November 09, 2005 09:38 ET

Deloitte-Digital Convergence: Substance Finally Replaces Hype

TORONTO, ONTARIO--(CCNMatthews - Nov. 9, 2005) -

Deloitte Expects Multi-Trillion Dollar Industry to Emerge from Voice-Over-IP, Enterprise Collaboration Software, Mobile Phone Content, IP Television and Networked Games

Despite a history of hype and limited actual success in the 1990s, digital convergence has now become a reality, says a new report from Deloitte's Technology, Media and Telecommunications (TMT) industry practice, and companies who do not adapt to this trend face failure.

The report, "Digital Convergence: The Trillion Dollar Challenge," asserts that convergence will create new product categories and new markets. But, more importantly, in some cases it will change the structure of existing industries - shifting the balance of power and altering the basis of competition.

"Convergence became a buzz word during the dot-com boom, but it didn't deliver," said Garry Foster, National Director, Technology, Media & Telecommunications, Deloitte. "The concept was based on future technologies - but with the expectation of immediate revenue - and companies didn't stop to consider and understand what customers actually wanted and needed."

Now, the report says, a wealth of convergence products and services is emerging, from online music to Internet Protocol (IP) appliances. Each of these offerings satisfies a real customer need - and most are already generating real revenue and earnings.

Some of the most significant converged services are expected to be from Voice over IP, with industry analysts forecasting $1 trillion in revenue by 2010. In addition, 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 revenue. Other emerging products and services expected to generate substantial revenues by 2010 include enterprise collaboration software, IP television, mobile phone content, networked games and online music.

"Businesses that leverage digital convergence as a competitive advantage have the potential to benefit greatly," said Foster. "However, convergence will also have the power to obliterate business models in a relatively short time frame - for example, the way increased bandwidth and advanced devices are challenging the long-term viability of wireline voice. The 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."

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.

About Deloitte

Deloitte, Canada's leading professional services firm, provides audit, tax, financial advisory services and consulting through more than 6,100 people in more than 47 offices. Deloitte & Touche LLP operates in Quebec as Samson Belair/Deloitte & Touche s.e.n.c.r.l. The firm is dedicated to helping its clients and its people excel. Deloitte is the only professional services firm to be named to the Globe and Mail's Report on Business Magazine annual ranking of Canada's top employers for two consecutive years: 35 Best Companies to Work for in Canada in 2001 and 50 Best Companies to Work for in Canada in 2002. "Deloitte" refers to Deloitte & Touche LLP and affiliated entities. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu. Deloitte Touche Tohmatsu is a Swiss Verein (association), and, as such, neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the name "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu" or other related names. The services described herein are provided by the Canadian member firm and not by the Deloitte Touche Tohmatsu Verein.

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