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Interviewer: Paul Lee
Interviewee: Jolyon Barker

PL - Hello, my name is Paul Lee, a director at Deloitte and a lead author of the predictions series. Predictions is an annual series of views on the global technology, media and telecoms sectors which Deloitte has published for the last eight years.

In this podcast, I'm talking to Jolyon Barker, leader for the technology, media and telecoms practice for Deloitte in the UK. Jolyon is going to address three questions related to predictions. Firstly why we do predictions, secondly how we did with the predictions we made about 2008 and thirdly what the overriding themes are for predictions 2009.

PL - Jolyon, at the moment predicting is very hard to do, why do you think predictions are so relevant for Deloitte in the UK?

JB - Well for us as Deloitte we look at predicting the year ahead for the technology, media and telecommunications industries to provide a context for the organisations that we're working with throughout the globe, helping them define their strategies, the complex moves that they need to make over the next year. I think 2009 is going to be a particularly challenging and complicated year as we face all of the implications of global recession and there is no doubt that for every executive in every organisation that we serve around the world, they are facing inordinate challenge. They want to have as much context as possible to make the decisions, often very, very difficult decisions that are going to have to be made over the course of this year.

PL - And to provide that context you need to have a robust methodology and how does the methodology that we're using stand out? What are the constituents of that methodology?

JB - I think the thing that makes predictions special, there are three things, firstly we operate on a global level so we really try and draw on the expertise of the Deloitte firm and our clients from around the world to make sure that we can bring to bear ideas in a very pithy and clear way. We check those ideas through our people around the world and we have over 6000 practitioners in Deloitte serving the TMT industry at a senior level and we can ensure that the ideas that we are putting in place as our predictions really resonate with them. Thirdly, and very specifically in this year we've spoken to 50 CXOs of our major clients, leaders in their respective industries to ensure that what we are saying really aligns with how industry is thinking into the year ahead. So here we're not trying to be deeply analytical in each prediction that we produce, we're trying to understand where the industry is going, draw on the expertise that we have, draw on that from around the world and synthesise it into where we see movement happening within each of the technology, media and telecommunications sectors.

PL - One of the key tests of how the predictions are is how we did last year. What's your view on how we did in 2008 for 2008's predictions?

JB - Paul, looking at 2008, we've had a series of predictions that have significantly resonated in the marketplace. When I look at the media industry, we projected that 2008 could see online advertising facing a barrage of obstacles and I think over the period we've seen the rate of growth fall by well in excess of 30% across a range of different categories in the online space.

If I look at the telecoms arena, we projected that mobile operators could use the prospect of a downturn to encourage customers to consolidate all of their voice spending on mobile, so foregoing the monthly fixed line rental. Now when I look at what's been happening around the world particularly in the US, we've seen, for example over the first half of 2008 a move to 17.5 % of households being wireless only, up from 13.5% the year before. So we're seeing a very, very significant shift into wireless only homes and in part that's as people want to forego that line rental.

If I look at the technology predictions, in 2008 we suggested that resistance might grow to the volume and depth of information that websites are capturing about consumers' online behaviour and some websites, we believed were likely to differentiate on the basis of that privacy. Over the course of 2008 we've seen Yahoo, we've seen Microsoft and we've seen Google all beginning to change the way they deal with private data. And very, very specifically we've seen Yahoo announce that it is no longer going to retain data on online searches beyond three months, previously that was at thirteen months. We've seen very similar statements from Google and Microsoft, both reducing, significantly reducing the length of time for which they will hold private data and make it available to people. So, in summary, my sense is that we produced a broad range of exciting predictions for last year and I think many of them really have held the course through 2008. I'm very expectant that our 2009 predictions will deliver the same sort of insight.

PL - And looking at 2009, again we have 30 predictions covering a large range of themes, but what do you see as being the dominant issues which are coming out in 2009?

JB - Well there is no doubt that 2009 will be defined by the global recession and the challenges in our economy which will create enormous challenge in the political environment and of course within the technology, media and telecommunications industries. We're seeing that really being defined through a number of themes and the rise of new business models will be one within this environment. We're looking at the idea of gadgets for free, so taking some of that mobile subsidy model and transferring it into other electronic areas. We're looking at the rise of the net book i.e. access to cheaper, portable computing. The change of business model in the enterprise as e-mail and the need to store vast amounts of data potentially gets replaced by a more social network orientated approach to communication within the enterprise. So the rise of new business models, a critical transformation in a recessionary environment.

The second critical theme within that recessionary context is, in the sort of words of Warren Buffett that you can really understand who's exposed when the tide, when the tide goes out and we've got predictions on what we've called 'Putting Print out of Peril May Require Stopping the Presses', which is about the, a perspective on the very challenging environment facing the newspaper industry in 2009. We look at the rising cost of free online content and the implications of organisations no longer being able to provide the volume of information that they have done for free to everybody. We've looked at what we've called 'The Third Screen Goes Dark - Mobile Television Loses its Reception', but the reality that the evolving mobile television business model is going to take longer to develop, it will require different mobile devices and it will be constrained by the backbone architecture of our mobile networks.

The third critical theme in the context of this challenging global environment for 2009 is around efficiency being everything. We look at common sense of green and lean IT; we look at the importance of 'Downsizing the Digital Attic' and ensuring that organisations are not spending inappropriate amounts on digital storage. We look at 'Data Ascend[ing] from the Basement to the Boardroom' as we've called the prediction but this is really about the ability of organisations to absolutely understand the data that they control and use it to ensure the absolute efficiency and effectiveness of their organisations and they way they target consumers and the markets that they operate in. So we have a range of predictions, we do believe that they are firmly in the context of what will be a very challenging 2009. We also believe that they will help organisations and individuals think through those challenges and maybe think a little bit ahead or in a slightly different way as to how they face those challenges and the decisions that are made in their context.

PL - So Jolyon, just to conclude, the outlook for 2009 is challenging but they're always silver linings in every context. From the predictions, what do you thing are the principal opportunities for growth in '09?

JB - Paul as you've said 2009 is going to be a very challenging year, however there are silver linings. If you look at the media industry, we've seen Mama Mia as the top grossing movie in the UK ever. We'll continue to see rising audiences on television. The challenge is going to be marrying that to falling advertising revenue base. We're going to see the advent of 3D cinema which I hope will be arriving more strongly in the UK this year.

At the same time if you look at the telecoms world, the smart phone is beginning to come of age, the use of data by a broader range of consumers beyond the core business customer. And although pricing is going to continue to be a challenge, we do see those smart phones continuing to establish and take ground over the course of 2009. And if I look at the technology industry, technology is ultimately the source of resolution for many of the challenges, be they around efficiency, be they around business models that we face as a society.

And I think the technology sector will continue to address those challenges, we will see significant pressure on margins but we're going to continue to see terrific innovation driving change across our economy and I think that will be of huge benefit to the UK and for our technology sector.

PL - Thank you very much

JB - Thank you