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APKIT, Committee on IT Development Monitoring

Digital BusinessCountries – leaders, issues, initiatives

Companies – shifts, implications for Executives

Natalia Berdyeva

Moscow,

May 2015

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APKIT & our Committee in brief

• APKIT, Information & Computer Technologies Industry

Association. It is a noncommercial association in the

Russian IT Industry

• Members include leading Russian and international

IT players who control up to 70% of the

Russia IT market

• The Association - through negotiations with business

and public authorities - contributes to the development

of IT market in Russia

• Ten Committees in the Association:

1. Committee on Protection of Copyright and Intellectual

Property

2. Committee on Education

3. Committee on IT development monitoring (IBM)

4. Committee for Property Protection

5. Committee on Regional Policy

6. Committee on Software Development and Export

7. Committee on Information Security

8. HR Club

9. Committee on Legislation

10. Council on professional qualifications in IT

Apkit http://www.apkit.ru/

The Committee http://www.apkit.ru/committees/monitoring/

The Committee on FB https://www.facebook.com/apkititmonitoring

Nikolai Komlev -

Executive Director,

APKIT

Committee on IT development monitoring

Kirill Korniliev,

Head of the

Committee,

Country General

Manager of IBM

Russia/CIS

Natalia Berdyeva,

Coordinator of the

Committee, Market

Development

Advisor for Europe

at IBM

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Executive Summary

Digital

• Is a new era of IT development. New added value solutions, business models are created on the base of Cloud, Mobility, Social

Business, Big Data/Analytics, with the help of new innovation accelerators such as 3D and others

• Digital is about efficiency in the economy, about destroying but also creating jobs and not only in IT, ultimately about creating greater

wealth. Importantly it is also about everyone having a voice and getting enormously personal helpful advice

• Among challenges for Digital development are broadband connectivity, spectrum licensing, pricy infrastructure. Also consensus

between privacy and legitimate use of data for public safety. Also wider access to internet in the world and other

Countries and Digital Economies

• Singapore is in the world top rank for being Digital

• 7 of the Top 10 Digital countries are Europeans including Finland, Sweden, Netherlands, Norway, Switzerland, United Kingdom,

Luxembourg

• 5 of the Top 10 countries that have improved their Digital score the most since 2012 are from the CIS including Armenia,

Georgia, Kazakhstan, Russia, Kyrguz Republic

• The performance of 3 Baltic countries is particularly remarkable. Estonia preceding Belgium and Ireland

• Europe started Digital Single Market Program 2015-2016 that could contribute €415 billion per year to the economy and

create 3.8 million jobs. Digital Single Market is one of the Top 10 priorities of the EU Commission

Companies and Digital Technologies

• The development of technology is such that business better adapt business model to the possibilities - and the imperatives –

of technology (and not harness technology to the imperatives of business model)

• Disruption of Digital changes the landscape of companies. Traditional vertical value chains are added with Infrastructure

Organizations, Platforms, Communities (Stacks). For executives (even being from vertically integrated companies) this means a

need to define the company by stacks and to seek competitive advantages in every stack

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Objectives of this presentation

Provide analysts and some industry leaders view

on Digital development and future,

on Countries and Companies levels

Outline key issues, shifts, implications.

Not everything, but certainly important

things to consider

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Content

Definitions

Part I. Countries and Digital Economies

‒ What is needed for global Digital Economy. View from Facebook, Google,

Microsoft, Vodafone

‒ Most digital countries in 2015 based on WEF Network Readiness Index

‒ EU Commission Top 10 priorities including Digital Single Market

Part II. Companies and digital technologies

‒ New landscape of companies

‒ Implications for Executives

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Definitions. Digital is about new business models, connecting people/business/things, working in the world of big scale of information and new technologies, making personalized secure offer to everyone and everything.

Gartner: Digital business is the creation of new

business designs by blurring the digital and physical

worlds. Digital business promises to usher in an

unprecedented convergence of people, business,

and things that disrupts existing business models.

With more than seven billion people and businesses,

and at least 35 billion devices, communicating,

transacting, and even negotiating with each other, a new

world comes into being: the world of digital business.

