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The Latest

28 October 2021: The US Senate voted unanimously to deny Huawei and ZTE from supplying equipment to US enterprises due to national security threats that would violate the Secure Equipment Act. Once approved by Pres. Joe Biden, the companies will not be granted equipment licenses by the Federal Communications Commission (FCC) under its ‘Covered Equipment or Services List’. A few days before, the Federal Bureau of Investigation (FBI) raided PAX Technology's Jacksonville warehouse after reports of alleged transmission of malware through the Chinese manufacturer's point-of-sale (PoS) terminals.

Why it’s Important.

As a member of Five Eyes (FVEY), an alliance of countries including Canada, New Zealand, the UK and the US, for joint cooperation in signals, military and human intelligence, Australia has previously followed the US in cutting off suspicious foreign tech companies' domestic presence due to national security concerns.

  • Australia blacklisted Huawei and ZTE in 2018 from selling 5G equipment. The two firms vehemently dismissed accusations over high-speed mobile network espionage, citing discriminatory tactics even with a no-backdoor agreement. 
  • In the same year, the Australian Defence Department banned messaging and payment app WeChat for failing to meet the organisation's standards for use on networks and mobile devices but not necessarily because of security and privacy issues.
  • In late October 2021, PoS terminals from PAX were detected sending anomalous network traffic, which has seen formal requests to replace the equipment due to security concerns. 

The fundamental issue here is supply chain security - the ability of nation state actors to inject spyware (or other malware) into equipment that is broadly used globally. Even where the security risks are not validated, the potential remains. It must also be noted that in the recent past, allies of Australia have engaged in such activities.

With the current geopolitics on global telecommunications being influenced by the US, sweeping impacts on the global supply chain and reduced competition in the market are likely.  

IBRS expects this technology supply spat will expand into areas outside of telecommunications, such as industrial control systems and PoS. Any widespread technology that can be used to impact or monitor aspects of national economies are likely targets.

Who’s impacted

  • Telecommunications procurement

What’s Next?

For organisations considering foreign-manufactured tech products and services, look more closely at the implications of selecting such equipment or platforms. While there is still no public evidence on the credibility of allegations against specific state actors, senior leaders must take security concerns in their organisation and assess the risks they are willing to take when selecting any vendor.

In addition to the security risks, there are also reputational risks, and risks associated with having to replace key solutions, such as is the case with the PAX PoS hardware.

Related IBRS Advisory

  1. Choosing Huawei could be risky - but not why you think
  2. Are you FRUSTRATED with procurement? Why procurement often goes off the rails

Conclusion:

For enterprises and small to medium businesses (SMBs), Artificial Intelligence (AI) opportunities are widespread and industry-specific. Each industry will grapple with conversations to understand how AI can:

  1. Create competitive advantage.
  2. Complement existing business.
  3. Disrupt, or even destroy the business model that exists today.

What businesses need to plan for is that AI engineering and AI ops are destined to be the essential umbrella to govern AI in the coming decade. Hyper-automation (HA) of business processes will see some business models fail whilst others thrive into the 2030s.

Conclusion: Agility to respond to change has become essential. Compared with previous years, CIOs are expected to produce results over longer periods of time, now expectations have become much higher. Stakeholders are expecting results as soon as possible. With the trend geared towards an increase in technology dependence, the pressure of delivering results has therefore increased for CIOs and IT leaders.

Part of this new set of expectations is improved efficiency and productivity, which in most cases requires a thorough evaluation of business processes to garner potential inefficiencies. One of the primary tools organisations have at their disposal is the enterprise resource planning (ERP) systems. Eventually, it all boils down to whether or not the migration to S/4 HANA can be justified in terms of value-add-services. Implementation effort and run costs are only a part of the business case, not the whole.

 IBRSiQ is a database of client inquiries and is designed to get you talking to our advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.