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A very good presentation by McKinsey on the US Stimmulus pla. It showes great opportunities for Mexican Companies in the US and gives a guideline on the sectors Mexico should focus on.

Transcript of Business Opportunities

  • 1. Preliminary analysis of US government stimulus package and implications for high-tech providersDiscussion document February 26, 2009 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

2. Executive summary United States stimulus package will be $787 billion including spending and taxbreak, which is greater than a third of $2.0 trillion economic stimulus packages totalcommitted by major world ecomomies. The top 4 packages US, China, Japan, andEU account for 90% of total stimulus spend. Seventy percent of the stimulus will be in the economy by September 2010dollars are being spend and regulations are being set right now, making this aperishable opportunity US stimulus spending will have a major impact on technology with $59 billion in directand $194 billion indirect technology spending. Spend will impact multipletechnology areas including software, hardware, and specialized technology systems(e.g., airport baggage scanning systems) Most technology spending will come from projects in five key areas: broadband,electronic medical records, infrastructure, education, and energy / CleanTech Technology firms need to act now since spending will begin immediately. Specificallycompanies should conduct detailed analysis and understand line by line implicationsof stimulus package and develop shovel-ready strategies to capture short-termpockets of spend McKinsey & Company | 1 3. Global stimulus efforts are massive in size and scopeFocus of this analysisWorldwide stimulus spend Percent ofBillion USDdomestic GDP Total Stimulus1 2,047 US stimulus package is overUS7875.4 one third of the worldwide stimulusChina586 7.5 Global stimulus packagesJapan275 6.1 focus on infrastructure, clean technology, direct investmentsEU and ECB2260 1.7 in the market, and packages to support individualsCanada45 3.4 The top four packages accountRussia 200.9 for nearly 90% of total stimulus packagesIndia200.6 Even small packages areAustralia202.4 significant when looked at as a percentage of country GDPOther3 340.6 1 Represents lower bound on total stimulus spending as some country packages not included in this total 2 Total includes contributions from EU, ECB and EU member states 3 Combination of stimulus packages from Indonesia, Norway, S. Korea, Brazil, Thailand, Singapore, ChileSOURCE: Lit Search , CIA World Factbook 2008 Estimates McKinsey & Company | 2 4. Over 70% of US stimulus package will be spent within the first 2 years, creating a perishable opportunitySpending Revenue2 Estimated outlays and revenue impact of the approved US stimulus package1 Billion USD219Negative revenue in later years is due 120to: (1) accelerated depreciation inearly years and (2) increased tax180 revenue associated with incomerelated to electronic medical records 12665 4630 28 -6 -5 12 -1-10 -3 -6 -7 -2 -3 -5 -1 8 -02009 10 11 12 13 14 15 16 17 18 19 FY 1 Static scoring 2 Includes tax credits, accelerated depreciation provisions, tax-free bonds, unemployment and other benefits, health insurance for unemployed workers, and health information technology incentives. 3 Assumes exchange rate as of 2/24/09 of 0.146257 RMB/USDSOURCE: Congressional Budget Office (2/13/2009)McKinsey & Company| 3 5. Direct tech spending is $59b including clean tech, with >$200B in spend that has ancillary benefits for ITDirect technology implicationStimulus spend breakdown1Indirect technology implication2 Billion USDNo technology implication 787 301Focus of analysis183280 48725 22 2245910 18414 3 6714 100 1 199 8118 462319984 791 111 2309 102TotalTax cuts3 Spending Healthcare Science &Infra- Education Energy/ Save public Social aidTech structureCleanTech sector jobsand services 1 Sum may not add to total due to rounding 2 Indirect tech refers to the category spend that could result in tech spend. For example, new bridge/road construction spend could result in technology spend on CAD/CAM software and traffic control technology; in this case all the spend for infrastructure would be included 3 Direct and indirect technology tax cuts apply to CleanTech applicationsSOURCE: Congressional Budget Office (2/13/2009), House Committee on Appropriations; McKinseyMcKinsey & Company| 4 6. Major opportunities for IT providers in US stimulus package Opportunity overview Types of IT providers affected Healthcare $17.2b in incentives for EMR EMR software providers adoption + $2b for interoperability IT hardware provider including PCs, infrastructure servers, storage, handhelds and $9.3b in targeted medical IT networking devices Science and $7.2b investment in national Telecom access providerstechnology broadband infrastructure Computer hardware/software $17b indirect technology spend Scientific instrumentation through scientific research Infrastructure Significant