Sources: IDC http://www.slideshare.net/michaelkurzidim/idc-predictions-2015;

Gartner http://www.gartner.com/technology/research/digital-business/ ;

Europe Digital Single Market http://ec.europa.eu/priorities/index_en.htm

IDC: New "Innovation Stage" of value creation on top of

the 3rd Platform and a new wave of core technologies –“Innovation Accelerators”

Europe Digital Single Market is one in which the free

movement of goods, persons, services and capital

is ensured and where individuals and businesses can

seamlessly access and exercise online activities

under conditions of fair competition, and a high level

of consumer and personal data protection,

irrespective of their nationality or place of residence

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Part I

Countries and Digital Economies

‒ What is needed for global Digital Economy.

View from Facebook, Google, Microsoft, Vodafone

‒ Most digital countries in 2015 based on WEF Network

Readiness Index

‒ EU Commission Top 10 priorities including Digital Single Market

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1989• Berlin Wall Comes Down, no more

Cold War and opportunity for

business to globalize

• World Web borne out of Cern

experiment to manage documents

and with that a significant opportunity

for change and transformation

2015• Some worldwide globalization

assumptions significantly

challenged

• Increased pace of Innovation on

Technology side and new

opportunities

What is needed for global Digital Economy?

Source: Davos 2015 - The Future of the Digital Economy http://www.youtube.com/watch?v=PjW_GSv_Qm0&app=desktop

Davos 2015, plenary session on The Future of the Digital Economy

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On the panel –

Sheryl Sandberg, COO of Facebook

Eric Schmidt, Executive Chairman of Google

Satya Nadella, CEO of Microsoft

Vittorio Colao, CEO of Vodafone

Davos 2015, plenary session on The Future of the Digital Economy

Source: Davos 2015 - The Future of the Digital Economy http://www.youtube.com/watch?v=PjW_GSv_Qm0&app=desktop

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Vision of Digital Economy Future,

Pessimistic or Optimistic?

Davos 2015, plenary session on The Future of the Digital Economy. Key statements

• Optimistic

What is the change? • Internet is no longer anonymous. Everyone has voice

• Enormously personal helpful advise

• It is no longer possible for a country to step out of some basic assumptions in banking,

communication, etc

• It is about productivity and money, but also about more equal world

• Creates job, also out of IT sector

• Small business access to technology have never been better, …

Challenges and things to solve • Internet to connect another 60% of the world

• Balance btw privacy and use of data for legitimate public safety

• level of sophistication, no balkanization of internet

• More broadband connectivity, key GOV programs for broadband

• Who will pay for bandwidth, spectrum and infrastructure

• How to use TV whitespace (btw the channels that you never see) to provide internet service

• Spectrum licensing. Will it be possible in ultra-dense spectrum, do you license “oxygen”…

Where do you see evolution of

internet

• “Internet will disappear as everything in our life gets connected“, Eric Schmidt

• Adaptive use of bandwidth, …

Source: Davos 2015 - The Future of the Digital Economy http://www.youtube.com/watch?v=PjW_GSv_Qm0&app=desktop

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Davos 2015, plenary session on The Future of the Digital Economy. Closing remarks

Closing remark on what is needed for Digital World

Sheryl Sandberg, COO of Facebook

“Inclusion. an internet that connects everyone, that is available to everyone”.

Vittorio Colao, CEO of Vodafone

Trust environment btw technology providers, governments, plumbers and customers

Eric Schmidt, Executive Chairman of Google

Government to do one important thing – help build and license the

infrastructure that makes this incredible future happen as quickly as possible

Satya Nadella, CEO of Microsoft

Global consensus, it cannot be left to only one company or country, global

consensus on establishing that trust

Source: Davos 2015 - The Future of the Digital Economy http://www.youtube.com/watch?v=PjW_GSv_Qm0&app=desktop

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Part I

Countries and Digital Economies

‒ What is needed for global Digital Economy. View from

Facebook, Google, Microsoft, Vodafone

‒ Most digital countries in 2015 based on WEF Network

Readiness Index

‒ EU Commission Top 10 priorities including Digital Single Market

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World Economic Forum, Networked Readiness Index (NRI)

1. Environment – quality of regulatory and business

environment

2. Readiness – affordability, the quality of digital

infrastructure and population preparedness to use

technology

3. Usage – level of technological diffusion among

individuals, businesses and the government

4. Impacts – information and communication

technology social and economic impacts

NRI assesses ability of countries to make best use of ICT technologies.

