get ready: open to sharing means open for business … · · 2016-01-11top of mind issues facing...

Top of MindIssues facing technology companies

Get ready: open tosharing means openfor business

2 | Get ready: open to sharing means open for business

“Developed economies have deployed the devices, the cloud and high-speed broadband networks necessary to support far faster propagation of disruptive digital technology business models than was ever possible before.The sharing economy is among the first of these models, but far from the last.”Pat HyekGlobal Technology Industry LeaderEY

“Sharing economy” defined:The sharing economy comprises new business models empowered bymultiple disruptive technologies (i.e., cloud-based collaborative apps ridingon high bandwidth, always-on mobile networks and the web) that exploitpreviously inaccessible information to instantaneously match consumerneeds to idle capacity. This creates disruptive economic efficiencies.

Get ready: open to sharing means open for business | 3

Sharing economy overview

The sharing economy is unleashing highlydisruptive, technology-enabled businessinnovation in select industries. When willthe sharing economy knock on your door?

04

Opportunity knocks; disruption enters

Technology-enabled sharing-economy modelscreate large new business and societalopportunities, even as they precipitatedisruption and new business risks.

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Challenges facing the disrupters at the gates

Even as they disrupt, sharing-economycompanies face some serious challenges.Are you prepared?

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Government: welcome committee or gatekeeper?

The world’s governments must determinehow to recover revenue streams disruptedby sharing-economy models and decidewhether to empower their citizens toparticipate.

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Incumbents: opening for sharing- economy business

Don’t look for a sharing-economy strategy.Instead ask, “What is our business strategyin a sharing-economy world?”

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We’ve been here before

The sharing economy is among the firsttech-enabled business models to fullyexploit cloud- and mobile-enabled high-bandwidth networks. Here’s what techcompanies need to think about.

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“Technology innovation is rapidly changing the competitive landscape in every industry. It’s enabling entrepreneurs, lowering market barriers to entry and giving rise to disruptive new business models like the sharing economy —while also disrupting tax, regulatory and legal codes.”Channing FlynnGlobal Technology Industry LeaderTax ServicesEY

Table of contents


Now, the question is not if but when the sharing economy will knock on the next industry’s door as it sweeps across business-to-consumer (B2C) markets and into business-to-business (B2B)sectors. Ultimately, sharing-economy business models may changethe very nature and structure of the corporation.

Our research and analysis for this report have convinced us that the potential for the sharing economy to disrupt most industries,globally, is unprecedented.

Real-time markets boost utilizationThe model’s value creation comes from making available informationthat drives up utilization rates — of virtually anything — through real-time, online marketplaces.

Sharing-economy business models create online and mobileplatforms for property (asset) owners and service providers toadvertise their availability and for customers to purchase the use of those assets and services. They take information that previouslywas either inaccessible or difficult to find — especially informationrelated to availability and location — and make it very easy to access.It might be information about the availability of a room in yourdestination city, rent-by-the-hour office space near your afternoonmeeting or the nearest car that can take you to the airport.

Sharing economy overview

“The sharing economy shatters the entire logic on which large enterprises are built.”Paul BrodyAmericas Strategy LeaderTechnology SectorErnst & Young LLP

The sharing economy has unleashed extremelydisruptive, technology-enabled business innovation— so far, only in selected industries. In the process,its business models have delighted customers;empowered individual entrepreneurs; rewardedinvestors; disrupted incumbent businesses;angered existing workforces; and confoundedgovernment, tax, legal and regulatory agencies.


Customer and societal benefits come with short-term upheavaland disruptionBy increasing utilization rates, sharing-economy models dramaticallyreduce economic inefficiency. Their rapid adoption also demonstratesthat they delight customers. And some would say, in the long-term,such skyrocketing productivity can lead to significant benefits forsociety at large.

Until now, headline-making sharing-economy businesses havemostly focused on consumer services. But commercial andindustrial organizations are beginning to adopt the same automatedintegration processes that power existing consumer-focusedsharing-economy models. Imagine factories run by industrialconglomerates worldwide participating in online marketplaces that create easy access to asset and business process availabilityinformation, along with a relatively frictionless transactionenvironment within which to rent the use of those assets orprocesses. Economic efficiency and productivity would spike, while the pace of innovation would accelerate — again.

Prepare to answer the sharing economy’s knockSharing-economy business models have been born into a worldwholly unprepared for them. Many existing rules don’t apply — and while many countries’ cultures have rushed to embrace them,others have rejected them. But, ready or not, when a sharing-economy opportunity knocks on your organization’s door — whetheryou’re a start-up or an incumbent — you’ll need to know how youshould answer.

“The rapid adoption that sharing-economy models have so far enjoyed suggests that change will come soon, and fast, to many industries. Now is the time to think through your organization’s strategies, opportunities and tactics.”Channing FlynnGlobal Technology Industry LeaderTax ServicesEY


Sharing economy opens doors toincreased liquidity and new valueThe sharing-economy business modelsbehind both opportunity and disruption arecomplex, multidimensional and nuanced.But they all share a simple core: they applythe information access and real-time tradingattributes of electronic equity exchanges to any asset or service market. Then theylayer on information about availability,location and quality (often through userratings and reviews), and deliver all of thatin simple-to-use apps, over wirelessnetworks, to your mobile device. “Sharing-economy marketplaces enable well-informed,instant purchase decisions in a trustedtransaction environment, from whereveryou are and at any time,” notes ChanningFlynn, Global Technology Industry Leader,Tax Services, EY.

Just like equity exchanges, sharing-economy marketplaces increase liquidity in their respective markets. The increasedliquidity drives up utilization of existingassets and services, opening doors for those on the provider side of themarketplace to monetize their assets andservices to a greater extent than before.

APIs for IoT and “industrial mash-ups”will knock on many more doorsSharing-economy business models makeextensive use of application programminginterfaces (APIs) that enable simplifiedaccess to stored information, automatedservices or both. APIs enable many sharing-economy businesses to develop rapidly,leveraging information and servicesprovided by others to create new value.“Think about the way ride-hailing andhome-sharing apps use location andmapping services,” explains Jeff Liu, GlobalTechnology Industry Leader, TransactionAdvisory Services, EY.

While the headline-grabbing sharing-economy services known so far aregenerally B2C, proliferating APIs areopening B2B doors as well. For example,the internet of things (IoT) is rapidlyequipping all manner of physical things(both industrial and consumer) withsensors, networking and APIs thatultimately will enable them to participate in sharing-economy marketplaces, thusunlocking their underutilized capacity. Inaddition, “Better instrumentation of thephysical world has the potential to helpbusinesses understand their risks far better.

