Countries across the globe are spending billions of dollars on ICT infrastructure development but the returns they receive are not always in line with the investments being made. Transformation into digital economies is a goal for many countries but the infrastructure and regulatory environment must be focused on results. ICT policies must therefore be set to maximise investment returns so the future potential of the digital economy can be realized.
The importance of the digital economy is now well understood and countries are investing to engage in it. Consultancy Arthur D. Little has reported that the digital economy typically contributes 5% of GDP directly and 15% of GDP indirectly.
“Any country that is trying to develop a digital economy has to decide where to focus their resources,” said Rajesh Duneja, the head of the Regulatory Compliance Centre at Arthur D. Little, speaking at Huawei’s Better World Summit. “When you develop a strategy, you have to bet on a few things and you have to let go of certain things. These decisions have to be made based on the characteristics of the digital economy and the country’s strengths and weaknesses. Some countries have abundance of skilled manpower, some countries have abundance of capital and some are in geographically advantageous locations.”
Duneja pointed out that these differences dictate national approaches to the digital economy and ICT policies. To categorize the variations, the joint resesarch has developed seven archetypes. The first archetype is an innovation hub. These countries have long traditions of researching and developing new products and services and have the capabilities to commercialise these. Companies like Sweden, Israel and South Korea are good examples of innovation hubs.
The next archetype is ICT prosumers. “These are countries that dominate and fuse industries,” explained Duneja. “Germany is a good example and it’s very strong in automobile and manufacturing. It’s no surprise that SAP, which is dominant in ERP systems, came out of Germany.”
In the production arena there are two further archetypes, the services powerhouse and the global factory powerhouse. “Ireland has become the back office for Europe, while The Philippines is now the centre for voice-based call center services,” added Duneja.
Another archetype is a global factory. “This is traditional hardware manufacturing,” explained Dubeja. “China used to be the global factory for the world for electronics and, as it is progressing and becoming prosperous it is moving towards being an innovation hub. Other countries are filling in the gap such as Mexico, which is a good example of a global factory.”
A further archetype is business hubs. These have been traditionally the locations for trade and commerce and many of these countries have also become centers for ICT trade. These locations are where the multinationals locate their head offices.
Then, in the consumption area, there are two more archetypes. One is ICT patrons, which are countries that have used ICT to grow. Duneja said Bulgaria is a good example of an ICT patron which has invested significant amounts of money in egovernment resources and now is moving towards being a service powerhouse. The final archetype covers the ICT novices, these are countries that are focused on developing their infrastructure and these still some way to go towards the digital economy.
“There is a huge opportunity for countries, especially the 50% of the countries which are still isolated novices,” explained Duneja. “They are going to be spending a lot of money and they should get a better return on their investments.”
Duneja emphasized that while all would theoretically expect to become ICT innovation hubs, countries in other categories can maximize the contribution of ICT to GDP without having to move all the way to that category. Countries such as Malaysia, Ireland and Singapore, which are not innovation hubs, have almost 10% of their GDP contributed by ICT.
“We’re often asked where should we invest?” said Duneja. “The answer is it depends on your archetype. If you have $100 million, and your archetype is a service powerhouse, and you want to spend this money in quantum computing, it’s a very risky bet because you do not have the right ecosystem to be able to maximise the benefit.”
“If you’re a service powerhouse, you are better off taking that $100 million, spending $40 million on improving the quality of the engineers that you have,” he explained. “You may spend another $30 million in attracting development centres for quantum computing and another $30 million in improving the infrastructure or making it easier to do business in your country. If you’re in an innovation hub, spending $100 million on developing the quantum computer hardware is a must for you. The archetype approach allows you to focus your resources on which areas give you the best result.”