It is composed of 4 components

1. Environment subindex

1st pillar: Political and regulatory environment

2nd pillar: Business and innovation environment

2. Readiness subindex

3rd pillar: Infrastructure

4th pillar: Affordability

5th pillar: Skills

3. Usage subindex

6th pillar: Individual usage

7th pillar: Business usage

8th pillar: Government usage

4. Impact subindex

9th pillar: Economic impacts 10th pillar: Social impacts

Source: WEF, The Global Information Technology Report 2015

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Top Ten 2015

1. Singapore [2]

2. Finland [1]

3. Sweden [3]

4. Netherlands [4]

5. Norway [5]

Legend: [rank 2014]

• 7 out of 10 are Europeans

• Singapore the only of the

Asian Tigers in the top 10

• Total 143 in the rank

Top 10 Digital countries by NRI 2015

6. Switzerland [6]

7. United States [7]

8. United Kingdom [9]

9. Luxembourg [11]

10. Japan [16]

Source: WEF, The Global Information Technology Report 2015

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• 5 of the 10 countries that have

improved their NRI score the

most are from the CIS

• FR, all CIS

• 40 Kazakhstan [38]

• 41 Russian Federation [50]

• 57 Azerbaijan [49]

• 58 Armenia [65]

• 60 Georgia [60]

• 71 Ukraine [81]

[rank 2014]

Top 10 most improved countries by NRI since 2012

Source: WEF, The Global Information Technology Report 2015

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• ICT services not fully liberalized

• business usage improved markedly

but remains limited

• low number of per capita patent

applications

• lack of independence and

inefficiency of judicial system

• poor protection of intellectual

property

Russia progress and challenges by NRI 2015

• improvement in most of the pillars

• workforce skillset

• affordable ICTs

• individual and business usage

Source: WEF, The Global Information Technology Report 2015

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Armenia, what we know about their state focus on IT

Source: Apkit, "IT-Summit 2015“,http://www.apkit.ru/news/index.php?ELEMENT_ID=17722

Vigen Sargsyan, Chief of Staff of the President of the Republic of Armenia

“We believe that the main task of the authorities is not to impede the formation

of the IT market. Our main role is the expansion of the infrastructure”

• favorable conditions for IT companies whose staff is above 30 persons

• IT projects moves “bottom up”

• 300 out of 900 communities have free access to the Internet

• free economic zones are created, for example, on the basis of the Yerevan

Scientific Research Institute of Automated Control Systems

(Soviet period brands – RAZDAN, NAIRI and other)

• production IT projects can be placed today in these zones

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Part I

Countries and Digital Economies

‒ What is needed for global Digital Economy. View from

Facebook, Google, Microsoft, Vodafone

‒ Most digital countries in 2015 based on WEF Network

Readiness Index

‒ EU Commission Top 10 priorities including Digital Single Market

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1. Jobs, Growth and Investment

2. Digital Single Market

3. Energy Union and Climate

4. Internal Market

5. Economic and Monetary Union

6. EU-US Free Trade

7. Justice and Fundamental Rights

8. Migration

9. EU as a Global Actor

10. Democratic Change

What

Digital Single Market is one in which the free movement of goods, persons, services and capital is ensured and where individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence

When & Why

• 2015-2016

• Moving from 28 national markets to a single 500 million people one

• This could contribute €415 billion per year to our economy and create 3.8 million jobs