Opportunity knocks; disruption enters

The sharing economy has led to start-ups with extraordinaryvaluations, up to US$50 billionor more, and to strikes, riots, new legislation and relatedcriminal trials. All of this ishappening because tech-enabledsharing-economy models createlarge new business and societalopportunities, even as theyprecipitate disruption and newbusiness challenges and risks.


And better understanding of risk shouldlead to a lower cost for risk resilience,” saysPaul Brody, Americas Strategy Leader,Technology Sector, Ernst & Young LLP.

Thus, the sharing economy could drive new kinds of dynamic, even automated,business alliances. We anticipate theemergence of industrial mash-ups leveragingnew types of APIs that enable simplified,automated access to business processes —perhaps a manufacturing process or anentire factory. “Imagine how factory APIswould stimulate industrial alliances andinnovation by simplifying access andexperimentation,” says Liu.

Sharing-economy opportunity knocks Growing liquidity, asset utilization andmarket efficiency are all powerful benefits —but they’re very abstract. And factory APIsare still in the future. Here are five alreadyproven, tangible benefits and opportunitiesthat emerge from sharing-economybusiness models.

1. Customer delight. The power ofdelighted customers cannot be overstated.“The customer’s voice will always carry a lot of weight and customer delight is why the sharing economy is here to stay,”says Pat Hyek, Global Technology IndustryLeader, EY.

Customers experience increased liquidityand market efficiency primarily as improvedquality of service, lower prices and instantgratification. But there are more sharing-economy paths to customer delight:• Sharing-economy marketplaces offer

a richer array of options than typicallyoffered by incumbent businesses thatachieve operational efficiency via verticalintegration of selected choices.

• They are similar to social networks in thatthey offer people new ways to connect,interact and support each other.

• They often fill in marketplace gaps. In carhailing, for example, some fill a price andservice gap between taxis and limousines,and certain developing nations now haveextremely low-cost ride-sharing servicesthat fall below taxis in price.

“The sharing economy creates real-time digital marketplaces for assets and services. As the utilization of assets and services goes up, the benefits to society are great. But the level of disruption from the sharing economy to existing business models is also huge.”Paul BrodyAmericas Strategy LeaderTechnology SectorErnst & Young LLP

Impact: customers

Sharing-economy marketplacesdelight customers.

Opportunity

Build long-term customer loyalty and win customers away from competitors.

Ask yourself

How do we continuously automateand simplify the customer experience,while expanding choice?

Impact: efficiency

The sharing economy improvesasset and service utilization.

Opportunity

Monetize assets owned by others.

Ask yourself

How do we enable individuals, small businesses and incumbentcorporations to monetize theirassets through our business model?


2. Individual entrepreneurship.“The sharing economy makesentrepreneurs of us all,” says Brody. Some sharing-economy participants reportlife-changing experiences. Sharing-economymodels empower individual entrepreneursin the following ways: • Sharing-economy marketplaces become

real-time platforms through whichindividuals can advertise their services.

• They enable better monetization of anindividual’s assets, time or skills.

• They lower market-entry barriers byproviding the marketplace and the toolsto use it.

• Their rating systems allow those with the most merit to rise to the surface andpotentially earn at a higher rate.

• They mirror the evolving future of work,reflecting the Millennial generation’sapparent desire for greater independenceand flexibility.

3. New “abstracted” value creation.Technology providers are often surprised bythe unintended uses their products serveonce they are released. Sharing-economymodels may drive a similar phenomenonthroughout other industries too. “Sharing-economy platforms and APIs enable anasset’s value-creation potential to beabstracted, or detached, from the physicalthing,” notes Liu. Through this abstraction,capital assets like real estate or factoriescan be monetized in new ways notnecessarily envisioned by their owners. “It separates new value that a thing mightoffer from its current, or orthodox, value,”Liu says. This abstraction is key to theindustrial mash-up opportunities Liuenvisions on the horizon.

4. Developing-economy boost. Indeveloping economies, sharing-economymodels may enable first-time access tocertain assets for a large portion of thepopulation. “You can envision sharingmodels being extended to refrigerators and freezers, for example, offsetting theownership cost for those who can affordthem and providing affordable access formany others,” explains Jim Hunter, Asia-Pacific Tax Leader, Ernst & Young TaxServices Ltd. Thus, the benefit ofdeveloped-economy conveniences mightspread in developing economies morerapidly than previously thought.

“The real uniqueness and popularity of sharing-economy company offerings is the real-time direct connections made between supply and demand — provider and consumer.”Pat HyekGlobal Technology Industry Leader EY


5. Societal benefits. Sharing-economymodels are believed to be better for theenvironment because they make greateruse of existing resources, reducing the needto make more. And increased utilization and efficiency raise productivity, which, in turn, can raise standards of living. “As the utilization of assets and services goesup, the benefits to society are great,” says Brody.

Disruption, challenges and new businessrisks also emergeBrody goes on to point out: “But the levelof disruption associated with it is also huge.”Sharing-economy models do more thanincrease market efficiency.

They also disrupt by establishing moredirect relationships between producers andbuyers. That changes the way money flowsthrough the economy, often in ways neveranticipated by existing tax, regulatory orlegal codes. Following are three types of themost disruptive challenges.

1. Government challenges: tax,regulatory and legal. If much commercemigrates from incumbent marketparticipants to sharing-economybusinesses, governments may see revenueflows disrupted before they’re able to enactnew rules. “As happened with cloudcomputing before it, laws on the booksdon’t currently cover transactions like theones many sharing-economy businessesenter into,” notes Flynn.

“So who pays a tax becomes an issue. Inmany cases, sharing-economy companiesdon’t even know whether or not to collect a specific tax,” he added. This disruption isclear and easy enough to state, but thechallenge of resolving it is enormous,requiring new laws and regulations inhundreds — or perhaps thousands — ofjurisdictions around the world. It may negateother societal benefits if governments losetax revenues to fund the services on whichtheir populations depend. In addition, a“meta” question governments must ask is,“How do we want to participate in thesharing economy?” To date, some haveembraced it and others have outlawed it.See “Government: welcome committee orgatekeeper?” on page 18.

Impact: access

Proliferating APIs enable automatedaccess to commercial assets andbusiness processes.

Opportunity

Innovate new products and services by integrating assets andservices from multiple suppliers(i.e., industrial mash-ups) .

Ask yourself

Can we provide simple interfaces to our assets or processes so thatothers can innovate around them?

