During a recent presentation in Dubai, Paul Lee, Global Director for Deloitte Research, Technology, Media & Telecommunications, presented the company's 2016 TMT predictions with specific relevance to the MENA (Middle East & North Africa) region for its fourth year.
Deloitte supplies industry insights based on deep analysis, built around meetings with industry experts and field executives, as well as Deloitte's proprietary programs of research with tens of thousands of consumers worldwide. Global TMT predictions focused this year on virtual reality, among other topics such as mobile ad-blockers, mobile games, Gigabit internet and cloud services.
"A lot of energy has been poured into these predictions, as there are few other industries that are as exciting, fast-evolving, and game changing as TMT," said Emmanuel Durou, Partner and Technology, Media & Telecommunications (TMT) Leader at Deloitte Middle East in his intro speech. "More exciting than this is witnessing the Middle East adopt and create its own trends in the TMT space. Over the past five years, this region has made significant forays in broadband connectivity and speed, which have in turn enabled new categories of service to become mainstream."
"In 2016, we look forward to seeing some evergreen ideas finally take flight in the Middle East," Durou added. "These include virtual reality corporate applications, hybrid cloud adoption, or the take-up of cognitive technologies in enterprise software. We also see mobile everywhere – taking over in gaming and now payment with touch commerce."
Paul Lee led the TMT prediction discussion held at the Westi Dubai Mina Seyahi. In his introduction speech, he said: "Based in London, I have two responsibilities: one is to do research, and the other is to talk about it. In terms of our predictions, we try to aggregate all the definite sources of insight that we have access to. We liaise with specialists in tech-media, the consumer market, and others which all converge and spill over into other sectors."
"We also do our own research, conducting a lot of consumer surveying throughout 30 countries, and speaking to experts within the industry in question," Lee added. "Essentially, what we try to do is assemble as many pieces of this jigsaw puzzle of the tech-telecom sector, and provide useful information on what's happening."
"How good are we at predicting?" said Lee. "In recent years, we've been about 80 percent correct. We try to be as evidence-based as possible. When the market is pointing towards a success story, we're happy to argue and say we don't think it will be. If we believe that it is the case that consensus is wrong – and what we tend to find over time – is that the reporting which is out there gets more and more excitable year-on-year."
According to Lee, one of the topics Deloitte has been asked about many times over the years is virtual reality (VR). Deloitte predicts that majority of MENA revenues from VR devices and services in 2016 will continue to be driven from video games. According to industry sources, the estimated MENA computer gaming market is currently around US$1.5 billion and forecast to grow three-fold by 2020, the majority of which will come from the GCC region.
According to Deloitte, GCC countries have already witnessed companies beginning to sell commercial enterprise VR solutions and corporates incorporating VR solutions, to help sell their products and services. Although currently at a low base, the VR market in the region is expected to grow at a rapid rate, driven as much by the corporate sector as by gaming.
Development of VR technology has spurred a global race to identify and capture the next major market opportunities. However, VR still faces technological and user experience challenges before it can make the transition to mainstream adoption. So, will VR crossover from niche to mainstream? Deloitte predicts that it eventually could, but not yet.
"What we're forecasting is that there will be growth in the VR market, but a very small amount in the bigger picture," Lee explained. "We are projecting about $700 million in sales of hardware and $300 million in sales of content, all of which will be in games, which in total makes it about a $1 billion market. When it comes to consumer electronics, $1 billion is not very big, especially when you compare it to the smartphone market which is the biggest market, which generates $1 billion globally every single day in sales."
"With VR, what we're looking at is about 2-3 million devices, which again is not very many," Lee added. "One of the things you have to consider with any new technology is how consumers will react to it. You can have the most amazing technology, but if it doesn't resonate with how people behave and how they're hardwired, it probably won't succeed. In terms of virtual reality, there are many different calibers and qualities. But often, when they're talked about, they're conflated and presented as one."
