Deloitte, the business advisory firm, has today forecast that convergence will have a substantial financial impact on the technology, media and telecoms (TMT) sector, generating over a trillion dollars in revenues between now and the end of the decade. Details of this are revealed in a report launched today.

Jolyon Barker, head of technology, media and telecoms at Deloitte, comments: “The first wave of convergence in the 1990s didn’t deliver, due to distraction with what technology could deliver tomorrow, at the expense of understanding or respecting what customers actually want today. However there are clear indications that we are moving beyond this, with the emergence of a wealth of converged products and services with potential to deliver value to customers and suppliers alike.

“Convergence will create new product categories, new markets, and in some cases even change the structure of existing industries – shifting the balance of power and altering the basis of competition. Our analysis has shown that convergence will generate over a trillion dollars for the sector as a result of new products and services. To take advantage of this, businesses across the sector have to understand and harness its potential to transform every aspect of their business.

he extent to which convergence adds or destroys value is a direct function of the extent to which a company anticipates, plans for and takes the lead in convergence.

“Some of the most significant converged services are expected to be from Voice over IP, with some industry analysts suggesting that global revenues from this area will have generated $1 trillion by 2010. Internet Protocol (IP) appliances, which will include next-generation digital music players, home entertainment services, home video phones and enterprise collaboration services will also generate sizeable turnover.

Other emerging products and services expected to generate major revenues by 2010 include: enterprise collaboration software, IP television, mobile phone content, networked games and online music.

“There will also be a group of convergence losers. One of the most likely reasons for this is technological hypnosis – focusing on achieving engineering excellence at the expense of commercial common sense. One such example could be mobile television services which are being heavily pushed by equipment manufacturers, network operators and content owners, despite the underlying trend of ever larger televisions, the historically weak adoption of handheld television sets, and the sheer cost of delivering such services. While television over a mobile phone is an engineering feat, for consumers it is likely be novelty at best if it is not customised for the mobile experience.

“Convergence is being driven by three underlying trends. The first is proliferation of digital data, which provides a common base for handling diverse types of information – numbers, words, music, pictures, video, and more – using the same devices, processing techniques, and media. The second is widespread connectivity, which helps bring diverse information together, and extends the value and capabilities of a device beyond its out-of-the-box functionality. The third is continuous advances in technology, from battery life to processor speed.

“Convergence needs to be about respecting and responding to customer needs. It can transform industries, catalyze fundamentally new business models, restructure value chains and shift the balance of power. Businesses in the TMT sector should proactively develop a convergent strategy that is appropriate to its core competencies, its target market and its alliances,” concludes Barker.

Convergence can impact on three levels of a business:

• Products and services represent the highest level of convergence: providing goods and services that meet real customer needs, above and beyond what is currently available. However, this will only be achieved when supported by convergence at the two other levels – platform and organisation.
• Organisational convergence involves different organisations working together to deliver a convergent solution. Since most convergent offerings extend beyond the capabilities of a single organisation – no matter how large or diversified – convergence at the organisation level is generally a prerequisite to delivering a convergent product or service.
• Platform convergence involves consolidation around a small number of standards – network protocols, data formats, and standard media types – allowing companies to focus their efforts, and create critical mass in the marketplace.

The trillion dollar challenge Through 2010 emerging convergence products and services will generate at least a trillion dollars revenue.  Learn more and download our full report The trillion dollar challenge

Notes to Editors

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is based in 21 UK locations, with over 9,500 staff nationwide and fee income of £1,355 million in 2004/2005. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.