“As happened with cloud computing before it, laws on the books don’t currently cover transactions like the ones many sharing-economy businesses enter into. … In many cases, sharing-economy companies don’t even know whether or not to collect a specific tax.”Channing FlynnGlobal Technology Industry LeaderTax ServicesEY

Impact: policy

Tax, regulatory and legal policiesoften don’t apply to sharing-economy business models.

Opportunity

Collaborate with governments to help make certain thatappropriate policies are developed.

Ask yourself

How might different policy changes affect our business, and what approach will deliver the best outcome?


“Sharing-economy models are disrupting society, because they change the entire dynamic throughwhich we interact with each other, with commerce,with government and with industries.” Robert DeMaineStrategic AnalystGlobal Technology SectorErnst & Young LLP

2. Incumbent company and workforcechallenges. Sharing-economy models oftendisadvantage incumbents in multiple ways,from luring customers away to not havingto own the assets they monetize. They aretypically simpler and more automated thanincumbents. And they create competitorswhose regulatory and legal status is unclearand that often are paying less tax as aresult. See “Incumbents: opening forsharing-economy business” on page 24.

3. New business risks. Sharing-economymodels face their own challenges anduncertainties, from the continuous rapidevolution of their own business models tonewly enacted tax, regulatory and legalcodes — every change of which likely ripplesthrough their business and operatingmodels as well as their IT infrastructures.See “Challenges facing the disrupters at thegates” on page 12.

Optimize your business strategy for asharing-economy worldWhether your organization is an incumbenttechnology company, a sharing-economytechnology company or an incumbent inany other industry, we believe the time isnow to address the potential impact ofrapidly rising sharing-economy models.Ultimately, all industries will feel rippleeffects, because all assets and services arepotential candidates for real-time onlineand mobile marketplaces. The sooner youstart analyzing your organization’s businessstrategy for a sharing-economy world, thesooner you can optimize it.

“Sharing-economy companies represent one of the true culminations of where technology is going. They bring together mobile phones and apps connected to online marketplaces, with great simplicity, so that whatever your context is at that moment, everything you need is right there and all connected. It’s a perfect model for how we all use our phones and how important that device is in our lives.”Tara MurphreeAssurance Services and Bay Area Technology Assurance LeaderErnst & Young LLP


Impact: workforce

Sharing-economy models causemassive disruption of existingindustries and workforces.

Opportunity

Empower those who have beendisrupted to participate in newsharing-economy models.

Ask yourself

How do we help disrupted workersmake a successful transition?

Impact: society

Increased economic efficiencyraises the global standard of livingand is good for the environment.

Opportunity

Strengthen society throughbusiness models that build a betterworking world.

Ask yourself

How does our business modelimprove the lives of marketplaceparticipants?


These are start-ups based on new businessmodels whose long-term success requiresthat they pioneer solutions in multipledimensions to resolve the many tax,regulatory and legal conundrums theirmodels raise. Pioneers always facehardships. The challenges we identified forsharing-economy companies fall into thefollowing categories:

1. Continuous business model evolution2. Continuous operating model evolution3. New business risks and related uncertainty4. Tension between rapid global growth

and local diversity5. IT development and systems issues,

reflecting all of the above

Getting the business model rightSharing-economy business models are new enough that they still are constantlyevolving — mostly in small ways, butsometimes in big ways. It’s a challenge all start-ups share. But for companiessimultaneously dealing with new kinds ofbusiness risks and uncertainty in their tax,regulatory and legal requirements, eachchange is magnified and multiplied.

Challenges facing the disrupters at the gates

These are early days in the rise and evolution of sharing-economy business models. Amidall the focus on disruption, it’seasy to overlook the significantand diverse challenges facingsharing-economy companiesthemselves.

“If sharing-economy companies end up having to make separate cases to every government around the world, it’s really going to affect their ability to do business.” Ray DePoleBay Area Tax Market LeaderErnst & Young LLP


“In the past 12 to 18 months, one sharing-economy company we know had two or three significant business model changes,” notes Jamie Wolfe, International Tax Services, Ernst & Young LLP. The company in question began by offering services on a subscription basis, changed to a per-booking commission system and eventually added a separate service fee. “Each of those changes generates ripple effects across tax, regulatory and legal,” Wolfe explains.

Further, sharing-economy companies oftenface two questions with far larger businessmodel implications:

• First, who is your real customer, thebuyer or the service provider? While yourgo-to-market plan may answer, “both,”accounting standards require a definitivechoice (with implications for revenuerecognition as well as tax, regulatoryand legal compliance).

• Second, who is and who isn’t anemployee? Since sharing-economycompanies view themselves astechnology firms providing electronicexchanges for transactions betweenindependent service providers and theircustomers, it makes sense to them thatthose service providers are not theiremployees. But it makes less sense tomany governments and little or none atall from the point of view of incumbentcompanies participating in the samemarkets.

How such questions ultimately are resolvedwill impact sharing-economy companybusiness and operating models, as well as a whole host of compliance requirements.

Challenge

Continuous infrastructure andprocess evolution.

At issue

Companies must constantly improveautomation and integration to stayabreast of ongoing technologyinnovation.

Ask yourself

What is the operating model that maximizes delight for both customers and asset and service providers?

Challenge

Continuous policy and businessmodel evolution.

At issue

Business model changes aremagnified by tax, regulatory andlegal uncertainties.

Ask yourself

How will possible business modelchanges interact with evolvingpolicies in the jurisdictions in whichwe operate?

“Many sharing-economy companies are driven by a passion about how their models protect and perhaps even improve the environment.”Jon CislerInternational Tax ServicesErnst & Young LLP


Continuously evolving an operating modelthat delights customers and providers Sharing-economy companies face anadditional challenge that drives ongoingoperating model evolution: they mustcontinuously streamline processes andautomate more and more of them, whileintegrating new capabilities.

Because of technology’s continuous wavesof innovation, sharing-economy companiesthat don’t continuously improve theirautomation and integration face disruptionby even newer, more efficient start-ups. Forexample, as convenient as car- and home-sharing services may be, there is still theproblem of access — getting the keys intocustomers’ hands. Networked electroniclocks have begun to emerge; they will likelybe rapidly integrated into sharing-economysystems, and then their use will beautomated to offer customers and providersa seamless, in-app experience.

New risks and uncertaintyNo one pays taxes unless governmentsenact taxes. Likewise, you can’t comply with regulations until they’re written. Many of those outside of sharing-economycompanies consider these statementsdisingenuous. But while some jurisdictionsdo have laws and regulations that apply tosharing-economy transactions — or havepassed them recently — the fact is thatmany others do not. And for sharing-economy companies, this creates hard-to-assess challenges in the form of potentialrisk and uncertainty.

