High mortality rate in software-apps sector an object lesson for all TMT companies, says AlixPartners industry report

08 November 2017

NEW YORK (Nov. 8, 2017)—The fact that almost 1,300 firms in the software-applications sector have disappeared in recent years should be an object lesson that no company in the technology, media and telecommunications (TMT) industry is immune from the potential negative impacts of sectoral growth.  That’s according to a new report, “The TMT revolution: ride the wave—or drown in it,” issued today by AlixPartners, the global business-advisory firm. 

The AlixPartners report asserts that the TMT industry is poised for further strong growth in the years ahead, forecasting industry market capitalization in 2020 of $17 trillion, up 31% over 2016’s $13 trillion. However, the paper also finds that as an example of things to fear no fewer than 1,278 software-apps companies have exited the public markets since 1996, due to bankruptcy, acquisition or privatization. This, says the report, is the direct result of failing to navigate a three-phase maturity process: Disruption, High Growth, and Commoditization or Consolidation.

To minimize the risk of becoming a casualty of growth, the AlixPartners report recommends a framework for action by TMT business leaders, dubbed “CODE”—for Connected products and services, Open business models, Defense-oriented cybersecurity and Engineered systems for data collection and analysis. It also emphasizes the importance of TMT companies having a sharp focus on return on invested capital (ROIC), the financial metric often said to be best for determining how big a “moat” any company has around itself.

Francesco Barosi, global co-head of Technology, Media and Telecommunications Practice at AlixPartners and a managing director at the firm, said: “As TMT companies mature, many will experience the same plateauing of growth that companies in other industries have already gone through. The way to avoid that is to be very proactive in managing costs and instilling a strong ROIC focus all throughout the organization.”

Giacomo Cantu, a managing director in the Technology, Media and Telecommunications Practice at AlixPartners, said: “Operational inefficiencies in TMT can be especially insidious, given the complexities and short life-cycles of many products. This often manifests itself in bloated organizations with overly-complex structures. That’s why it’s important to put the right business frameworks in place and regularly re-examine them, even when in growth mode.”

The full report can be downloaded here for immediate usage.

About AlixPartners

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