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Business Transformation

GCI: Measuring Growth Factors in the Digital Economy

For national economies, broadband penetration matters and data center resources matter even more, but infrastructure alone isn't as important as the user experience and the richness of the services that run on top.

That's one of the key findings from the Huawei Technologies Co. Ltd. Global Connectivity Index (GCI), an annual research report based on data from 50 countries that aims to find correlations between ICT investment, adoption and economic growth. (See Huawei Launches 2015 Global Connectivity Index.)

Now in its second year, the GCI is based on the premise that ICTs are a "production factor" driving economic growth and change. The index is intended to be a barometer of this change, targeting what it identifies as five key transformational technologies -- broadband, cloud, IoT, big data and the data center.

These technologies work interactively to drive digital economic growth. The index calls broadband and data center core technologies, while cloud, big data and IoT are executions on these technologies that bring about economic activity and growth.

So the index tracks ICT inputs, demand and adoption a holistic way, measuring not just each discrete factor but also the synergies between them and the extent to which different economies take advantage of them.

The methodology is based on 38 different items, including the level of investment, infrastructure such as international bandwidth and the number of servers, and the adoption of technologies such as mobile and social media, along with other stats like the number of patents and R&D spending.

Not surprisingly, it finds a strong correlation between GCI and GDP per capita. Just as predictably, the leader board is populated by countries such as the US, Sweden, Singapore and Switzerland.

But as well as the leader group, it also identifies two others: the followers, comprising mostly developing countries such as Chile and China; and the beginners, the countries well behind the leaders. About a fifth of the countries surveyed fall into the beginner category.

The index leaders all enjoy high GDP per capita, though it's not necessarily a direct link. Some mature European economies, such as Spain, Portugal and Italy, fall into the follower category because of poor investment in key inputs, most likely as a result of tough economic circumstances. The index warns that they will fall behind some of the fast follower countries if they don't increase investment.

Indeed, one of the GCI's main messages is that ICT investment is critical for those seeking to expand their digital economy. It calculates that a 20% increase in ICT investment will lift GDP by 1%.

Where the index offers fresh insight into technology diffusion and its economic impact is when it scrutinizes the five transformational technologies against a four-part matrix: supply, demand, experience and potential.

Interestingly, the gap between leading countries and laggards is narrowest when it comes to raw connectivity. Developing countries have gone a long way in deploying 3G and fiber and driving mobile adoption. But when it comes to building out data center capabilities they are investing at one-third the level of the developed countries. That shortfall in data center investment straight away crimps an economy's ability to support cloud infrastructure and services.

The developing economies also perform only half as well as the mature economies in adopting and using the five transformation technologies.

Those economies are mainly focused on increasing the supply inputs. By contrast, while GCI leaders have created better connectivity supply they also have invested effectively to drive adoption through demand and improved experience. In fact, the leaders have achieved higher rankings for demand and experience ratings than for supply.

"This indicates that countries that lead in the digital economy have not only invested to build the necessary supply of connectivity services but have also invested effort in ensuring higher adoption and use of the technology as well as a better experience for the users," the GCI said.

It predicts that in the next decade, developing countries like China, Indonesia, Chile and Brazil might be able enjoy faster digital transformation than mature economies if they can nurture their GCI inputs.

There's food for thought for telcos in these findings in pointing up business and strategic opportunities in the value chain, and on how their economic value might be perceived by stakeholders.

But the underlying message from the GCI is that all countries need a vision for ICT investment. Governments need to lead the way in laying out and pursuing long-term policies and in aggressively pioneering the use of these technologies themselves. In particular, countries need to invest in IoT and big data and in upskilling workforce IT capabilities.

Robert Clark, contributing editor, special to Light Reading

This article was sponsored by Huawei Technologies.

DHagar 7/13/2015 | 9:24:44 PM
Re: GCI Measuring Digital Economy RClark, good points.  That will be interesting to see the trends.

Yes, you are correct on legal and regulatory.  In California, there is significant planning/regulatory developments in play regarding sustainability with the ports and the economic development in light of greenhouse gas reductions.  Just an example of the reality needing a wholistic approach where you measure the total combined impact, not just one or the other.

That's what I truly value in your report and the info.
R Clark 7/13/2015 | 9:14:29 PM
Re: GCI Measuring Digital Economy I think they were astute to identify the lack of a holistic meausre of progress in the digital economy worldwide.  Where these indexes work really well in being able to show changes over time, so it will be interesting to see the results in three or more years. Iif there's one other area that would be helpful it would be the legal and regulatory environment, including IP protection and privacy. All important for the digital economy. 
DHagar 7/13/2015 | 2:47:07 PM
Re: GCI Measuring Digital Economy Reporter31858, great thank you!  I have looked up and downloaded the report.  Excellent perspective and identification of benchmarks to monitor growth.  Also, I like that they are relating the investments to GDP numbers.
DHagar 7/13/2015 | 1:23:06 PM
Re: GCI: Measuring Digital Economy danielcawrey, good example!  It truly requires a combined investment in infrastructure if it is going to achieve equitable sustainable digital development.
Reporter31858 7/12/2015 | 9:25:45 PM
Re: GCI Measuring Digital Economy DHagar

You can find more information at www.huawei.com/gci

 
danielcawrey 7/11/2015 | 2:26:34 PM
Re: GCI Measuring Digital Economy Emerging markets would do well to follow the US strategy after World War II. The government at that time invested a ton in infrastructre and R&D. Some of these rising countries have a lot of cash reserves as part of being heavily involved in the export market.

Some of that money flows to government, and it would be smart to make internal investments that can help build a base for entreprenuerial activity. 
Vishnu Goel 7/11/2015 | 3:48:57 AM
An India specific GCI should be evolved! Robert, no doubt this is very informative and insightful about growth drivers linkages to ICT. A country specific evaluation as well as what to include is needed as India goes Digital. There is a heuristic feeling that GCI for India should include Language Skills(Chinese//Spanish) besides ICT. Vishnu Goel T&M +919810101238
DHagar 7/10/2015 | 4:06:07 PM
Re: GCI Measuring Digital Economy Robert, really good information!  This is what is needed to stimulate the investments in ICT and in building awareness that these factors are key elements today in competitive growth.  I would like to see it utilized as a measuring stick of economic "sustainability"!  It can also promote the  growth at the next level of the data and IoT.

Is there a summary of the factors, website, or paper?

Great material, thanks!
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