Key to do

• common European data protection rules

• break down national silos in telecoms regulation; management of radio waves

• modernizing copyright rules; application of competition law

• modernizing and simplifying consumer rules for online and digital purchases

EU Commission top 10 priorities including Digital Single Market

Source: EU Commission, http://ec.europa.eu/priorities/index_en.htm

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Part II

Companies and digital technologies

‒ New landscape of companies

‒ Implications for Executives

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1. Commercial internet, the dot-com era,

broad and cheap communication of the

information

2. Web 2.0,

user-generated content, usability, and

interoperability (eg Wikipedia, Facebook)

3. Hyperscaling

big – really big – is becoming beautiful

the more participants – the more choices –

the more reviews – the richer the experience

Source: BORGES' MAP Navigating a World of Digital Disruption by Philip Evans & Patrick Forth, May 2015, http://digitaldisrupt.bcgperspectives.com/

3 Waves of Digital Disruptions

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Small number of

companies competing on

similar vertical value

chains

New landscape of companies

2 extremes: (1) Small

developers competing

to write apps for the

iPhone; (2) Linux

hackers or

Wikipediasts

collaborating to build

a massive body of

shared intellectual

property.

Infrastructure

organizations owned by

governments or

municipalities. Also for-

profit corporations

Companies by definition

Nonprofits such as Wikipedia.org. Also

Corporations such as Facebook and

InnoCentive

Source: BORGES' MAP Navigating a World of Digital Disruption by Philip Evans & Patrick Forth, May 2015, http://digitaldisrupt.bcgperspectives.com/

Stacks

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New landscape of companies, some illustrations

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Focus on growth,

cost cut is not an

option

Agile, long term vision, short term planning and adjustment

New product and services

Do not harness technology to the imperatives of business model;

adapt business model to the possibilities - and the imperatives -

of technology

Partnerships to gain scale

Data Consolidate across company

Earn trust of customer (only then data sharing will succeed)

Look for opportunities to leverage data and cut out useless 3rd party

services (data from car sensors about driving and drivers / data from

insurers about drivers)

Regulation

Implications for Executives (1/2)

Close collaboration between companies and governments,

locally and globally

Source: BORGES' MAP Navigating a World of Digital Disruption by Philip Evans & Patrick Forth, May 2015, http://digitaldisrupt.bcgperspectives.com/, experts opinions

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Organization Nurture culture of leaders and innovators

Define organizational units by stacks (even if you keep vertically integrated

company). Build competitive advantage for every stack unit on a standalone

basis

Seek advantage roles in stack curated by others (ideal agriculture: sensor

measures temperature-agri machinery capture/relay the data-planting

optimized. For individual farmers this is out of reach. Here is an opportunity)

UP-source. Look where you can perform tasks by digital communities cheaper

and faster (eg free reviews at Amazon, crowd sourced technical support at

Cisco and some telcos)

DOWN-source. Check where you can share infrastructure (France – SFR and

Bouygues Telecom share towers and masts in low density service areas, each

continues to compete with its own transponders. UK – carriers EE and Three share towers, masts, backhaul. Sweden – Telenor and Tele2 share spectrum)

Implications for Executives (2/2)

Source: BORGES' MAP Navigating a World of Digital Disruption by Philip Evans & Patrick Forth, May 2015, http://digitaldisrupt.bcgperspectives.com/, experts opinions

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Thank you

Наталья Бердыева / Natalia Berdyeva,

Coordinator, APKIT Committee on IT development monitoring, http://www.apkit.ru/committees/monitoring/

Market Development Advisor for Europe, IBM

Cell: + 7 [985] 761 59 74,

Email: Natalia.Berdyeva@ru.ibm.com

LinkedIn http://www.linkedin.com/pub/natalia-berdyeva/6/970/35

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Back UP

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Some my recent reports for Apkit

http://www.slidesh

are.net/nataliaberd

yeva/2015-

42093981

http://www.slidesh

are.net/nataliaberd

yeva/analysts-on-

2015-natalia-

berdyeva-for-apkit

http://www.slideshare

.net/nataliaberdyeva/

hr-trends-and-

advisory-march-

update

http://www.slideshare

.net/nataliaberdyeva/

hr-trends-for-apkit-

lanit-v11-rus-

45214402

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Source: The Digital Imperative, March 02, 2015 by Ralf Dreischmeier, Karalee Close, and Philippe Trichet,

https://www.bcgperspectives.com/content/articles/digital_economy_technology_strategy_digital_imperative/

