3 Tech DD Trends You Need to Know

 As an investor, it’s essential to be up-to-date on the latest industry trends. The need to keep informed is especially true in the tech sector, which is notoriously volatile, even without recovering from a global pandemic and recession on the horizon. Information Technology Due Diligence

To help you stay ahead of the curve, we’ve compiled a list of three tech trends that you need to know. These trends are based on our findings during technology due diligence.

Cyber concerns are raising serious red flags.


Technology leaders need to emphasise securing our data as we become more’ digital’. Speaking with cyber experts, they state that the low barrier to entry and the current economic climate will prompt more people to turn to (cyber) crime.

We noticed the rise of cyber concerns during the pandemic. Unfortunately, cyber concerns are typically 50% or more of a modern Tech DD report.

There are many reasons why firms may not be aware of the seriousness of these threats and how they could impact their business. However, leaders must take steps to protect their data and systems from cyber-attacks.

They may be too busy with other aspects of their business to pay close attention to the security of their systems.
They may not have the expertise to identify potential security flaws.


They may be unaware of the seriousness of cyber threats and how they could impact their business.


These observations can stall a deal depending on the firm’s maturity and the data being handled. But it is better to address the problems than be liable for them after the deal completes.

In rare cases, cyber security remediation is needed before deal negotiations can continue.

Witnessing CTOs realise their environments are not as secure as they thought is fascinating. Typically they keep a close watch on cyber security concerns, and to learn a major area is not secured can be unsettling initially.

Reflecting on some of the gaping holes we’ve managed to spot, I believe this is worth the investment in Tech DD alone. And note that we provide advice or suggestions on addressing these issues.

Wage inflation compounded with vendor inflation.


One word.

Inflation.

From January this year (2022), we saw hiring inflation impact target operating models, hiring plans and financial forecasts. This led to significant red flags during Tech DD and the re-positioning of the financial model by management.

But why is wage inflation in the tech industry occurring?

There is a shortage of skilled labour in the tech industry, increasing wages as companies compete for talent.
The cost of goods and services used in producing technology products and services has increased, leading to higher costs for companies and, ultimately, higher employee wages.


The demand for high-quality technology products and services continues to grow, placing upward pressure on wages across the tech sector.


Amazon and Microsoft had to increase the pay of their engineers because of a shortage of skilled labour. As highlighted in the following articles:

Conclusion


As a tech investor, staying abreast of the latest industry trends is critical. By being informed about the pressures on technology teams today, you’ll be well armed to assess the impact on your investment thesis and value creation plans for target firms.

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