With a new year almost upon us, Jon Snade, senior assoicate with Pinsent Masons solicitors looks at the important trends technology companies need to be aware of.
As we move towards the end of 2012 and start thinking about 2013, what do tech businesses need to prepare for? From our experience advising companies of all sizes we believe there are seven key trends that they need to focus on:
- Exploiting and protecting intellectual property
Intellectual Property is at the heart of tech businesses remaining competitive and has increased in importance in 2012 in two areas - countering infringement issues and effectively exploiting IP. Valuation of IP is now closely linked to overall company worth - as demonstrated by Yahoo's lawsuit against Facebook in March 2012 claiming patent infringement.
This forced Facebook to update its initial public offering (IPO) filing, warning would-be investors that the lawsuit could have a "material" impact on the social network's business. Companies at every stage of growth need to ensure that their patents and other intellectual property rights are properly protected and that they do not in turn breach the intellectual property rights of others.
- Convergence between technology sectors
While convergence of voice, data and mobile has been happening for a while, we are now seeing a wider convergence of software, networks and the devices used to access information. This is leading to the "technologisation" of different sectors, such as healthcare, oil and gas and financial services. Many of these companies are now essentially tech businesses, relying on converged IT to operate in ways that were previously impossible.
- Securing skills in a competitive marketplace
Innovation-based businesses in the UK rely on access to a skilled workforce, so securing the right staff and skills is a major focus. Changes in 2012 to the visa system for employing non-EEA workers in the UK has had a major impact, making it harder for businesses to employ migrant workers.
Companies need to look at how to tackle this 'innovation gap' either through increased training of UK staff or investment in R&D centres outside the UK.
- Increased focus on protecting personal data
With social networks now part of the mainstream, we're now seeing an increased consumer focus on privacy and protecting their personal data. Technology businesses need to be alert when storing, using and securing personal data to avoid a public backlash and potential legal sanctions.
There have been a string of high profile data breaches (including a recent case at Dropbox). Many of these involve Cloud-based businesses and we're seeing an increasing trend for "self-reporting" by cloud businesses to the Security, Trust & Assurance Registry (STAR) in order to reassure consumers.
- Incentivising the workforce
Traditionally, technology businesses recruited and incentivised staff based on a combination of salary, bonuses and stock options. Low equity prices mean many stock option schemes are currently essentially worthless so companies need to look at restructuring incentive schemes so that they regain their place as a staff motivator, particularly if investors are looking to realise value through an exit.
- "Disintermediation" via the internet
The power of the internet and social media is allowing B2B and B2C customers to go direct in more industries, especially professional services. This means that non-technology businesses need to capitalise on these opportunities, with a strong online presence vital to continued growth.
- Safety on the internet and investor relations
The reputational impact of illicit content was shown by investors 3i and Balderton pulling out of Habbo Hotels parent Sulake following revelations that the teen website was hosting illicit content. We are now seeing increased due diligence and monitoring from investors in online businesses to guard themselves against this sort of threat.
Companies themselves will need to invest more financial and time resources in safety and monitoring issues in order to secure funding.
2013 promises to be another year of change in tech - now is the time for businesses to prepare themselves to meet the challenge.