opportunity for IT Design and engineering software(largely indirect) support of infrastructure projects developers Direct IT opportunities involving IT IT hardware including data storage, PCs upgrades for Social Security and specialized hardware Administration and airport security Specialized software providers Education $650m investment in educational Computer hardware/system integrators(largely indirect) instructional technology Educational software $250m investment in school data Data storage and analysis systems Energy/ $27.5 for renewables Semiconductors, hardwareCleanTech $19.7b for increased energy Range of opportunities for high tech efficiency players across all subsectors $11b for energy infrastructure Semiconductors, software, hardware, IT including $4.5b for smart grid services and electronics $5.5b for cleaner vehicles Hardware, software, services, electronicsSOURCE: Congressional Record, ARRA Bill McKinsey & Company | 5 7. Significant challenges for government agencies in the implementation of the stimulus spending Unprecedented spending will challenge agencies to spend wisely and maintain accountability"Forty billion dollars is a huge amount of moneyAbsorbing the money, making sure it's spent appropriately and gets into the hands of the right recipients...are going to be significant challenges. creating opportunities for Gregory Friedman, Inspector General, DOEprivate sector Work with regulators tounderstand and define what You have a huge policy shift here of moving a bureaucracy that'stransparency and impact should been focused on research and development to being a manager of alook like, e.g. what metrics, massive amount of money Rep. Frelinghuysen, R-New Jerseyprocesses, tools required Proposals/solutions that address An obscure Commerce Department office with a $19 million budget implementation challenges will and fewer than 20 grant officers could end up in charge of $7 billionhave competitive advantage, e.g. in grants to expand Internet access in rural areas WSJ 2/13/09 tracking of spend, usage oftechnology, social ROIWe are asking the American people to trust their government with an unprecedented level of funding we must prove to them that their dollars are being invested in initiatives and strategies that make a difference in their communities and across the country.Memorandum to Head of Departments and Agencies 2/9/09SOURCE: News reportsMcKinsey & Company | 6 8. Questions for discussion How quickly are you assessing and prioritizing the opportunities? Hundreds of categories, each w/ very different dynamics must conduct detailed analysis on timing, size, decision makers, relevance to product portfolio, and business implications Spend and regulatory design have already started prioritize (e.g. size, ease of capture) and develop comprehensive strategy immediately Do you have access to the new decision makers and customers? Many decision makers not typical IT customers, e.g., govt regulators, doctors, school boards New customer segments emerge (e.g. rural consumers, small medical clinics) that existing channel may not reach How can you solve the governments implementation and regulation challenges? Implementation/regulations being developed currently understand legislative/presidential intent and develop solutions/influence implementation to address Govt will have significant implementation challenges (transparency, speed, impact, multiple agencies, existing regulations) understand trade-offs and craft solutions to help solve them Position offers to reflect public nature of opportunity regulatory requirements, social benefits What is the impact on the stimulus spend on your product portfolio? Dramatic shifts in market size may change product investment decisions (e.g. 30-50% increase in broadband capex /opportunity for wireless broadband, doubling of clinical mgmt market) How will this impact your governance, organization and go-to-market model? Opportunity is inherently cross-functional product teams, government affairs, field sales, channel partners must all be able to work together; are incentives aligned? Additional spend is likely (e.g. education, clean tech from budget proposal); need to link govt affairs with your sales organizations real-time to capture opportunities McKinsey & Company | 7 9. Contents Healthcare Science & technology Infrastructure Education Energy/CleanTech China stimulusMcKinsey & Company | 8 10. Healthcare stimulus spend will have significantNo technology implicationIndirect technology implication technology implications, both directly and indirectlyDirect technology implication Billion USDFocus of detailed analysis Specific Opportunity 301 Tax cuts Health19.2 Information To jumpstart efforts to computerize health Technology records to cut costs and reduce medical errors.100 Education Prevention and To fight preventable chronic diseases and1.0Save publicWellness Fundinfectious diseases 98 sector jobs andservices0.5 Healthcare for Increase the number of uninsured Americans uninsuredwho recei