The Digital Economy: What is it and what importance does it carry?
The digital economy, also known by other classifications such as “internet economy”, “new economy”, and “web economy”, is based on new and improving digital computing technologies. There are three significant components to the digital economy: the supporting infrastructure (such as networks, hardware, software, etc.), e-business (how business proceeds in the digital marketplace), and e-commerce (transfer of goods and services in the digital marketplace). It is rapidly developing on an international level, and as new and improved forms of technology emerge, it will continue to blur the lines of the traditional economy.
The emergence of the digital economy certainly carries some significance to it as well. Many experts and commissions have agreed that the digital economy is one of the most (if not the most) important factor in fostering innovation, competitiveness, and growth. It can allow small businesses (SME’s for example) to expand their growth and clientele in ways that were formerly not possible. It is also changing the way businesses operate, and the responsibilities of the executives and leaders of these companies. The digital economy is changing the way information is shared between businesses and individuals, the access to previously inaccessible marketplaces, and finally on a larger scale, the way companies do business.
Advantages and Disadvantages of the Digital Economy
The emergence of the digital economy carries its fair share of upsides and drawbacks. To begin with the advantages, it saves an enormous amount of time and physical space. With the introduction of digital libraries, digital medical records, and expansive databases, information can be retrieved in a moment’s notice. The digitized information also has minimal space requirements, as compared to the traditional method of keeping records, which required lots of physical space in the form of extensive files and storage space (i.e. cabinets).
Another effect of the digital economy is the disappearance, effectively, of cash. It would not be far-fetched to say that the days of going to your local street vendor to buy a snack in paper money may be few and far between. Depending on how you view it, this disappearance can be a positive or negative. One of the main drawbacks to the digital economy is the monetary commitment in the beginning phases. There is a substantial initial capital investment in order to provide for the necessary infrastructure and framework, and if one does not have the required capital, they could be left behind on this growing trend. Many fear that those businesses and countries who are reluctant to enter the digital economy may essentially be “left behind” in this rapidly growing economy. There are staggering statistics to support this, such as the fact that only 2% of European businesses are taking advantage of new digital opportunities, and that 41% of businesses are non-digital in the EU.
The Irish Digital Economy: What can we expect?
The case of the Irish digital economy is a very interesting scenario, to say the least. While projections show that Ireland may be heading for a very successful and rapidly expanding digital economy, there are experts that question whether or not Ireland has the infrastructure to deal with this. We will begin with the statistics and projections that paint a positive picture for the future Irish digital economy. The Irish digital economy is projected to be worth €21.1 billion by 2020, which rounds out at 10% of GDP. This would also bring 150,000 jobs to an economy that is currently the fastest growing in the EU. The quality of education in Ireland is also ranked 5th in the world by the World Economic Forum’s 2015 Global Information Technology Report , a very good sign for the future prospect of technology education and innovation. However, Ireland is ranked 26th in the world in infrastructure capabilities, 45th for business-to-business transactions, and 36th for ICT (information and communication technology industry) use for these business-to-business transactions. These figures pose some doubts about Ireland’s capability to keep up with the ever-changing, rapidly-growing digital economy (for more insight on this debate, the following link is to an excellent article written by Paul O’Riordan of the Irish Examiner, who discusses this issue in-depth: http://www.irishexaminer.com/viewpoints/analysis/is-ireland-ready-to-grasp-the-digital-economy-330429.html).
Future Perspectives
The 2015 World Economic Forum, held in Davos-Klosters, Switzerland, talked extensively about the future of the digital economy and how it will affect the global landscape (click this link to view the segment on the digital economy future: http://www.weforum.org/events/world-economic-forum-annual-meeting-2015/sessions/future-digital-economy). The panel consisted of five experts: Vittorio Colao, Satya Nadella, Sheryl Sandberg, Eric Schmidt, and Jim Hagemann Snabe. Each of the experts echoed the same exceptionally positive outlook of the future digital economy, expressing certain sentiments on the rapid growth of the economy and the scope for the digital world to evolve. Mr. Schmidt, who claimed that he might possibly have the most optimistic view among his colleagues, said that “new developments in machine intelligence will make us (humans) smarter as a result”. Ms. Sandberg also brought up the powerful topic on how increased technological innovation and practice can reduce divide among people, and more specifically, that this is the age of “shift from the historically powerful to historically powerless”, or in other words, every individual has a voice of opinion to broadcast.
In essence, the future is limitless for the digital economy, and as long as it enhances the way of the global community, it will be a successful economy for decades to come.
Evan Carvalho
International Trade Associate – World Trade Centre Dublin
9 February 2016
References
http://ec.europa.eu/growth/sectors/digital-economy/importance/index_en.htm
Mesenbourg, T.L. (2001). Measuring the Digital Economy. U.S. Bureau of the Census.
