Private companies are shifting investments to tech

Instability within the economy and the world at large has failed to shatter the confidence of private company CEOs. In a recent EY CEO Outlook Pulse, which included over 200 private company CEOs from around the world, we found that more than half are moving forward with planned investments. And within that group, 74% are looking to grow their digital and technology capabilities.

This increased investment in technology is welcome news, with private companies outpacing the 63% of non-private companies that plan to accelerate their technology spend. It’s also much needed, as previous research conducted by EY teams showed private companies lagging their public counterparts across a range of risk factors, with significant investment in data and technology needed to narrow that gap.

So, what’s driving these investments?

My friend and colleague Peter Bos, who leads the EY 7 Drivers of Growth program, offered some insight. Over the past year, he has had the chance to learn how more than 1,000 private businesses are planning to take their technology agenda to the next level.

• There is a dramatic rise in the importance — in terms of both impact and urgency — of data and digital asset security and protection. Cyber threats continue to rise, and remote work has created another opening for cyber-attacks. Companies are identifying their most critical digital assets and business growth drivers for protection. In turn, risk management is refocusing on how data is accessed and shared within and outside the organization to meet data privacy and security regulations and requirements.
• Adopting new technologies to become more efficient, productive, and profitable is also high on the C?suite agenda. The current economic situation in many markets around the world, rising inflation rates, supply chain disruptions and rising energy costs are having an impact on technology investment allocation. As a result, the last 12 months have shown an increased focus of private companies leveraging technology to increase resiliency, reach higher efficiency and productivity levels, and lower cost levels. For example, given the adoption rate of ecosystems across almost every industry, technology investments are geared toward making ecosystems a success by overcoming key technology challenges. 91% of CEOs surveyed by EY teams in The CEO Imperative: How mastering ecosystems transforms performance, agree that ecosystems have increased the resilience of their business. However, critical challenges like data integration, interoperability, having a common cloud platform and again cybersecurity — but now for the whole ecosystem — require additional technology investments.

Private company CEOs are complementing these technology investments by building their people’s digital capabilities and encouraging innovation. Our survey found that 65% of private companies are retraining and upskilling the workforce across the organization to help them work with new technologies. And 60% are focusing their investment on innovation and R&D as they develop and enhance their capabilities to adopt and deploy new technologies in an agile way.

Over the next few months, we will likely see more and more private companies significantly increase capital investment in digital, technology, talent, and innovation, especially compared to public companies. These investments are sure to contribute to any future economic recovery, so it’s encouraging to see a majority of private businesses looking ahead instead of retrenching in these uncertain and volatile times.?

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.