008 financial crisis. Economic conditions remain challenging in 2024 and growing geopolitical uncertainties continue to test the nerve of investors. But our survey shows that many of our respondents are once again weighing up the varied advantages of acquiring external businesses.

Consistently, across the world, respondents highlight the benefits they expect to enjoy once back on the acquisitions trail. Accessing new technology, the ability to scale at pace and establish a presence in new markets, increasing market share rapidly, and accessing skilled talent, all rank highly as reasons to do transactions.

However, key priorities emerged in different regions.

For instance, in Europe accelerating market share growth ranked higher than in other markets. Establishing a presence in other markets was a priority in the Asia Pacific region, while in North America widening the talent pool ranked higher than elsewhere.

Confronting challenges

Asked what are the major drawbacks from acquiring an external business, our respondents are again fairly consistent across different markets. Integrating systems across the enlarged business, restructuring complexities, the cost of detailed due diligence and fear that this will divert funding from other crucial projects, all ride high in their concerns. Again, there are some interesting regional variations. Integrating working practices and cultures is a particular concern for African organizations, while due diligence costs and the threat that an acquisition will act as a distraction for senior management score highly in Latin America. In Europe and APAC more respondents worry about integrating systems that may not be compatible.

Despite a number of challenges that have impacted the development and deployment of 5G, it continues to be seen as a technology with huge potential, not least because of the advantages it offers in terms of data processing speeds, increased connectivity and lower latency.

Respondents to our survey placed 5G second only to AI in terms of technologies that offer greatest potential in the coming years, ahead of digital transformation, cybersecurity, the Internet of Things and Fintech.

Overall, 5G scores 59% in our global survey – compared with AI at 63% – and it scores considerably higher than that in Europe (63%), Africa (61%) and the Middle East (68%). In some ways that is surprising, since 5G has faced a series of significant hurdles since it began to be rolled out across networks.

These include the imposition of tough national security controls to restrict Chinese involvement in key markets, a struggle to prove at scale many of the anticipated use cases for the technology, and concerns over spectrum allocation. Most of these issues continue to bite.

Two things stand out from DLA Piper’s seventh biennial Tech Index surveying the mood of organizations and key individuals in the technology sector – an overwhelming sense of optimism and an absolute focus on the promises, and potential threats, of Artificial Intelligence.

The first is, perhaps, more surprising than the second.

The global economy is in much better shape than when we last took soundings in 2022. Then inflation was soaring, and interest rates had climbed to a 40-year high, abruptly ending a protracted period of readily available debt financing and a transactions boom in which the tech sector played a starring role.

Today the outlook is brighter but not without continuing uncertainties.

Inflation may have come down swiftly to more sustainable levels, but interest rates have not fallen as fast as many had hoped, and all the forecasts project a prolonged period of relatively sluggish growth in many major economies, most notably Europe and the UK.

It’s, therefore, surprising that our latest survey finds the tech sector in such exuberant mood, with a record overall tech score of 71, three points higher than in 2022, which was itself the highest score we had ever seen in our surveys.

And importantly we have, this year, taken a truly global approach to canvassing opinion so have a picture of consistent confidence across the world, with only slight variations from region to region.

Past editions of the Tech Index have focused exclusively on Europe, relying on a much smaller sample size.

But this year we have widened the scope, questioning a total of 1,200 respondents and testing the opinions of businesses with revenues ranging from USD10 million to USD10 billion to give us a deeper insight into the mood of tech businesses and the people shaping tech policy in government and regulatory authorities.

Respondents this time not only express confidence in the current economic climate but are equally upbeat on the current direction of regulation, availability of skills, the state of venture capital markets and the current IP environment. All are seen overwhelmingly to be conducive to growth, although there are bigger doubts expressed about tax regimes.

Against that backdrop, respondents expect revenues to increase in the year ahead, with more than a third expecting growth of more than 6%.

It’s only when asked for their reflections on the current febrile geopolitical environment that their confidence dips and by a considerable margin.

That’s only to be expected against a backdrop of war in Ukraine, conflict in Gaza, continuing trade tensions between the US and China, and a raft of elections that have proved highly unpredictable, with growing concerns over the rise of protectionist and divisive populist movements. The outcome of November’s US election is a particular cause for concern, given the global economic and political impact it will undoubtedly have.

How, then, to explain the confidence that tech businesses are expressing in a world which, at this level, remains troubled?

We believe it’s a reflection of the resilience businesses have had to show after coming through what has been a very unsettling few years. They’ve coped with the shock of the pandemic and the sharp economic correction that came in its wake, including soaring energy prices, supply chain disruptions, the need to retrench and restructure and conflict.

It’s as if they have emerged with a new mindset – ready to see uncertainty as the new norm, better able to navigate unpredictable challenges and always eager to look for new opportunities for growth.