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Infrastructure developers look to joint ventures with technology companies

Most infrastructure developers expect to enter into joint venture agreements with technology companies in the next three years as a way to gain long-term access to technology, a new survey has found.12 Oct 2017

The survey, which gathered the views of 120 senior executives in the infrastructure developer sector, was commissioned by Pinsent Masons, the law firm behind Out-Law.com, for its new report on the evolution of I'nfratech'.

This is part of a series exploring the opportunities and challenges of infratech, the integration of technology into infrastructure. You can read more in our special report or request an exclusive Pinsent Masons research report

Infratech concerns the increasing convergence of digital technologies with physical infrastructure, and the Pinsent Masons report found that industry expects technologies such as wireless networks, sensors and artificial intelligence (AI) to have the greatest impact on infrastructure services by 2020.

While the survey found that sub-contracting arrangements are overwhelmingly expected to remain the most common way in which both infrastructure developers and technology companies expect to work together in the next three years, it also highlighted increasing appetite for closer collaboration between businesses in the two sectors particularly as end user considerations increasingly influence the type of infrastructure we want.

Greater collaboration between infrastructure developers and technology companies over the next three years was predicted by 76% of infrastructure respondents, as well as by 71% of the 120 senior executives from technology and communication providers who were also surveyed for the report, which was produced in partnership with the Institution of Civil Engineers (ICE) and techUK.

Joint venture agreements with technology companies was the most commonly predicted mechanism for collaboration over the next three years identified by infrastructure respondents (53%) an increase of around 50% over the last three years. More than a third of the executives (35%) said their business had already completed a joint venture with a technology company in the past three years.

Technology companies also have a growing interest in entering into joint venture agreements with infrastructure developers, according to the report. The survey found that 21% of technology companies completed such a deal in the past three years, but that 43% of the respondents from the sector expect similar deals to be struck by 2020.

The survey also found that more than 40% of businesses across both sectors expect to achieve this collaboration via public private partnerships, while the potential for new "alliance models" to emerge in the longer term was also highlighted in the report. One chief executive of a UK infrastructure business said that alliances could replace joint ventures as the preferred model for collaboration in future.

"Alliance models work by eliminating the need for separate contracts with each entity involved in a project," the report said. "Instead, a single contract covers all participating parties. Objectives, risks and benefits are shared. The recent formalisation of alliancing in the NEC4 contracts is likely to stimulate interest in this mechanism."

A number of potential difficulties might need to be overcome if collaborations between infrastructure developers and technology companies are to be successful, according to the report.

In particular, it said there is potential for "disagreements … around risk allocation and misunderstanding of the exact nature of the risks being taken on", and different views too on how data in Infratech projects should be shared. There are also likely to be cultural differences to overcome, it said.