Growth of the Digital Economy

As pointed out in the previous chapter, the concepts ‘digital economy’, ‘information economy’, ‘information society’ and ‘knowledge society/economy’ are inextricably intertwined and are often used interchangeably. However, the concept ‘information society’ is increasingly being seen as a unifying term. In defence of why this is so, Schienstock et al. (1999) have argued that the notion of an ‘information society’ is presented as a strategic aim meant to overcome current social stagnation. The central argument is that the information society would create and secure millions of new jobs; guarantee economic competitiveness; bring ecological advantages; intensify democracy; and revolutionize our ways of living and working with the help of new communication technologies.

E-Readiness Assessment Methods and Tools

E-readiness assessments are largely investigated at country-level across a number of sectors, and tend to adopt quantitative approaches that assign to countries’ numerical scores depending on how well they have performed on specific components of e-readiness measures. A weighted average is calculated based on the relative importance accorded to these components in order to determine the level of e-readiness of countries (Rizk, 2004). The results of e-readiness rankings of countries are regularly published annually by some agencies. For example, the Economist Intelligence Unit (Economist Intelligence Unit, 2001) annually publishes a comprehensive list of countries on the basis of their measured e-readiness. The ranking categorises countries on the basis of their overall e-readiness, as calculated from 89 indicators across six weighted dimensions, namely connectivity, the business environment, consumer and business adoption, the legal and regulatory environment, supporting services, and social and cultural infrastructure. The result of the calculations is the classification of the world’s largest economies on the basis of their perceived adopter category.

Challenges of the Digital Economy

There are various challenges faced by SMEs in their endeavour to make more active use of the Internet and e-business. These challenges vary widely across different sectors of the economy as well as from country to country. The most commonly cited problems relate to being unable to apply the Internet to business; preferences for established business models; lack of an enabling environment (lack of ICT skills, poor network infrastructure); high costs associated with ICT equipment, networks, software, ongoing support, etc; and security and trust issues (the poor security and reliability of e-commerce systems, uncertainty of payment methods, etc) [OECD, 2004].

E-Government Readiness

The United Nations (2008) believes that in a world characterised by rapid changes driven by globalization and the emerging knowledge-based economy, e-government provides the means to achieve maximum cost savings and improved service delivery to both citizens and businesses. In short, the digital economy and e-government can be said to be inextricably intertwined. Global e-commerce growth and expansion in the private sector are linked to an online population that is projected to reach some 1.8 billion by 2010 (United Nations, 2008). Most of this population will be using e-government infrastructure to go online. Moreover, the widening scope of digital technologies through e-government means that few (if any) industries are exempt from some degree of transformation and electronic commerce. The UN 2008 E-government Readiness Report showed that in the United States alone, online retail sales were expected to reach nearly $120 billion by 2008 (United Nations, 2008). In less developed countries, similar trends are apparent, with Argentina, for example, having recorded a more than 100% increase in e-commerce levels from 2005 to 2006 - more than $3.3 billion online transactions were recorded in the latter year. Much of e-government reflects private sector activity, which has both encouraged and pressured public sector organizations to act in a similar manner. Fiscal constraints imposed by a quasi-competitive system of global investors, as well as a strategic desire to generate cost savings and reallocate spending to new priorities, make the nexus between technology management and efficiency a central concern in government (United Nations, 2008).

Globalisation of the Digital Economy

Data transmitted over the Internet does not recognize national borders. It is this factor that has led information technology to open up new avenues in global commerce. People in separate countries can work on the same project without having to physically relocate. Organizations can now deploy their resources and operations anywhere around the world. Information about new products, corporate earnings, etc; can be shared simultaneously in a networked economy via corporate e-mail systems, value-added networks or over the Internet. In an increasingly globalized business world, for which the Internet is partly responsible, countries are likely to experience the migration of skilled workers to higher paying economies or jobs. Therefore, as the globalization of the world’s economy takes shape, concerted efforts must be made by national governments and states to train enough students and workers to meet the new challenges brought about by the digital economy (Selhofer, 2003).