Occupancy tax is offered as an illustrativeexample in our section titled, “Government:welcome committee or gatekeeper?” (seepage 18). As noted there, home-sharingmarketplaces raise questions aboutwhether the tax is applicable. If so, whoowes it? Who should collect it? And howshould all of the above be reported?

Given the business risk and uncertaintysuch open questions engender, sharing-economy companies must decide how tobehave in situations where existing rulesdon’t seem to apply. Their approaches varywidely. Some pursue the most efficientoperating model they can envision, makingthe conscious choice to worry about rulesand regulations only after they are enacted —or the organization is sued or its employeesarrested. Others are collaborating withofficials in jurisdictions where issues arise,sometimes before legal action andsometimes after.

“In the past 12 to 18 months, one sharing-economy company we know had two or three significant business model changes. Each of those changes generates ripple effects across tax, regulatory and legal.”Jamie WolfeInternational Tax ServicesErnst & Young LLP


Another example illustrates the new kindsof business risk faced by sharing-economycompanies: who is liable for propertydamage in multiparty transactions? Onesharing-economy company created a fundto reimburse owners when their propertysuffers extensive damage — raising therelated question of whether that companyhad therefore become an insuranceprovider subject to compliance with thatindustry’s regulations.

Tension between rapid global growth and local diversity Successful sharing-economy companiestend to expand internationally faster thanmany other companies. An importantinternationalization challenge is the tension

between a single global operating modeland fine-tuning local models to account forlocal rules, norms and more. The globalapproach gives up potential local opportunityand efficiency in return for global operatingefficiency. “The complexity of country-by-country operating models is enormous,”notes Stephen Bates, International TaxServices, Ernst & Young LLP. While theapproach may be more tax efficient andless risky, it requires IT systems to bedesigned separately for each country —among many other complexities. AddsBates: “As each jurisdiction brings newrules online for the sharing economy, you’llface an ocean of operating model re-engineering.”

Challenge

Tension between rapid global growthand local diversity.

At issue

Companies must seek optimalbalance between global and localoperating models.

Ask yourself

What are the opportunity and costtrade-offs between one globalapproach and fine-tuning operationsfor each locale?

Challenge

New business risks and uncertainty.

At issue

Multiparty transactions raiseunanswered tax, liability, insuranceand licensing questions.

Ask yourself

How do we increase our resilience to risks and address gaps fromunanticipated changes to tax,regulatory and legal policies?

“Sharing-economy companies have the technology and the marketplaces, but every day they must ask and answer, what is the operating model that enables a delightful end-to-end experience for both the customer and the provider?” Angela CarterMarket Segment Leader — Bay Area TechnologyErnst & Young LLP


“Sharing-economy companies must carefully consider liability issues and existing regulatory frameworks when setting up their operating model and corporate structure, or they could run into serious issues down the road.”Dr. Peter KatkoHead of IP/IT/Privacy Law GSAErnst & Young Law GmbH

Reflecting each change in IT systemsAs business and operating models evolve;as risks are addressed; and as governmentsaround the world catch up with the sharingeconomy by enacting new tax, regulatoryand legal codes, virtually every change mustbe reflected in IT systems and processes.“The challenge is to have enough qualifiedprofessionals who understand not only thesystems development software side butwho also understand the laws well enoughto properly reflect changes in theorganization’s systems,” says Wolfe.

Déjà vu disruptedWhile thorny and complex, all five of thesharing-economy challenges we haveelaborated also are the most recentiterations of similar challenges faced byinnovative technology companies since the industry’s inception in the 1950s. EY has experienced each inflection point as advisors to technology companies,beginning with the very first generationthat emerged from Silicon Valley to theglobal technology players of today.


Challenge

IT development issues.

At issue

Almost every change resulting fromthe evolution of the sharing economymust be reflected in IT systems.

Ask yourself

How do we maximize the flexibilityof our IT systems in order tominimize the expense of ongoingchanges?

“The complexity of country-by-country operating models is enormous. It may be more tax efficient and less risky, but then your IT system has to be designed separately for each country — among many other complexities. Plus, as each jurisdiction brings new rules online for the sharing economy, you’ll face an ocean of operating model re-engineering.”Stephen BatesInternational Tax ServicesErnst & Young LLP


Embracing sharing culture — or notGovernments around the world are decidingwhat kind of innovation economy they wantto have as sharing-economy companiesenter from other countries and as domesticstart-ups launch. Some are making proactivedecisions and some are allowing existingrules, regulations and special-interestgroups to work it out in court.

Asia-Pacific countries, for example, havegenerally embraced the model (thoughHong Kong is a notable exception). “InSingapore, someone who wants to drive fora ride-sharing app can obtain the necessarylicense for only SGD40,” notes Alex Postma,Global Director, International Tax Services,Ernst & Young Tax Co. (Japan). Singapore’sGovernment also has invested in ahomegrown ride-sharing start-up, whichalso received investment from China’ssovereign wealth fund and that country’sown leading ride-sharing company.1 But notall cultures have embraced sharing. PeterKatko, Head of IP/IT/Privacy Law GSA,Ernst & Young Law GmbH, notes that carsharing is not popular in Germany:“Germans just don’t want to let other peopleshare their cars. In Germany, my car is my

castle,“ he said. In addition to culture, insome instances, governments are taking ahard-line approach. For example, in Franceand Hong Kong, drivers for ride-sharingapps have been arrested and companyoffices raided.2

Giving entrepreneurs access to opportunity“The important issue for countries to thinkabout is the reverse of what most peoplethink. It’s not about making business easierfor sharing-economy companies. It’s aboutgiving the entrepreneurs in your countryaccess to opportunity and to growth fromcustomers in other countries,” explainsPostma. Two factors are critical toempowering a country’s individualentrepreneurship: clear rules and thebureaucracy’s response to speed. Clearrules around tax, regulatory requirementsand legal liability enable citizens to conductcommerce effectively both within andbetween borders. Speed is a problematicissue when companies used to near-real-time app revisions in response to customerrequests find themselves dealing withbureaucracies that take many months toapprove an operating license.

Government: welcome committee or gatekeeper?

Taxi driver strikes and riotschallenge governments tomaintain order. But the realsharing-economy challengesfacing the world’s governmentstoday can be summed up in twosimple-to-state but difficult-to-answer questions:

• How should they empower citizens to participate in sharing-economy innovation?

• How do they recover disruptedrevenue streams by revising tax, regulatory and legal codes?


