Technology Disruption

January 08, 2021

By Richard Cleaveland and Christine Gagnon

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The year 2020 has been an extremely challenging one and through it all, technology innovation has allowed many to stay connected with one another, continue working and even enable on-line commerce while physical locations were shut down. In fact, while some industries continue to struggle due to the COVID-19 pandemic, technology-focused companies have carved a path forward for business and have even thrived in this environment. The shutdowns have caused widespread adoption of collaboration technology, e-commerce platforms and mobile platforms, and have enabled many to re-think how they work, learn, shop and even engage with their medical providers.

Companies in these areas have led the significant positive performance of the stock market and have fueled a flurry of M&A and IPOs as 2020 closed out. Companies such as Zoom Technologies, DocuSign, Amazon and Shopify, among many others, have encountered growth in market capitalization that range from 100% to 300%, and some of the hottest IPOs of the year were e-commerce platforms such as DoorDash and Airbnb. 2020 has truly been a blockbuster year for IPO activity, which demonstrates how the public markets have valued technology companies than earlier private funding rounds. Enterprise solutions providers also realized the need to add collaboration and mobile functionality to their platforms to be competitive as evidenced by the recent announced transaction between Salesforce.com, Inc., a widely used CRM solution, and the business communications platform developer Slack Technologies.

Equally significant was the growth encountered by infrastructure and cloud services companies that support collaboration and e-commerce platforms. The need to operate in a virtual environment and build increased resiliency into systems led to significant growth for those industries. In addition, for entities that did not already have their systems and infrastructure in the cloud, it became an imperative to move there as quickly as possible, which further fueled growth in the sector.

Finally payment platforms have seen significant growth in customer accounts, customer engagement and transactions during the year. Payment applications such as Venmo, PayPal and ApplePay have made it increasingly easy to have a touchless, germ-free way of instantly making payments and also simplified bill splitting. Additionally, the payment-based analytics provide business owners with more precise payment data and allow for better monitoring of customer transactions and spending.

Even with the full recovery from the pandemic, the demand for collaboration tools, e-commerce and payments platforms will continue and will fuel further innovation and M&A activities in these areas.

Steve Socolof, managing partner of Tech Council Ventures, an early stage venture capital firm, said: “The COVID-19 pandemic accelerated a trend already occurring to a more remote, mobile working environment. Not only does this provide an opportunity for collaboration tools, but will also increase demands for automation and security. This will be seen in industry as Industry 4.0 with data collection and analytics providing optimization and visibility across supply chain, manufacturing, and delivery with more connection directly to the end-customer.”

The focus on innovation in the upcoming year will include those technologies supporting increased collaboration and mobility. Virtual meetings are going to continue to play an important role in how business is being conducted in the post-pandemic workplace and even more so, mobile technology will be required for immediate access at any time, from any place.

In addition, the continued transition to Industry 4.0 and the demands for automation and transparency will lead to further innovations and adoption of solutions using artificial intelligence and machine learning, and further use of data analytics.

On the Fintech front, PitchBook, in their Q3 Emerging Tech Research, believes large incumbent players in the financial services sector and high levels of regulation may continue to limit the disruption to core services such as banking and lending. In addition, they believe while e-commerce and peer-to-peer payments activity is up, volume of purchases may be adversely impacted by the prolonged economic stress of the pandemic. Despite this mixed outlook, while the payments and wealth sectors of technology may not have seen the growth other areas of technology experienced, there continues to be wider adoption of mobile and virtual banking services and areas such as cryptocurrency which continues to garner credibility with the industry. In fact, Coinbase Global, the largest U.S.-based cryptocurrency exchange has filed with the SEC for an IPO. This is actually the first major bitcoin-focused company to test the public markets. In addition, Square in its third quarter letter to shareholders discussed a continued acceleration of secular shift such as omnichannel commerce, contactless payments, and digital wallets for consumers.

Finally, there continues to be significant changes to health care. With the new administration, there is likely to be an increased focus on access. With the successful use of telehealth platforms over this past year, expect continued use of this technology to reach those groups currently underserved. In addition, the continued focus on behavioral health solutions will also drive demand for applications using AI and data analytics.

These advances in automation, mobility, collaboration and data analytics drive across multiple verticals and provide a significant demand for better security over data and personally identifiable information. This perfect storm of a world extremely dependent on technology has become a breeding ground for cyber attacks and threats. In a recent article on cybersecurity risk assessment planning, Jason Connotillo, a Director in EisnerAmper’s Process, Risk, and Technology Solutions, states that although “cybersecurity threats themselves are no longer novel, clients are taking notice that attacks appear to be rising during the pandemic and moving to a virtual work environment.” In addition, increasingly regulators have questioned policies used by aggregators of data to safeguard personal information. The wave of regulation in this area will also drive innovation.

The COVID-19 pandemic was the perfect storm to cause significant technological disruption to how people work and live. This coming year will bring even more innovation and continue to drive the acceleration of the trend to a more distributed, connected and data driven society.


Our Current Issue: Q1 – 2021

About Richard Cleaveland

Richard A. Cleaveland CPA is an Audit Partner and National Software Sector Leader, within the firm's Technology and Life Sciences Industry Group,

About Christine Gagnon

Christine Gagnon is an Audit Partner and Co-leader of the Florida Life Sciences and Technology Group.

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