Conclusion and the Way Forward

The primary focus of this book has been on digital economies, SMEs and e-readiness. With the exception of this chapter, which provides the book’s summary and conclusion, the eighteen chapters that make up this book collectively cover conceptual aspects of the core subjects discussed, i.e. the digital economy’s components and infrastructures; the digital divide and its implications to SMEs, e-readiness and the digital economy; ereadiness measurement tools and methods; e-commerce and e-business; e-government; content, knowledge and e-records management; e-readiness of SMEs in the digital economy; information needs and behaviour of SMEs in the digital economy; capacity building - SMEs and the digital economy; globalisation of the digital economy; trends and best practices in the digital economy; and challenges of the digital economy.

Capacity Building in SMEs

The preceding chapter demonstrated that one of the more pressing challenges facing SMEs is the lack of adequate skills, which makes capacity building a critical preoccupation. The 2003 WSIS highlighted the need for capacity building to achieve an information society where there is rapid growth and the wide spread use of information, and where people have the necessary literacy competencies to appreciate what information is needed, where to get it, and most importantly, how to use it. Appropriate levels of education and Internet familiarity are necessary for digital commerce to be viable. Digitally enabled consumers and businesses are the basic cornerstones of the digital economy. Without the necessary ICT skills, firms would find it difficult to penetrate global markets. Notably, labour-intensive businesses that support digital commerce, such as call centres or KM outsourcing providers, move quickly into markets where skills are available to support their operations.

E-Readiness of SMEs

Increasingly, SMEs are achieving and sustaining competitive advantages using ICT that are propelling and accelerating the globalization of businesses. The growth of the Internet has created a global, cost-effective platform for businesses to communicate and conduct commerce. The Internet is making it possible for SMEs to enjoy the benefits that were once only afforded to larger businesses. A study by Ramayah et al. (2003) in Malaysia revealed that most SMEs in that country are increasingly embracing e-commerce and spending increasing amounts of money on information technology, with subsequent higher revenues. SMEs in the digital economy have significant advantages over larger competitors (Dejonckheere et al., 2003) arising out of: Increased outsourcing of information activities, resulting in • new business opportunities The low degree of capital intensity of many e-businesses, which has resulted in relatively low start-up and exploitation costs; Enhanced speed of decision-making and innovativeness; Electronic networking and clustering, which allow SMEs to combine the advantages of being small-sized with the various benefits of large scaleBenterprises.

E-Records Management and Freedom of Information for SMEs

While records management in general and e-records management in particular have received serious attention in large enterprises, the same cannot be said for SMEs. This is despite the emergence of an economy where transactions are increasingly carried out electronically, and where the management of e-records emanating thereof must be meticulously managed to obviate disaster. Iron Mount Digital (2007), a leading provider of data backup/recovery and archiving software based in the UK, warns in its findings (based on industry research) that SMEs are reportedly failing to put in place disaster recovery plans in the belief that such recovery plans are the domain of larger companies. Such SMEs could face total shut down or bankruptcy unless they developed contingency plans to ensure that normal operations are resumed following a serious incident. In these plans, SMEs should include a disaster contingency team, assessing key areas of risk across the business, planning for recovery, and reviewing and communicating the plan to employees. It is important for SMEs to continuously backup crucial company information so that in the event of a disaster, the company can be safe in the knowledge that it can restore company data.

E-Business and E-Commerce

E-business and e-commerce are applications around which the digital economy revolves. The concept ‘e-business’ was originated by IBM in 1997 to refer to the sum total of buying and selling goods and services, servicing customers, and collaboration amongst business partners online. E-business consists of electronic applications that offer production planning, scheduling, outsourcing, and other business-related operation processes. E-commerce is still evolving; as of yet, a widely accepted definition has not been agreed on (Coppel, 2000). Loosely defined, e-commerce refers to doing business over the Internet; in other words the buying and selling of goods and services that can be delivered offline as well as the creation of products that can be digitised and delivered online (e.g. computer software). Activities in ecommerce may include order registration, electronic advertising, electronic billing, electronic marketing, online delivery and tracking, and customer services support.