A new report by the National Institute of Economic and Industry Research has concluded that the costs of not investing in new technology by miners will be steep, with a difficult next decade as companies move from investment to efficiency.
The report, released by IBM as part of its Smarter Planet initiative, forecasted the economic impact on seven industries through transforming the way they did business involving new technologies, including robotics, high-speed broadband, mobile devices, Big Data and cloud computing.
“This right now is the tipping point, we believe, where the risk of inaction outweighs the risk of action,” said Andrew Stevens, IBM Australia and New Zealand’s managing director, who conceded that the conclusions might be viewed with skepticism by some, given that the report was commissioned by a technology company.
The NIEIR’s Reinventing Australian Enterprises for the Digital Economy report considered what the year 2025 might look like for those in financial services, retail, mining, telecommunication, public administration, healthcare and higher education. It found that the era would be defined for firms by how well they adopted to new technology and used it to “deliver unique value to customers and citizens with the speed, efficiency and ubiquity they demand.”
For miners, it would be a critical time as the investment cycle switched from capital expenditure to capital efficiency.“I think the major point about the mining sector is that it’s going to come under more difficult times as commodity prices decline and their profitability is going to come under threat,” the NIEIR’s executive director, Dr Peter Brain, told Ferret.
He said that research found the differences between companies that transformed their operations and laggards was stark, and based on, “The extent to which the companies integrate their front office and their middle office with the mine and the back.
“Over the last few years with the expansion the back office in particular has grown rapidly and integration of the whole enterprise across the whole totality of operations has become somewhat fragmented.
“So what the leaders will do is invest heavily in new technology to integrate the front, middle and back office; much more remote control from remote operations, and looking across the entire supply chain, integrating not just simply pit-to-port, but pit-to-customer.”
The report mentioned Rio Tinto’s use of remote operations - citing its remote operation of its parts of its Pilbara mines from Perth - and use of automation and robotics to boost its productivity.
The research also modelled two companies with sales over slightly more than $8 billion for last year. It predicted that in 2025, the company that led in technological adoption would trump the other, and would triple the laggard’s market capitalisation and more than double its sales.