Opportunity for developing economiesGovernments in developing economies maybe particularly motivated to embracesharing-economy models because assetsharing has the potential to raise theirpopulations’ standard of living. Ifparticipants in markets where they havelimited access to scarce resources beginsharing assets, those markets may seeunique sharing-economy opportunities.“The key obstacle developing economiesmust overcome is that some areas lacksufficient digital connectivity. It may takeyears for them to catch up before assetscan be put into an online and mobilemarketplace,” says Jim Hunter, Asia-PacificTax Leader, Ernst & Young Tax Services Ltd.

Revising tax, regulatory and legal codesto recover disrupted revenue streamsAdvancing technology makes existing tax,regulatory and legal codes obsolete withincreasing frequency as waves of innovationoccur more rapidly. This has long been achallenge. Sharing-economy businessmodels magnify the challenge by raisingcomplex questions that any two people — let alone separate jurisdictions — mayanswer differently. Consequently,uncertainty reigns as tax, regulatory andlegal guidance falls behind market activity.

Taxing questionsSharing-economy business models havemagnified the nexus questions that arealways raised when transactions occur invirtual online spaces. They have also raised

new questions, such as which party isresponsible for a given tax and who is andisn’t an employee subject to withholding.The Organisation for Economic Co-operationand Development (OECD) provided newglobal guidelines for digital economy taxationissues in October 2015, so governmentshave some base-level guidance in hand asthey wrestle with these questions (refers to report on Action 1: Addressing the TaxChallenges of the Digital Economy [theDigital Economy Report]). But the sharingeconomy is already overtaking the newguidelines. For instance, consider how B2B sharing-economy models could test the OECD’s new provisions for suchfundamental tax questions as transferpricing and the attribution of intellectualproperty within global value chains.

Challenge

Access to opportunity.

At issue

Enabling individual entrepreneurs toprofit within and across borders.

Governments must ask

How can governmental response be accelerated and tax, regulatoryand legal codes clarified to supportsharing-economy activity?

“The biggest question governments must ask is, what kind of innovative economy do we want to have? Governments that put in too many stringent regulations end up shutting down innovations before they can gain momentum.” Paul BrodyAmericas Strategy LeaderTechnology Sector Ernst & Young LLP

Challenge

Whether to embrace sharing culture.

At issue

Creating innovation that raisesoverall standard of living.


Should nations subsidize and/orpromote sharing-economy innovationor block and outlaw it to protectincumbent domestic industries?


Nexus questionsThese questions are amplified by themultiparty nature of many sharing-economytransactions. Home-sharing servicesprovide an illustrative example: they may have a member living in France whoowns property in Canada and rents it to aMexican resident. “Where is that servicetaking place? Is it at the property? Is it at the owner’s residence? Is it in Mexico,where the renter entered credit cardinformation and booked the sale? Or is it online somewhere, wherever themarketplace servers or the paymentprocessor is located?” asks Wolfe. It’s likelythat every jurisdiction wishes to tax thetransaction in some way. Global consensusis needed to avoid confusion and conflict,but that will take time to emerge.

Who pays? Occupancy tax provides the illustrativeexample for this issue, but similar concernsapply to value-added and other indirecttaxes as well. Occupancy tax is generallythe responsibility of a hotel owner. Buthome-sharing marketplaces don’t own theproperties advertised in their marketplaces.And since the property owners don’tnecessarily provide all of the services of ahotel, it’s not certain they are subject tooccupancy tax. In some jurisdictions, therearen’t any regulations (or forms) forreporting the kind of payments that ahome-sharing marketplace makes to aproperty owner for short-term rentals. Sodoes occupancy tax apply? Who collects it?And how would a jurisdiction know a tax is owed, or how much is owed and who owes it? “It’s a much bigger challenge forgovernment agencies to collect tax frommany individual property owners, so theyprefer to work with the marketplace,” notesJon Cisler, International Tax Services, Ernst& Young LLP. But marketplaces ask whythey should be subject to tax when allthey’re doing is providing a service thatconnects two people in a transaction.

“The important issue for countries to think about is the reverse of what most people think. It’s not about making business easier for sharing-economycompanies. It’s about giving the entrepreneurs in your country access to opportunity and to growth from customers in other countries.”Alex PostmaGlobal Director, International Tax ServicesErnst & Young Tax Co. (Japan)

“Technology is moving fast, and in many cases there are no rules surrounding sharing-economy businesses because that type of business didn’t exist before. It’s not that they’re trying to skirt the rules — it’s that the rules just don’t exist.”Tracy Benedict Tax, Global Compliance and ReportingErnst & Young LLP


When is an individual entrepreneur an employee?While some service providers participatingin sharing-economy marketplaces do so insmall increments between other work andplay, some focus on their service as thoughit were a full-time job. Is it? Not for everyone,clearly; but is it for some and, if so, whereis the line? Ride-sharing marketplacesargue that drivers are not employeesbecause they work only when they wish to and are provided no work tools by themarketplaces. But not all jurisdictions — oreven all participating drivers — agree, andthe question currently is the subject ofmultiple lawsuits. How it is decided willaffect income and withholding tax and maysignificantly impact sharing-economybusiness models.

Regulatory questionsTaxation is not the only regulatoryconundrum raised by sharing-economymodels. Here are four more thatgovernment regulators must resolve: • Are sharing-economy companies everbanks? If so, when? Certain jurisdictionsrequire banking licenses for the multipartytransactions marketplaces often enterinto, in which they collect funds from oneparty, keep a share and then distributethe rest to other parties.

• Are sharing-economy companies everinsurers? If so, when? Some marketplaceshave established funds to reimburseowners whose property is damaged as a result of a marketplace transaction.Certain jurisdictions may consider this aregulated insurance activity.

• Who needs a license? Currently,homeowners generally don’t need alicense to rent a room in their homes. But hotel and motel operators andproperty owners who rent for the entireyear usually do. Jurisdictions have begun to wrestle with this question in light ofnew sharing-economy activity; newregulation likely is forthcoming.

• What do you need to report? Manyjurisdictions have no regulations togovern reporting of the kinds of paymentsmade to service providers and assetowners in many sharing-economybusinesses — the forms don’t even exist.Expect jurisdictions to recognize new andemerging forms of sharing-economycommercial activity with new reportingregulations.

Challenge

Recovering disrupted tax revenuestreams.

At issue

Creating new rules for multipartytransactions that may have noequivalent in existing tax codes.


How should new nexus, payor, andemployee and contractor questionsbe answered?

Challenge

Digital wireless infrastructure.

At issue

Enabling developing economies torealize their potential from thesharing economy.


How can developing nationsaccelerate deployment of digitalinfrastructure?

