Trends in the TMT Legal Market: 2016
Big data is seen by many as the driving force within the market this year. The growth in data harvesting has been the catalyst behind the recent increased focus on data protection by governments globally, and the mounting pressure on companies to build security controls into products.
Data protection is set to be of central concern to companies and their business models in the future, offering opportunities for law firms to increase their expertise in this area. As a result, demand for TMT lawyers is escalating across sectors that have traditionally been separate from the digital industry. In addition, the telecommunications market is expanding globally, with Africa presenting a particularly attractive opportunity for international investment. As new technology proliferates, businesses from all sectors will look to exploit it for competitive advantages in the marketplace; consequently, there will be an increasing need for specialisation within TMT law itself, and a greater demand for its provision across industry sectors.
Big data: “Information has become powerful and king”
The growth in big data has been the major development of the last year. Data is becoming central to businesses as one of their most valuable assets. Data mining (the analysis of data) leads to targeted advertising, product development and the ability to provide products and services that are closely tailored to customers’ needs, and specifically their spending habits. Equally the majority of businesses, even in sectors unrelated to TMT – for example, financial services – are essentially looking to “monetise their data” through various means, such as through online platforms. This data, and the technology required to obtain and process it, offers businesses increasingly diverse ways of gaining a competitive advantage in the marketplace. All of which has led to a considerable uptick in demand for TMT lawyers and the expertise they bring, not just in relation to technical issues (for example, regarding financial technology, security verification and the transactional means of moving funds), but for compliance with data protection and the provisions now required in contracts.
With the growth of such a valuable asset comes increasing measures to protect it. Data protection is one of the foremost concerns being addressed by governments and businesses today. In January 2015 the Brazilian government issued the Preliminary Draft Bill for the Protection of Personal Data, inviting public debate. The bill would apply to all individuals and companies processing personal data by computerised means, where the processing occurs in Brazil or the personal data was collected in Brazil, and would impose obligations and requirements, as well as penalties for violation. Similarly in May, the Upper House of the Dutch Parliament passed a bill introducing a general obligation for data controllers to notify the Dutch Data Protection Authority of data security breaches and also increased sanctions for violations of the Dutch Data Protection Act.
This demand for the protection of and control over personal data is in part being driven by consumers and increasing consumer awareness of privacy rights. In India, the government was recently forced to withdraw its draft encryption policy after public uproar at the proposed measures which would have forced Indian citizens to store plain-text versions of their encrypted data for 90 days and make it available to security agencies.
One of the most eagerly anticipated pieces of legislation, with the most wide-ranging impact, is the European Data Protection Regulation, due to be completed by the end of 2015. This is the end result of the EU Commission’s complete data protection reform which was begun in 2012, and aims to give people better control over their personal data though various provisions. The EU rules will even apply if personal data is handled abroad by companies that are active in the EU market and offer their services to EU citizens.
In addition, the legislation will have an extensive impact, applicable across all sectors and in all 28 countries. Consequently, demand for specialist TMT knowledge will increase, as data protection becomes “a necessary part of most businesses”. Whereas in the past, expertise was sought for technical questions as part of larger corporate and commercial transactions, this area of law and the issues it grapples with will become a vital component of legal advice sought, and a necessary part of due diligence.
The Data Protection Regulation will also give more powers to the independent national data protection authorities to effectively enforce the EU rules. It is expected that they will be empowered to fine companies up to €1 million or up to 2 per cent of the global annual turnover of a company for data breaches. This is a big difference from the current situation, for example in the UK, where currently organisations may be fined up to £500,000 for serious breaches of the Data Protection Act 1998. As a result of the regulators being “given more teeth”, companies will be forced to focus more on their compliance with data legislation, and make “data protection… a key board issue”. This will offer law firms increasing opportunities to offer compliance and regulatory advisory services to companies.
Looking forward, data security will remain a high-profile challenge that companies and law firms must grapple with.
Proliferation of TMT legal services across the industry sectors
The increasing importance of data to businesses has seen a rise in the need for TMT legal advice across all industry sectors.