The pace of Disruption

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WEF, Networked Readiness Index 2015

• Singapore replaces Finland at the top of the ranking

• High income economies continue to dominate

• Sub Sahara Africa still faces serious challenges with all but one country appearing in the bottom half of the table, the only exception is Mauritius [#45]

• Number of success stories in Gulf Region and Central America

• In Caucasus Armenia is the country that made the most progress since 2012

• The performance of 3 Baltic countries is particularly remarkable [Lithuania, Litva, Estonia] with Estonia [#22] preceding Belgium [#24] and Ireland [#25]

60% of the global

population still not online

450 million people out of

reach of mobile network

To transform potential

into reality:

• Digital infrastructure

investments

• Education

• Regulation that

encourages

competition,

innovation and

private investment

Source: WEF, The Global Information Technology Report 2015, http://reports.weforum.org/global-information-technology-report-2015/

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The Russian Federation climbs positions to 41st, as a result of an improvement in most of the pillars.

• The country further improved the skillset of its workforce, moving up 12 positions to achieve 52nd place.

• In general, ICTs are affordable [15th], even though ICT services have not been fully liberalized yet.

• Individual uptake is good and rapidly increasing: in the last year, Russia has significantly improved its

performance across all dimensions of the Usage subindex [39, up 14].

• In particular, business usage has improved markedly but remains limited [66th, up 18]. So is the capacity

of business to innovate, as reflected in the low number of per capita patent applications [43rd, one of the

lowest among high income economies].

• The country’s capacity to leverage ICTs and its competitiveness in general continue to be seriously

undermined by many institutional weaknesses, however. Russia ranks 79th in the Political and regulatory

environment pillar of the NRI, owing to the lack of independence [109th] and inefficiency of its judicial

system, and to the poor protection of intellectual property [106th], among other issues.

WEF, Networked Readiness Index 2015. Re Russia

Source: WEF, The Global Information Technology Report 2015

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Виген Саргсян, Руководитель аппарата Президента Республики Армения

«Мы считаем, что главная задача властей - не мешать формированию ИТ-рынка.

Наша главная роль – расширение инфраструктуры»

• льготные условия для ИТ-компаний численностью от 30 человек

• проект информатизации движется снизу вверх

• в 300 из 900 общин есть бесплатный доступ в интернет

• свободные экономические зоны создаются, например, на базе Ереванского НИИ АСУ

(бренды советского периода РАЗДАН, НАИРИ и др)

• в этих зонах можно размещать сегодня производственные проекты ИТ-сферы

Armenia, what we know about their state focus (original in RUS)

Source: Apkit, "IT-Summit 2015“,http://www.apkit.ru/news/index.php?ELEMENT_ID=17722

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(1) better access for consumers and businesses to digital goods and services across Europe;

(2) creating the right conditions and a level playing field for digital networks and innovative services to flourish;

(3) maximizing the growth potential of the digital economy.

1. rules to make cross-border e-commerce easier [harmonised EU rules on contracts and consumer protection when you buy online]

2. to enforce consumer rules more rapidly and consistently, by reviewing the Regulation on Consumer Protection Cooperation.

3. more efficient and affordable parcel delivery. Currently 62% of companies trying to sell online say that too-high parcel delivery costs are a

barrier

4. to end unjustified geo-blocking – a discriminatory practice used for commercial reasons, when online sellers either deny consumers access

to a website based on their location, or re-route them to a local store with different prices.

5. to identify potential competition concerns affecting European e-commerce markets. The Commission therefore launched today an antitrust

competition inquiry into the e-commerce sector in the European Union

6. a modern, more European copyright law. In particular, the Commission wants to ensure that users who buy films, music or articles at

home can also enjoy them while travelling across Europe

7. a review of the Satellite and Cable Directive to assess if its scope needs to be enlarged to broadcasters' online transmissions and to

explore how to boost cross-border access to broadcasters' services in Europe.