“To advance beyond disruption will require much more collaboration between governments and sharing-economy companies about how, and who, pays for certain societal costs, such as health care, other social services and the tax revenue normally associated with employees.” Pat HyekGlobal Technology Industry Leader EY


“There could be sharing-economy opportunities in developing markets that won’t exist in other markets because there may be a willingness to share an even greater array of assets and more incentive to mobilize resources than in some developed economies.” Jim HunterAsia-Pacific Tax LeaderErnst & Young Tax Services Ltd.

Legal questionsBeyond taxation, three concerns meritparticular attention as legal issues: 1. Liability: to what extent is the sharing

platform liable for property damage orinjury? The technology company whoseonline marketplace connects owners andrenters has no presence at the damagedproperty. But the parties are broughttogether through marketplace transactions.“The extent to which a sharing platform is liable in multiparty transactions is aquestion that first rose to prominence inthe context of home-sharing marketplaces,but it can be extrapolated to any platformthat connects service providers withcustomers,” Katko says.

2. Privacy: what are sharing-economyusers’ privacy rights? Extensive data iscollected on the activity of cars used inride-sharing services, for example. Howmight that data be used relative to theprivacy rights of service users? Certainjurisdictions take widely disparate viewsof privacy questions — particularly the US and Europe. Privacy could become a contentious issue for many sharing-economy businesses.

3. New legislation: laws targeting sharing-economy models have begun to emerge.In fact, two executives of a sharing-economy company face criminal trial inFrance for continuing to operate a serviceafter it was outlawed by new legislation.

“Digital economies are not cash economies; they have electronic trails. We know all the participants, and we know where everything happens, so collection of taxes and compliance with regulation can be built right into the system.”Paul BrodyAmericas Strategy Leader Technology SectorErnst & Young LLP


Challenge

Regulatory and legal uncertainty.

At issue

Enabling confidence in sharing-economy businesses.


How can the regulatory and legalrequirements demanded of allbusinesses be clarified for thesharing economy?

There is good newsThe good news is that because sharing-economy marketplaces are onlinebusinesses, compliance could eventuallybecome very straightforward once clearrules are established. “Digital economiesare not cash economies; they haveelectronic trails,” notes Brody. “We know all the participants, and we know whereeverything happens, so collection of taxesand compliance with regulation can be builtright into the systems.”


To understand the potential disruptionfaced by incumbent companies, considerthe automobile industry. Personal cars are used, on average, only 4% of the day.3

A taxicab in New York City averages 50%utilization. “If ride-sharing services are able to halve the difference and raise theaverage car’s utilization rate to roughly30%, that would be eight times the currentutilization of cars — and would represent a75% to 80% reduction in the number of newcars we need. That’s massively disruptive,”says Brody. Similarly, in the US, office spaceis used only 30% of the time4 and 20% of alltrucks ride empty,5 while those that aren’taverage only 75% full. “We don’t use assetsvery well in the real world. Like a recedingocean tide showing us what’s hiding belowthe surface, instrumenting the globaleconomy will reveal how much unusedcapacity there really is and where we canfind it,” notes Brody.

Consequently, sharing-economy businesseshave emerged to create real-time on-demand marketplaces for office space andtruck transport — and just about anythingelse anyone can imagine, from massage

therapists to package delivery to personalerrands. In the near future, we expect the sharing-economy model of real-timeautomated access through APIs to proliferatein industrial markets, leading to theindustrial mash-ups discussed earlier —which will accelerate B2B innovation andcreate further disruption.

What’s an incumbent to do?

Developing business strategy in a sharing-economy worldThe big mistake made by most incumbentorganizations is underestimating thedisruption. We believe companies askingthemselves, “What is our sharing-economystrategy?” may be headed down a poorpath. A better question is, “What is ourbusiness strategy in a sharing-economyworld?”

“Incumbent companies will be in a constantstate of transformation for many years as their customers begin to experiencesharing-economy business models, andthose experiences stimulate new andchanged customer expectations for all

Incumbents: opening for sharing- economy business

The insight that, in the long run,society will be better off and the world’s standard of living willrise as a result of the sharingeconomy’s improved utilizationof capacity is little comfort to the disrupted.

And we anticipate massivedisruption.


market participants,” says Hyek.Incumbents in slower-moving industrieswith relatively static business modelshaven’t yet experienced the continuouslyfast-evolving business strategies that firstemerged in the technology industry andmore recently have migrated to otherindustries as those industries becomeincreasingly technology enabled. Asmechanisms to listen for, and act on, fast-changing customer demands andexpectations will become a critical elementof ongoing success. This means dealingwith constant business innovation.

Leveraging incumbent advantagesIdentifying and exploiting the differentiatingadvantages of asset ownership will also be key for incumbents that own assets.

Obvious advantages of the traditional asset-heavy approach include the ability toestablish consistent customer experiencesthat build trust. In addition, incumbentcompany models may have advantages interms of security and reliability. Incumbentcompanies typically have better-establishedbrands that often reflect some or all ofthese attributes.

Participate in the sharing economy,including through M&APerhaps most important to an incumbent’sability to develop business strategy in asharing-economy world is to participate insharing-economy businesses right away.Ford Motor Company, BMW and Daimlerhave all launched car-sharing services.6

Small incumbent hotel companies havebegun advertising available inventory inhome-sharing marketplaces.7 The opportunityis to learn by direct experience — onereason why the CEO of a car-sharingcompany also drives for that company.

Likewise, the value of M&A as a path tosharing-economy participation should beexplored fully. “The right M&A strategy foran incumbent organization might be toacquire technology that adds an online-and-mobile marketplace for your own inventory.Or it might be acquisition of a sharing-economy competitor, so that you go tomarket with offerings on both the asset-light and asset-heavy sides of the market,”notes Liu.

“The key question for incumbents is not, what’s your sharing-economy strategy? It’s, what’s yourbusiness strategy in a sharing-economy world?”Paul BrodyAmericas Strategy Leader Technology SectorErnst & Young LLP

Challenge

Reduction in demand forreplacement products.

At issue

Increasing utilization of existingassets is likely to reduce long-termdemand.

Ask yourself

How do we assess, and respond to,the true impact of sharing-economybusiness models on long-termdemand in our industry?

Challenge

Reimagining business strategies.

At issue

Asset-heavy incumbents competingwith asset-light business models.

Ask yourself

How can we automate, simplify and add customer choice, whilehighlighting the differentiablevalues our brand offers?


The future of the corporation: the biggest disruption of allJust like when scientists broke open atomsto discover they weren’t the basic unit ofmatter after all, the rise of sharing-economymodels suggests that the modern largecorporation may not be the basic unit offuture commerce.