Robotics and digital devices have become so developed as to take on a growing number of tasks in both the workplace and various aspects of everyday life. This is driven by the increasing computer power in smaller devices, along with the interconnectedness provided by wireless technology and the desire to reduce costs, remove human fallibility and fill the gaps in workforces.
E-health is a particularly burgeoning area. With squeezed health-care budgets and an increasing aspiration for patients to be more in control of their treatment, more and more medical treatments are being delivered through electronic devices. This covers a variety of methods from mobile phone apps providing direct medical support or connecting to other medical devices, to patient monitoring devices, personal guidance systems, online symptom checkers and medication reminders. Indeed, e-health has become one of the fastest-growing markets of the past few years; it is predicted that global revenues will grow from US$2.3 billion in 2013 to US$21.5 billionn by 2018, with the European market being the largest e-health market by 2018.
Equally, many other sectors have been transformed from their traditional operation methods via the electronic delivery of services; these include education innovations, car parking schemes, driverless cars and bin-emptying services, among others. In the US, Amazon is proposing to introduce drones into their delivery services to ensure goods are received within 30 minutes of placing an order. As the internet of things advances, the proliferation of digital and robotic services will continue. This has implications for wider legal issues affecting, for example, contracts with suppliers and employment law considerations, and thus demand for lawyers with specialist knowledge will increase as new industry sectors begin to look at digitising their services.
Retail is another flourishing sector, with the rise of consumers using screens to make purchases. As retailers adopt more advanced technology, online sales are becoming optimised through tablets and other mobile devices, which are fast becoming the place where transactions occur.
This growth means that there are considerable opportunities for investment in both the infrastructure and the provision of services within the telecommunications sector. Indeed, the mobile network operator the Afrimax Group recently announced that it had secured US$120 million of growth funding from international investors to speed up the building of high-speed wireless broadband technology “across multiple African markets”. The mobile data traffic for Africa is forecast to grow around 20-fold between the end of 2013 and the end of 2019, according to a survey published in June 2014 by telecoms supplier Ericsson. Consequently, there is increased opportunity for firms to expand the global reach of their practice by increasing their access to a wider number of jurisdictions through new offices and referral networks.
Despite the ever-increasing demand for TMT lawyers and their expertise, the legal market itself is becoming more competitive.
As clients have become more sophisticated, so too has their awareness of how to get value from their lawyers. In such an environment lawyers are finding that they really have to “understand and care about TMT and the issues surrounding it”, including being knowledgeable about the latest technological developments, in order to gain the respect of clients.
Competition has also increased due to the growing number of lawyers active in the field. The biggest competitors to private law firms are often in-house counsel of the clients themselves. As TMT issues become progressively central to the way businesses are run, companies are looking to employ TMT law specialists in-house in order to reduce legal costs. One lawyer spoke of how often in-house legal teams work alongside the private practice lawyers “to learn the ropes”, and to be able to handle the same issues in-house in the future. The amount of work being done by external lawyers is diminishing as in-house teams expand.
Boutique law firms increase the competition on a third front: lawyers are able to specialise in certain areas and, with fewer overhead costs, any very niche issues which in-house teams feel unable to tackle can be outsourced to these firms. In addition, often the network of relationships between the specialist boutique firms means they can compete in a very real way with the larger firms’ ability to provide a “one-stop shop” to all clients’ legal needs.
As TMT issues become more international, firms which only focus on domestic law are facing the challenge of remaining competitive.
The larger corporate and commercial law firms need to decide if TMT law is going to be an integral part of their own business strategy, or if they are to buy in the specialism they need when working on the bigger corporate and multi-sector deals, as TMT law becomes central to business concerns.
Thus while demand for TMT lawyers is certainly set to increase due to the proliferation of data in new and existing industry sectors, competition within the legal market remains high. With more and more options available to clients allowing them to choose how they prefer to source this legal advice “firms need to have something distinctive about them in order to survive”.