The interesting thing about VR is that you can only consume the content by yourself – when generally, content is consumed in the company of others, because you react to other people's reactions. This is not possible with VR. Another challenge about VR is that if you have a really convincing experience, for example if you are situated in a hot environment, but are virtually in a cold or frightening atmosphere, it can trick the brain which isn't good for people. So what will VR do to health?
"Oculus is already aware that using VR can cause problems with hand-eye coordination, and it warns Oculus Rift users about potentially dangerous symptoms of VR use," Lee explained. "Goldman Sachs predicts VR industry to reach $80 billion, but I don't personally think it will get to $80 billion."
Types of virtual reality according to Lee:
- Full VR: "Expensive, powerful virtual reality model with a quality screen – expensive to use. $2,000 cost with expensive components. Has to be paired with a premium PC, can't use laptop to power it. Only 6 million ever sold. Not a very big part of addressable VR market. But fantastic experience."
- HTC: "$800, a bit cheaper. For people who love playing video games. Aimed at young males. Not that convenient to carry around. Sony bringing out a VR set sold with Play Station 4, about $400, so much cheaper, but you also have to buy controllers to go with it."
- Mobile VR: "Take mobile screen and place it into a battery powered holder. Can put in a high end Samsung phone to stream videos in virtual reality."
- EYE: "World's first professional VR camera – an assortment of 42 4K cameras arranged in a sphere shape. Most of what we have so far is games. The reason for that is because there are very few VR cameras out there. The cameras that have been used so far to create content are Go-Pros on holders."
During the presentation, Lee addressed other areas of technology that Deloitte expects to grow or decrease in 2016. Lee predicts that people will shift the way they use bandwidth. With unlimited bandwidth in the future, people could consume video on demand in 4K, and use Skype endlessly. With OTTs like Netflix and Skype gaining more market control, traditional television could lose ground.
"The biggest television market in the world is in the United States. Advertising for TV in the U.S. is currently worth $75 billion. It's the only way which you can get your brand out to a lot of people, very quickly," said Lee. "We predict that this year, the U.S. TV market will go through a significant contraction. It's significant, because the U.S. TV market has never before contracted. We're looking at it as a result of pay TV in particular."
"For over 20 years, we've had people saying television is dead, because it's a "waste of time", "efficient" or "stupid"," Lee added. "But during all that time, the U.S. television market has never contracted. But this is the first time we expect pay TV numbers will actually reduce. But the contraction we're looking at is about 1 percent, which sounds small, but in the scheme of things, it's very big. What we expect is a reduction in pay TV in households, so the number will decline."
On another note, in terms of Touch Commerce, Deloitte predicts that mobile driven commerce will enter into mainstream in 2016 in the Middle East. The early success stories of app based payment such as mPay seem to be a case in point. However, the pace of adoption of mobile enabled commerce will differ greatly depending on the underlying technology, according to Deloitte. While Near Field Communication (NFC) is taking time to gain traction, Deloitte predicts a promising customer uptake of touch commerce, depending on the pace of rollout by ecommerce and payment platforms in the Middle East.
Deloitte also predicts that in 2016, the market for cloud services in the Middle East will exceed US$1 Billion. Customers migrating to cloud will start with hybrid cloud models then full-service cloud deployments. Deloitte further predicts that software as a service is likely to grow much faster than other cloud technology vectors with growth fuelled mainly by the small and medium enterprise market, compared to large enterprises and the public sector.
Meanwhile, Deloitte predicts that governmental organizations will continue to maintain and promote a private cloud deployment due to regulatory requirements and a conscious decision to protect confidentiality and integrity of classified information. Non-governmental organizations (Large Enterprises and SMEs) will supposedly explore options of using the public cloud for both Learning-as-a-service (IaaS) and Software-as-a-service (SaaS) offerings, considering the maturity and stability of major productivity software in this space as well as ease of provisioning for infrastructure resources.