“The sharing economy shatters the entirelogic on which large enterprises are built,”says Brody. Through APIs that enableautomated process integration by disparateparties, sharing-economy companies aredisputing one of the core premises of moderncorporations: that integration is best donewithin a corporate structure to mostefficiently organize people and get them toagree on and manage processes.

Replacing the vertically integratedenterpriseSharing-economy models replace verticallyintegrated corporate structures with API-based integration and automation. For example, ride-sharing companiesdemonstrate that you can run a high-quality,reliable taxi service just as well (or better)than a vertically integrated, taxi-owningenterprise — without owning a single taxi.

“If the integration APIs and automationtechnology that underpin the sharingeconomy show that online integration builtup in days or months can allow you tomatch the performance of companies built up over decades, what is the valueproposition of large enterprises?” asks Brody.

Industrial mash-ups emergeIt is possible to envision a future in whichnew companies emerge by tying togetherservices from large networks of suppliersand customers to create new and moreagile products and services. In such avision, the basic unit of commerce mayevolve into discrete factories and businessprocesses built on the specialist talents andinsights of teams focused entirely on thatelement. APIs would proliferate across suchindustrial uses, enabling the automation ofaccess to the process as well as integrationof the process with other processes — all ofwhich leads to the emergence of theindustrial mash-ups envisioned by Liu. Wesee this vision as a large opportunity fornew kinds of value creation based onbringing together multiple pieces, leading toa dramatic change in the way businessesand consumers access information and,therefore, in the way we see the worldaround us.

“Incumbent companies will be in a constant state of transformation for many years as their customers begin to experience sharing-economy business models, and those experiences stimulate new and changed customer expectations for all market participants.”Pat HyekGlobal Technology Industry Leader EY

In the debate over whether certain sharing-economy asset and service providers are employees orindependent contractors, many observers agree both sides have some merit. However the question isresolved, it reflects a sign of the times: the nature of work itself is undergoing transformation.

Labor, disrupted: new solutions may emerge, while old ones are revisited

The breadth of this transformation can be seen, in part, in thegrowing call for the question to be resolved by adding a newcategory of worker: dependent contractors.8 The category alreadyexists in Germany and Canada, where dependent contractors get more protections than freelancers but are still distinct fromfull-time employees.9 The main distinction is that dependentcontractors have much more freedom than employees in certaindimensions, but the employer still has much control over theworking relationship.

Another aspect of the sharing-economy-driven transformation of work is that some analysts anticipate the re-emergence of old-fashioned guilds that cross-verify and authenticate thereputations of professionals in their respective communities.10

Such independent forms of validation for individuals’ professionalreputations may be necessary to prevent dependent contractors’reputations from becoming dependent upon a given sharing-economy platform.


Challenge

Potential disruption to corporate structure.

At issue

Sharing-economy models suggestvertically integrated corporatestructures may not remain optimal.

Ask yourself

Should we consider offeringsimplified access to our own uniqueassets or business processes?

“The right M&A strategy for an incumbent organization might be to acquire technology that adds an online and mobile marketplace for your owninventory. Or it might be acquisition of a sharing-economy competitor, so that you go to market with offerings on both the asset-light and asset-heavysides of the market.”Jeff LiuGlobal Technology Industry LeaderTransaction Advisory ServicesEY

Challenge

Participating in the sharing economy.

At issue

Integrating sharing-economymodels into incumbent valuepropositions.

Ask yourself

Should we invest in sharing-economystart-ups, launch a business unit oracquire an existing business?

Challenge

Business transformation.

At issue

Changing customer expectationsdriven by sharing-economyexperiences.

Ask yourself

How do we improve the monitoring offast-changing customer expectationsand accelerate our ability to act onthem?

We’ve beenhere beforeThis report presents our view that the sharing economy hasunprecedented potential to disrupt the global economy — andequally unprecedented potential togenerate global economic growthand societal benefit.

It is among the first new tech-enabled business models to fullyexploit the modern world’s high-bandwidth digital wireless networksthat link together large cloud data centers with the billions ofpowerful mobile devices in all of our hands. But it sure won’t be thelast such model.

We know because, surprising as it may sound, we’ve been herebefore. Ever since the early 1960s, when we began working with thefirst semiconductor companies emerging in “The Valley of Heart’sDelight” (later known as Silicon Valley), we’ve seen wave afterwave of innovative technology disrupt powerful industries andconfound tax, regulatory and legal codes.

From the beginning, we helped tech companies, relevant governmentagencies and other market participants pioneer new rules foremerging technology paradigms that impact business process, tax,accounting and other systems. By connecting the various parties,with transparency around common goals, we helped develop roadmaps for new regulations, new approaches to taxation and legalcodes, and new business strategies and operating models.

Based on our 50+ years of disruptive technologyexperience, the following pages provide fourperspectives on the same burning question: whatis most important for technology companies todo or think about when a sharing-economyopportunity knocks?



Getting past the current disruption demandsfar more collaboration between marketparticipants and governments to buildcommon ground around solutions for thetax, regulatory and legal disruptions causedby sharing-economy business models.

That’s what most sharing-economy companies want. Clearly, companies would prefer lessregulation and less tax because it makes their lives easier and their consumers happier. But mostly they want to work with governments, find fair and equitable solutions andexecute them. And they especially don’t want to be brought before government bodies andaccused of tax avoidance or being tax negligent — or even brought up on criminal charges, as we’ve seen happen. To be confident in their digital future, sharing-economy companiesand the enterprises that follow them must stay informed by engaging early with regulatorsand by inviting tax to their strategic planning tables. Working collaboratively is what movesus past the disruption stage so the benefits of sharing-economy models can spreadthroughout society.

The level of disruption about to come fromthe sharing economy truly is unprecedented.

The reason is simple: developed economies have deployed the powerful mobile devices, the high-speed networks and the cloud infrastructure necessary to support far fasterpropagation of disruptive digital technology business models than was possible before. The sharing economy is among the first such digital business models to combine thosetechnology elements into a universal disrupter of virtually all industries — there will beothers. What’s most important about sharing-economy companies is that they have theopportunity to broaden global access to new markets, thereby empowering subsequentgenerations of entrepreneurs. These companies represent the first of many waves of digital technology business model disruption, and, as such, have an opportunity to set thetone and establish examples that help others enjoy the benefits of such disruptions withoutworsening the digital divide. Today, many sharing-economy companies are attempting to do just that. They’re building out thoughtful business models for each unique market,demonstrating a willingness to deal with regulation, with tax, with labor unions or whatevercritical element of society they anticipate disrupting. They recognize that if they don’tapproach their business this way, eventually they will find themselves forced to react,without a plan, in suddenly very difficult and likely unforgiving situations. On the otherhand, by taking a collaborative approach and seeking common ground, they are helping usher in an entrepreneurial era with the potential to deliver significant benefits to society at large.