8. to reduce the administrative burden businesses face from different VAT regimes

9. present an ambitious overhaul of EU telecoms rules. This includes more effective spectrum coordination and etc

10. review the audiovisual media framework to make it fit for the 21st century , focusing on the roles of the different market players in the

promotion of European works [TV broadcasters, on-demand audiovisual service providers, etc.].

11. comprehensively analyse the role of online platforms [search engines, social media, app stores, etc.] in the market. This will cover issues

such as the non-transparency of search results and of pricing policies, how to best tackle illegal content on the Internet, etc

12. reinforce trust and security in digital services, notably concerning the handling of personal data.

13. propose a partnership with the industry on cybersecurity in the area of technologies and solutions for online network security.

14. propose a 'European free flow of data initiative' to promote the free movement of data in the European Union. The Commission will also

launch a European Cloud initiative covering certification of cloud services, the switching of cloud service providers and a "research cloud".

15. define priorities for standards and interoperability in areas critical to the Digital Single Market, such as e-health, transport planning or

energy [smart metering].

16. support an inclusive digital society where citizens have the right skills to seize the opportunities of the Internet and boost their chances of

getting a job. A new e-government action plan will also connect business registers across Europe, ensure different national systems

can work with each other, and ensure businesses and citizens only have to communicate their data once to public administrations,

that means governments no longer making multiple requests for the same information when they can use the information they already have.

The roll-out of e-procurement and interoperable e-signatures will be accelerated.

EU Digital Single Market, 16 initiatives under 3 pillars to lay the groundwork for Europe’s digital future

Source: EU Commission, http://ec.europa.eu/priorities/index_en.htm

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New companies landscape

Source: BORGES' MAP Navigating a World of Digital Disruption by Philip Evans & Patrick Forth, May 2015, http://digitaldisrupt.bcgperspectives.com/

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This isn't just some futuristic fever dream: the hotel is

scheduled to open on July 17th.

Japan opens hotel run by ROBOTS that will welcome

guests, carry bags and even clean your room

Facial-recognition technology will replace room keys

The first building in the hotel will open with 72 rooms,

followed by another 72-room building next year. A single

room will be priced at 7,000 yen a night, or around $59.

A twin room will set you back 9,000 yen, or $76.

"We will make the most efficient hotel in the world,"

company President Hideo Sawada said during a news

conference, according to Japan Times. "In the future,

we'd like to have more than 90 percent of hotel services

operated by robots."

Source: Futuristic Japanese Hotel Staffed Entirely by Robots, by Angela Moscaritolo,

February 5, 2015 http://www.pcmag.com/article2/0,2817,2476347,00.asp

Futuristic Japanese Hotel Staffed Entirely by Robots

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Jerry Brown, California Gov. , signed the bill, AB 129, written by Democratic Assemblyman Roger

Dickinson, legalizes bitcoins and other digital currencies for transactions in California.

"In an era of evolving payment methods, from Amazon coins to Starbucks stars, it is impractical to

ignore the growing use of cash alternatives," Dickinson said.

According to a recent JPMorgan Chase [JPM] report, California's GDP is estimated to hit just under

$2 billion for 2015, making it the world's eighth-largest economy -- ahead of Russia, Italy and Canada.

Source: Jun 30th 2014 9:53AM, Is California's Legalization of Bitcoins a Game Changer? http://www.dailyfinance.com/2014/06/30/california-legalizes-bitcoin-virtual-currency/

Virtual currencies

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• Адреса в дефиците, Уникальные IP-адреса в интернете стремительно заканчиваются, и проблему эту быстро не решить. Антон Благовещенский. 21.06.2012 http://www.rg.ru/2012/06/12/adresa-site.html

• Ученые предсказали крах интернета через восемь лет. Уже через восемь лет существующие линии передачи интернет-трафика не смогут справиться с нагрузкой 05.05.2015. Антон Благовещенский http://www.rg.ru/2015/05/05/internet-crash-site.html

Some other