Cloud as a concept and then as a reality swept through businesses over the past ten years, and most companies moved a lot of their applications to public cloud platforms. AWS, Google Cloud Platform, and Microsoft’s Azure (the hyperscale service providers) are now powerful influencers in business today. They turned IT into a commodity and then put an as-a-service layer on it, thus influencing business thinking as well as IT. But companies are now competing in a different way.
Many companies now experience dramatic improvements in productivity – measured by the effectiveness and efficiency of work. They achieve these improvements because of implementing the new operating models and agile methodologies. However, companies still looking to achieve productivity improvements find a fundamental dilemma in trying to implement necessary changes associated with the new operating models.
The European market has been slower than other areas of the world in adopting digital transformation, but that’s changing. With new regulations opening up the digital marketplace for fair competition, sizeable strategic partnerships, and providers embracing the latest cloud, automation, and Artificial Intelligence (AI) capabilities, Europe is poised to seize a leadership position in the tech landscape. But the region needs to act quickly and grasp the right opportunities to prevail. Read on to learn more about Europe’s road to digitalization by 2030.
COVID-19 accelerated the worldwide movement that has been underway for years by businesses to adopt digital initiatives. Amid the pandemic, digitalization was pushed into the spotlight as a means for businesses to survive by finding innovative ways to deliver services through digital media.
The European market, however, felt the impact because it has historically shown a slower rate of digital adoption in some segments and also bore the early onslaught of the global pandemic (starting with the outbreak in Italy).
Coupled with slowing macroeconomic growth and looming Brexit, enterprises in Europe have been facing significant challenges. The changes fueled by the pandemic have now pushed Europe to rethink its business models and talent and embrace accelerated digital transformation.
Gearing up for change
Combined with this market context, Europe’s dependence on global technology companies (versus homegrown firms) has increased. Various reasons exist for Europe’s perceived decline as the home of Big Tech companies, including a stricter tax regime, more active regulatory/legal frameworks, and a smaller homogeneous addressable market. Despite this, Europe outperforms the world in many pockets of innovation, such as financial technology (FinTech), blockchain, payments, creative agencies, and cybersecurity.
Now, new expectations that developed from the pandemic have led European organizations to gear up to fully embrace digital business models. According to an Everest Group key issues survey, customer experience is the most critical priority for enterprises and service providers over the coming few years, followed by operational efficiency, then launching new products and services. The image below illustrates Europe’s priorities in business model changes and areas of innovation.
To improve the customer experience, European enterprises are offering digital solutions for conducting simple interactions without physically going to a location or speaking directly to a customer service agent and delivering more personalized experiences for language support, channels, and availability.
Europe’s transition to digital by 2030
Against this backdrop, Europe also is ramping up technology sovereignty efforts. Recently, the European Commission set the course towards a digitally empowered Europe by 2030. European governments and regulators are rethinking the enabling frameworks and legal structures to foster innovation and digital leadership.
The goal is to achieve digital sovereignty in an open and interconnected world and to develop digital policies that will enable businesses to adopt and seize a human-centered, sustainable, and more prosperous digital future.
Among the European Commission’s targets are ensuring 80 percent of all adults have basic digital skills, three-quarters of companies use cloud services, all public services are available online, and all households have gigabit connectivity.
To achieve these ambitious expectations, Europe will need to move fast.
The pathway to digitalization
To pave the way towards digital success, Europe has set in motion initiatives such as the Digital Markets Act (DMA), the Digital Services Act (DSA), and GAIA-X, a project to develop common requirements for a European data infrastructure supported by representatives of business, science, and administration.
With data security, privacy, and technology sovereignty becoming key issues for the region, Europe is setting up the following sanctions to protect companies and ensure a competitive market:
DMA: Ensures a higher degree of competition in European digital markets by stipulating large online platforms behave reasonably, creating a fairer business environment that encourages new emerging players to enter the market, and gives consumers more choice at competitive pricing
DSA: Protects all users, no matter where they live in Europe, by guaranteeing a safe and accountable online environment and opening up new opportunities to provide digital services across borders
GAIA-X: Strives to develop common requirements for European data infrastructure and to establish an interoperable data exchange where businesses can share data under the protection of European laws
With these new seminal regulations potentially changing the enabling framework of doing business across Europe, the market is at a juncture where it can take back the reigns of the technology landscape. But its success at capturing the next wave of digital transformation will hinge on how the region, its businesses, and regulators react to the current situation.
A bright future there for the taking
Europe has always had a broad range of innovative companies and countries with strong start-up and entrepreneurial cultures. Large partnerships over the past nine months that point to scaling digital transformation are also on the rise in Europe. These include deals like Wipro joining with Telefonica and METRO AG, Infosys with Daimler, and TCS with Deutsche Bank and Prudential Financial. For more details, please see our webinar, Why Europe is Poised to be a Major Factor in Digital Transformation Strategies, from earlier this year.
With increased digitalization accelerated by COVID-19, European organizations are moving forward with top digital capability priorities like cloud, cybersecurity, and analytics alongside automation and advanced automation AI.
Europe also provides attractive options to meet the need to shift to digital with different constituent countries offering local language and cultural context, and easier intra-region mobility (Brexit notwithstanding). For instance, vibrant technology ecosystems are developing in different clusters such as Germany for hi-tech and automotive, Eastern Europe for product engineering, and the UK and Ireland for financial services, to name a few.
Poised to be one of the main drivers of digital adoption, Europe will retain its central place in the world’s technology economy. However, spotting the right opportunities and actions to grasp will be crucial over the next few years.
Europe must take advantage of current changes in the market by:
Adopting a design-led workforce strategy that enables it to leverage specific digital talent pools and re-skilling or upskilling current employees with needed digital skills
Increasing the numbers of global service providers and product vendors focusing on investments in Europe as an attractive location closer to clients or to reduce risks from hyper-competitive markets. This includes the diverse opportunity Europe offers across different regional clusters
Accelerating efforts by European governments and regulators to rethink frameworks and legal structures to foster innovation and digital leadership
Our recent research shows that European enterprises plan not just to recover but exceed projected financial goals. With the end of the pandemic in sight and the reopening of business throughout the continent, digital innovation and opportunities to scale will be ripe for Europe’s taking.
How do you view the European digital transformation opportunity? Share your thoughts by emailing [email protected].
It’s time to revisit your digital transformation strategy, given the disruption and organizational changes that occurred during the pandemic.
“IT leaders need to differentiate between what they had to do to survive out of desperation versus as part of a thought-out strategy,” says Yugal Joshi, Vice President of digital, cloud, and application services research for Everest Group.
The world’s businesses are moving into a deeper level of competitiveness and productivity. In the past, when we introduced sailing into the oceans, it improved trade, which resulted in a huge explosion in wealth. When we introduced the telegraph and phones into the world, it dramatically changed communication. When we introduced common accounting practices where we could professionalize the accounting function and rely upon a consistent way of record keeping, we thereby improved productivity. The next wave is where companies will share information across countries and organizational boundaries. However, this transition necessitates moving away from current IT architecture.
I previously blogged about the need for a new third-party services operating model that would be more productive and agile and focus far more on results. Though the industry was on the verge of moving to a new model, adoption was slow at first. Now, attraction for the move to a new model is picking up in the marketplace, but enterprise customers and service providers define expectations differently.