Digital development: good results, but room for improvement

According to Microsoft’s Digital Futures Index, a data model that maps digital development using a wide range of parameters, Hungary ranks middle in the EEC region. The game changers are said to include tech-savvy leaders and a digitally-focused government to significantly boost the country’s competitiveness.

Microsoft’s model analyzed data from Eurostat, World Bank, OECD, Euromonitor, and the Digital Economy and Society Index (DESI), among others, to create 55 metrics that describe the digital maturity of the Hungarian economy.

The aim was to provide an overview of the size of the digital sector and see how businesses, the labor market, digital public services, infrastructure and human capital compare to other Central and Eastern European countries and to some of the European digital pioneers. Microsoft says the information provides insight into Hungary’s strengths as well as development opportunities and can serve as the basis for making critical business and economic decisions at the national level.

Hungary ranks well above the average, set at 100 points by the Digital Futures Index, in several categories. On the one hand, proportionally, Hungarian companies employ most IT professionals. The country also scores particularly high in terms of connectivity, use of smartphones and maturity of remote work, underlined Christopher Mattheisen, general manager of Microsoft Magyarország.

In addition, the relatively low cost of living and well-developed digital infrastructure are attracting digital nomads in record numbers. The digital economy is larger than the automobile, accounting for 6% of GDP, and a McKinsey report estimates that it can add some € 9 billion to economic output by 2025.

When it comes to businesses, the Digital Futures Index reveals that more investment leads to more innovation, and that cloud technology not only drives innovation but also productivity.

Drive transformation

“It is more important than ever that senior executives in the 45-64 age bracket are digitally comfortable and can drive digital transformation within their organization,” said Mattheisen.

Part of long term success is hybrid work. Team collaboration is usually boosted by flexible working conditions which also help retain talent.

“A new generation of workers take for granted the existence of a hybrid work culture and infrastructure,” said Gabriella Csanak, director of marketing and operations at Microsoft Magyarország.

Training is another issue the importance of which cannot be stressed enough. Return on investment in technology only yields substantial returns if there is a skilled workforce that embraces and executes it across the spectrum of the operation, according to Microsoft. The employment of ‘learning officers’, who organize technology-related trainings, should be a priority. This can be part of the concept of lifelong learning which has yet to be adopted on a larger scale.

Adult training and retraining should involve as many people as possible in the workplace, as knowledge transfer can improve productivity. The most successful companies are adopting technologies such as AI, Internet of Things and the cloud in their daily practices.

“In Hungary there are great IT specialists, but even more companies need to invest in cloud and training,” Csanak said. He added that this is essential to better exploit digital solutions and minimize worker fluctuation.

Room for improvement

In some areas there is certainly room for improvement. Gender diversity, for example, is 40% below average, which argues for making IT more attractive to women. The number of students with STEM studies is 27% lower than the CEE average. Equally alarming is the level of digital skills in the 16-29 age group. In contrast, the ICT labor shortage is at an all-time high. In addition, less than 10% of companies provide mandatory IT training to their staff. For comparison, in Estonia the figure is 35%.

The level of digitization of public services received a score of 84; its improvement is important because it triggers a whole process cycle. People get used to using digital services, which affects their needs and demands in general and which in turn creates greater demand for digital services.

“The result is greater digital wealth,” Mattheisen said.

Digital literacy goes hand in hand with a better quality of life. Results from the Digital Futures Index indicate that quality of life is higher where older people and women have better digital skills. This is also linked to sustainability: the more mature the society is in terms of digital knowledge, the more sustainable lifestyles can be maintained.

Harnessing the power of data can accelerate positive trends. As Mattheisen noted, no business is immune to change, and those that have traditionally viewed their data assets as a strategic tool have fared better. Sophisticated data analytics will add value at all levels, from government to businesses and citizens.

Overall, the countries that are better off in terms of digital transformation also perform better on indicators reflecting economic and social development. In other words, they are “greener”, more innovative and competitive, and they have a higher standard of living. In Hungary, continued government and market cooperation is a prerequisite for progress, according to Microsoft.

This article first appeared in the print issue of the Budapest Business Journal on December 17, 2021.

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Sara H. Byrd