Pat HyekGlobal Technology Industry LeaderEY

Channing FlynnGlobal Technology Industry Leader Tax ServicesEY


I’ve worked on corporate transactions all ofmy professional life, so what fascinates memost about the rise of the sharing economyis what I believe will be a very large impacton future transactions.

When you look under the covers at the technology-enabling sharing-economy models, yousee an evolving capability to separate business functions that until now have always beenintegrated into a monolithic organization. This technology enables you to abstract away a business function from the physical assets and people who provide that function. Thatabstraction is what leads me to the idea I call industrial mash-ups, which would enablethose outside your organization to imagine and create new business value by innovating onand around the business functions that your organization presents to the world via sharing-economy-style interfaces. These would be new kinds of transactions, partnerships andalliances, which could form, live and die very dynamically — because these new interfaces to business functions help drain the friction out of fast-evolving business relationships.

I personally believe that there are massive,massive levels of disruption coming.

As EY’s analysis suggests, the sharing economy is rapidly leading to a kind of API-basedeconomy that enables automated integration of anything that anyone can imagine. Andmany of those words demand emphasis; once assets, services and business functions areabstracted into APIs, anything can become available to anyone to incorporate into theirvalue-creation equation. But the sharing economy is actually growing slowly right nowcompared with its actual potential, because it is still relatively clumsy and complicated, andcompanies face tremendous uncertainty and risk. What’s required to drive this assetutilization economy faster is far better automation of the process — embedding into softwareinterfaces the functions that people are still performing today, like getting keys to a room ora car to a customer. And then two other major things are needed: simplification, by integratingmultiple steps of the process into one, and clarification of all the associated legal risks andliabilities, tax and regulatory codes, as Pat and Channing have noted.

Jeff LiuGlobal Technology Industry LeaderTransaction Advisory ServicesEY

Paul BrodyAmericas Strategy Leader Technology SectorErnst & Young LLP

Sources

1 “GrabTaxi raises largest round yet, $350m from Coatue, CIC & Didi Kuaidi,” DealStreetAsia, 19 August 2015, via Factiva, © 2015 DealStreetAsia.2 “Hong Kong Police Raid Uber Offices, Arrest Drivers,” TechCrunch, 11 August 2015, via Factiva, © 2015 AOL Inc.3 “Spaced Out: Perspectives on parking policy,” RAC Foundation, July 2012, © 2012 Royal Automobile Club Foundation for Motoring.4 “What It Takes to Collaborate,” Herman Miller Insight, 2014, © 2014 Herman Miller, Inc.5 “Despite high fuel prices, many trucks run empty,” The Christian Science Monitor Online, 25 February 2012, © The Christian Science Monitor.6 “BMW Offers Customers a Stake in Carshare Venture,” Dow Jones Institutional News, 24 June 2015, via Factiva, © 2015 Dow Jones & Company, Inc.7 “Airbnb Grows to a Million Rooms, and Hotel Rivals Are Quiet, for Now,” The New York Times, 12 May 2015, via Factiva, © 2015 The New York Times Company.8 “What if There Were a New Type of Worker? Dependent Contractor,” The Wall Street Journal, 28 January 2015, via Factiva, © 2015 Dow Jones & Company, Inc.9 “The Continuing Evolution of the On-Demand Economy — The CIO Report,” The Wall Street Journal, 24 July 2015, via Factiva, © 2015 Dow Jones & Company, Inc.10 Ibid.


When the sharing economy knocks, how will you answer?

Technology sector leader

Pat HyekGlobal Technology Industry Leader+1 408 947 [email protected]

Sharing-economy article contributors

Ray DePoleBay Area Tax Market LeaderErnst & Young LLP+1 415 894 [email protected]

Jim HunterAsia-Pacific Tax LeaderErnst & Young Tax Services Ltd.+852 2849 9338 [email protected]

Dr. Peter KatkoHead of IP/IT/Privacy Law GSAErnst & Young Law GmbH+49 89 14331 [email protected]

Tara MurphreeAssurance Services and Bay Area Technology Assurance LeaderErnst & Young LLP+1 408 947 [email protected]

Alex PostmaGlobal DirectorInternational Tax ServicesErnst & Young Tax Co. (Japan)+81 3 3506 [email protected]

Jamie Thorvilson WolfeInternational Tax ServicesErnst & Young LLP+1 512 473 [email protected]

Technology service line leaders

Channing FlynnGlobal Technology Industry LeaderTax Services +1 408 947 [email protected]

Jeff LiuGlobal Technology Industry LeaderTransaction Advisory Services +1 415 894 [email protected]

Dave PadmosGlobal Technology Industry Leader Advisory Services +1 206 654 [email protected]

Guy WangerGlobal Technology Industry LeaderAssurance Services +1 650 802 [email protected]

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services.The insights and quality services we deliver help build trust and confidencein the capital markets and in economies the world over. We developoutstanding leaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in building a better workingworld for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of themember firms of Ernst & Young Global Limited, each of which is a separatelegal entity. Ernst & Young Global Limited, a UK company limited byguarantee, does not provide services to clients. For more information aboutour organization, please visit ey.com.

© 2016 EYGM Limited.All Rights Reserved.

EYG no. DC0288EY-GTCED None

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors forspecific advice.

About EY’s Global Technology SectorEY’s Global Technology Sector is a global network of more than 21,000technology practice professionals from across our member firms, all sharingdeep technical and industry knowledge. Our high-performing teams arediverse, inclusive and borderless. Our experience helps clients grow, manage,protect and, when necessary, transform their businesses. We provide assurance,advisory, transaction and tax guidance through a network of experienced and innovative advisors to help clients manage business risk, transformperformance and improve operationally. Visit us at ey.com/technology.

Stephen BatesInternational Tax ServicesErnst & Young LLP+1 415 894 [email protected]

Tracy BenedictTax, Global Compliance and ReportingErnst & Young LLP+1 512 473 [email protected]

Paul BrodyAmericas Strategy Leader, Technology SectorErnst & Young LLP+1 415 902 [email protected]

Angela CarterMarket Segment Leader — Bay Area TechnologyErnst & Young LLP+1 415 894 [email protected]

Jon CislerInternational Tax ServicesErnst & Young LLP+1 408 947 [email protected]

Robert DeMaineStrategic Analyst — TechnologyErnst & Young LLP+1 212 773 9178 [email protected]

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