EY: Outlook for 5G Rosy Despite Current Challenges

- February 27th, 2020

Companies are recognizing the benefits of 5G systems, but issues surrounding budget pressure and concerns about relevance are challenges to its growth.

While it’s still early in the adoption of Fifth Generation (5G) wireless technology, analysts at business research firm EY said organizations are optimistic about the network’s operational applications.

Following a survey of 1,000 enterprises, Tom Loozen and Adrian Baschnonga, members of EY’s telecommunication team, said companies are beginning to truly recognize the benefits of switching to 5G systems.

However, issues surrounding budget pressure and concerns about relevance are proving to pose challenges to the growth of the tech, the experts said.

 

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“Future spending intentions are healthy, while enterprises recognize 5G’s transformational potential and have a range of application scenarios in their sights,” the pair wrote. “Yet strategic, financial and operational challenges are mounting.”

The next stage of 5G technology is the newest wave of mobile wireless connection promising upload and download speeds significantly faster than the current generation of mobile connectivity available.

More broadly, Loozen and Baschnonga said the technology also has to contend with its perceived immaturity and the anxieties around “regulation, cybersecurity and the emerging partnering and collaboration ecosystem” that comes alongside it.

And these fears have certainly cropped up as the 5G network slowly expands. In an interview with the Financial Times, Forrester Principal Analyst Dan Bieler said that cybersecurity dangers are present with the communication between devices on the network.

“The sheer number of connected assets and devices heightens security challenges,” Bieler noted. This provides a possible target for hackers.

Less than half of respondents to the EY survey — 48 percent — reported having confidence in their ability to efficiently implement 5G-based Internet of Things (IoT), the pair found.

Despite the issues, the analysts wrote that 5G adoption is poised to grow rapidly in the next few years, with levels of investment into 5G by organizations rivaling that of investments into IoT by the end of 2022.

Organizations have already mapped out a series of uses for 5G technology, according to the survey, including supply chain management, systems and process optimization and customer insights and feedback.

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In fact, some companies are already exploring ways to adapt in order to use 5G alongside other emerging technologies to get a running start on the quickly growing network, the pair said.

A Statista report projects that while only 4 percent of mobile connections will be 5G this year in North America, by 2025, the new technology will make up 46 percent of mobile connections.

The pair called 5G “the critical catalyst for the next wave of IoT” as the adoption of the tech begins to change the entire supply chain.

The analysts found that moving forward into an increasingly 5G-dominated world, organizations are looking for vendors that offer end-to-end solution capabilities as well as competitive pricing and speedy deployment.

Therein lies another issue, however, as enterprises are still struggling to pick the best 5G providers possible.

The EY pair found that two-thirds of the companies surveyed felt their interactions with suppliers regarding 5G were “too tactical and transactional.”

Loozen and Baschnonga regard this technology push as vital to the ongoing acceptance of 5G as a viable network as more companies demand expertise in this new form of digital connectivity.

“More than seven in 10 organizations will prioritize vendors that have deep industry, financial, legal and risk management experience,” the experts said. “The onus on 5G-IoT providers to create a more purposeful and productive dialogue with their enterprise customers — one that is backed by specific skills in specific domains — is clear.”

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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