We are at the foothills of an exciting new era of technology; the era of personalised technology
In the past decade, we have witnessed unprecedented technological improvements and foundations have been laid. As we enter the second decade of the millennium, these foundations will be built upon and now is the time to invest in the sector.
The key building blocks, consisting of both massively powerful semiconductors and very high bandwidth communications, are likely to deliver technology suitable for most aspects of modern day life. I expect consumer-facing technologies will be more intuitive, reducing the reliance on large internal IT departments.
However, systems will still need to be maintained with the added complication of preventing malicious attacks.
These trends will continue to create opportunities for those companies developing new security solutions and cloud computing (internet-delivered software) as a service.
Over the next 15 years, it is likely functions currently provided by computers, phones, eBooks and Blackberrys will be merged onto one pocket-size device. A multitude of new applications will be running on this device such as near-HD-quality TV which is tailored to specific communities and dependent on the user’s location. The opportunities for creative software developers will be almost endless and personalisation will be key to success.
Unexpected advancements or disruptive technologies tend to have a big impact and duration. Predicting these disruptive technologies is difficult, but we think they will be in areas such as material sciences geared to reducing energy consumption including the long awaited mass roll out of fuel cells, new energy storage techniques and making variable output energy sources, such as wind farms, more viable.
Most of these future technologies require the creative extension of the building blocks of today’s technologies and as a result opportunities exist for new entrants with more creative skills. The UK, where the experience derived from doing business with all the idiosyncrasies of the EU, is well positioned for the years ahead.
The European technology industry is particularly vibrant with approximately double the number of companies (revenues over $5m) than in the US, as entrepreneurs use their creativity hoping to follow the success of companies such as Skype.
The key challenge is whether they can get to a critical mass so as to be acquired or to attract mainstream institutional interest, both of which offer the potential for a considerable uplift in valuation. This needs capital and expertise, offering the provider the potential for good investment returns.
Technology is an island of growth in a low growth world and with market opportunities moving Europe’s way; it is potentially a furtive hunting ground for the few experienced, hands on technology investors who can bring scarce capital and advice to industry participants.
Traditional capital is currently in scarce supply which creates opportunities for private investors to step in and if they can obtain tax relief then technology should form part of all our portfolios.
Jonathan Gain, chief executive, Stellar Asset Management
