G20 Executive Talk Series


Harnessing the potential of the digital economy

How Digital Economy Tools
Can Assist To Rebalance The Global Economy

Captain Samuel Salloum – GCEL Co-Chairman

The Digital Economy has gained much attention by policy makers throughout the global arena since it promises to be the catalyst in today’s 21st century technology era to drive a new wave of global economic growth. At the same time, it is the Technology Industry, our trusted 24-hour service providers, that have the capabilities and know-how to deliver upon policy makers’ commitments thereby implementing what the world’s citizens demand. Therefore, it is important to know where the technology industry stands today and how it can deliver what technology makes possible to boost our global economy.

Today, we are living in complex, fast moving times where there are multiple business transformation triggers in play at the same time. The world is facing significant forces such as globalization, modifications in trade policies, shifts in technology, excess production capacity and changes in customer demand. The last two forces are increasingly affected by the changing demographics in the world.

As mentioned by Ms. Ramos, harnessing the potential of the digital economy is key to escaping the low growth and low productivity trap in which the global economy is caught. In this regard, the technology industry can drive a tremendous social impact in today’s interdependent global economy by helping to de-risk trade and build the purchasing power of the mid and low income countries towards rebalancing the world economy. Otherwise, who will be left to buy the high technology goods and services produced by the high income countries during the next 20 to 30 years?

Even today the technology industry is battling a myriad of challenges towards meeting the needs of their customers including: poor top line revenue growth due to customers’ tight IT budgets, restrictive M&A and IPO markets, stringent R&D spending and lack of capital. Marketing budgets are under the greatest pressure with sales forces being culled. Even the perennial technology leaders have recently announced job cuts.

To revive their reduced revenue and profit levels, information technology services companies are conducting more research to develop new processes, products and business models to overcome the aforementioned challenges.

Accordingly, these firms are focusing on innovations such as: software as a service (SaaS), cloud IT, off shoring, digital convergence and continued consolidation in the service provider market. During the last few years, the industry has been quite active in the areas of infrastructure standardization, virtualization and consolidation.

The rise of Google and Facebook over the past 15 years is a testament to not only the power of innovation, but also the need to constantly change to stay ahead of disruptive competition. However, many businesses suffer from “status quo bias” or the preference to keep doing what they have always done, either through the fear of change or because current practices and behaviors are moderately successful, so why change?

Is important to note that one of the most dangerous phrases in the English language is “we’ve always done things that way” and this thinking has led to some of the greatest collapses of companies in the past 20 years, such as Borders, Blockbuster and Eastman Kodak.

In view of the ongoing market challenges, the technology industry seeks a new wave of innovation that maximizes on what technology makes possible today in order to increase their customers’ efficiencies, reduce their costs and assist them in gaining greater market share. In doing so, the technology industry will generate more revenues and increase the return on investment for their own shareholders.

SMEs represent up to 80% of employment in many countries. These enterprises are the future wealth generators of the world. While the technology sector has ingeniously created innovative and highly sophisticated vertical supply chain solutions used by many companies globally, these systems are costly and typically out of the reach of most trade participants causing them to be excluded from global value chains. In fact, 90.4% of the global value chain participants do not have a vertical system.

However, cost is not the only hindrance to adopting technology. For example, in India which has a low cost technology environment, the use of vertical systems is low because they have not been built to meet the demanding high quality information requirements of today’s fast paced global value chains that manage the horizontal process of trade.

Since trade is a horizontal process involving 19 industry trade clusters, there is a tremendous opportunity for the world’s technology firms to partner together under one roof and develop new processes and business models towards building the applications demanded by the real economy participants at the ground level.

By digitally connecting large, medium and small size companies through a horizontal trade platform, we can create an ecosystem that harnesses the huge volume of big data within the global B2B arena. This will then provide the seamless flow of validated, real time high quality information required by trade participants to make the right business decisions at the right time in the 21st century era. Digital trade will open new markets and enhance opportunities to all businesses, especially for SMEs, in global value chains.

The creation of high quality information will allow trade participants to reduce operating costs and de-risk doing business between the high, mid and low income countries. This de-risking effect will ease access to finance and insurance as well as create new market opportunities. Such a platform must also be provided free of cost to all trade participants through a new business model that incentivizes their participation, yet is able to sustain the deployment activities and handsomely reward the technology industry for their innovations.

The immense market potential for IT services companies offered by a horizontal platform will afford the ability to provide what their vertical systems customers have demanded for years, point-to-world integration. This increases the ability for IT services companies to sell more vertical system modules to their customers. In addition, the IT services companies can generate a significant source of new revenues, through a unique business model, by delivering thousands of applications for free, much like the apps provided through our smart phones today.

Technology companies need to take a fresh look and think ‘out of the box” as to how they do business in order to capitalize on the opportunities that lie ahead in the ever changing global marketplace. By providing the required digital tools for all to use for free through a sustainable business model, we can increase trade efficiency and transparency that will enlarge the global economic pie towards achieving sustainable economic growth.

This approach will benefit all industries involved in trade – commerce, finance, insurance and technology – driving greater returns for their shareholders as well as rebalancing the global economy. Considering the interdependency of our global economy we must all strive to create productive communities by committing to business excellence setting the foundation for a prosperous tomorrow.

As stated by Ms. Ramos, the G20 and the OECD are set to embrace the digital era as a long-term endeavor. Therefore, now it is incumbent upon the technology industry to ensure the cost of technology does not hinder the economic growth of our world.