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2017 Technology Trends- Northern Tech leads the way

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Nick Horrocks, Director at GP Bullhound
http://www.gpbullhound.com/
07788441200
nick.horrocks@gpbullhound.com
Twitter id – @NickHorrocks1

Whilst there is ongoing dynamic change within the global tech sector, the Northern economy remains well-placed to take advantage of this market. The North is an excellent place to start, incubate and grow tech businesses. It enjoys a strong transport infrastructure, a high-powered academic backbone and a relatively low cost base- all of which are vital components for a thriving tech community. This community has already started to develop superstars including MoneySupermarket, GB Group and BooHoo. In this article we want to showcase various tech trends and how the North is well-positioned to take advantage of these.

The Tech world is nothing if not broad and dynamic. GP Bullhound’s recent Technology Predictions report highlighted the fluctuating fortunes of various sectors . As businesses, regulators and consumers continue to grapple with an endless wave of new technology solutions so the fortunes of any particular sub-sector ebbs & flows. Nevertheless, the North is able to showcase some exciting companies which remain at the forefront of their markets.

The Connected Car is no longer a sci-fi fantasy. This year will be incredibly important for manufacturers and advocates of the technology to prove reliability and safety, not just to satisfy regulations, but also to tackle concerns amongst potential consumers.

The biggest obstacle that driverless cars face is the need for regulatory clarification – with Google, Ford, Volvo, Lyft and Uber forming a coalition to develop national guidelines for the use of driverless cars on American roads. The US National Highway Traffic Safety Administration (NHTSA) has recently issued a 15-point safety guideline for autonomous cars, which addresses issues ranging from privacy and system safety to post-crash behaviour and object detection. Though the publication of this guideline suggests a willingness by official agencies to embrace driverless technology, we do not anticipate the widespread adoption of autonomous cars without the development of a tighter regulatory framework that addresses safety, insurance and security concerns. Though the development of autonomous technology continues to make substantial progress, a series of regulatory, insurance and safety issues must be resolved before driverless cars become a common sight on the road.

Despite the uncertainty, the North is well-placed to take advantage of Connected Cars. We believe in the short to medium term that any businesses which focus on vehicle data are in a strong position. Anything from car financing, car sales data, vehicle maintenance and monitoring will help bring the Original Equipment Manufacturers (“OEMs”) , for so long so distant from their customers, closer to them. In the North, we have exciting companies in all these categories. AutoTrader is well known to consumers but also companies like Zuto in the car financing arena and Zerolight, which provides exciting car configuration software recently launched across the whole Audi range.

Another sub-sector facing further scrutiny from both consumers and regulators is Fintech. Some of the explosive early growth in Fintech has slowed as companies, especially in P2P lending and blockchain, face operational and regulatory challenges.

P2P lending platforms have the potential to create an optimal lending process that reduces costs for borrowers and increases returns for lenders. P2P lending enjoyed significant rapid expansion until early 2016, primarily driven by more efficient loan origination processes and the substantial capital from institutional investors in a lower interest rate environment. In fact, US-based P2P lending platforms received roughly 80% of their capital from institutional lenders last year. As competition in the P2P lending market intensified, some less qualified players focused on quantity over quality of their loans. This created bad publicity for the entire industry and raised the fear of increased default rates. Consequently, some P2P lending players are experiencing “capital flow” issues as both institutional investors and the general public are hesitant to invest in P2P loans.

Blockchain has the potential to be one of the most disruptive technologies, impacting many industries such as finance, legal and the Internet of Things (“IoT”) where transparency, efficiency, security and traceable unique identifiers are key attributes. While bitcoin was the first well-known application of blockchain, the use cases have expanded to wire transfers and international payment settlement solutions between banks.

There are still some challenges slowing down the adoption of blockchain technology, most notably regulation, the public’s confidence in the system and the significant upfront costs to replace established legacy transaction processing systems. Financial regulators are trying to assess the implications of blockchain and determine whether it could meet the broad technical, governance, legal and regulatory requirements of local governments. While further applications of blockchain technology will continue to emerge in 2017, significant investment, time and collaboration among key parties in the banking ecosystem will be required to mitigate existing challenges and push for widespread adoption.

In the North, we are fortunate to have a very active Fintech community. Exciting companies include Nostrum Group, AccessPay and Evolution Funding. We believe the platforms and infrastructure are in place to see this sector develop significantly over the next few years.

Whilst the Automated car and Fintech are facing challenges, Virtual Reality (“VR”)/ Augmented Reality (“AR”) is set to become the next major media platform in 2017 with the potential to be as revolutionary as the laptop and mobile phone. What remains to be seen is whether content developers can keep pace with the rapid progression of hardware capabilities.

The industry is at the peak of the hype cycle with hardware progressing ahead of content. Early pioneers of content will be crucial in building the VR ecosystem and maximizing the potential of the hardware. Realizing that VR is not just a passing trend, but a new way to engage with end users and provide unique brand experiences, led media companies and brands to allocate larger budgets for VR. This will subsequently generate demand for content. As content creation becomes ubiquitous with more tools and professionals, the cost of creating VR content will decline, thus further boosting the ecosystem.

Augmented Reality has been making significant progress albeit the technology and adoption are two to three years behind VR. The Pokemon Go craze and the launch of Microsoft HoloLens, Sulon Q and Meta AR have changed the public’s perception and highlighted the potential of AR. Pokemon Go has 500 million downloads to date and 50 million daily active users at its peak. Although the initial application of AR has been on gaming, other sectors such as healthcare and industrial AR are using the technology for inspection, real-time guidance and operational support. We expect to see a wide range of applications as AR evolves.

We anticipate the North becoming a prolific contributor to this sector as it develops. There is a core of gaming expertise which is increasingly being deployed towards AR. Liverpool-based Draw & Code is one such business which is looking to explore the endless possibilities of this nascent technology. Similarly, Digital Bridge, which has recently signed a contract with John Lewis to provide its visualisation tool software, allowing customers to see what home-decoration products look like in their room.

February 14th, 2017

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