As Covid-19 accelerates a worldwide digital revolution, data is increasingly becoming the most important currency in business. Enterprises that harness data see faster labour productivity growth – to the tune of 5–10%, according to the Organisation for Economic Co-operation and Development’s (OECD) new Digital Economy Outlook – and higher revenues.
A combination of headwinds from Covid and emerging sectors such as the internet of things (IoT) have catalysed digitisation and the rise of big data, according to Vincenzo Spiezia, senior economist at the OECD and a lead author on the digital economy report.
“[Data] is definitely the biggest asset because most of what is produced now in the digital economy is about information, it’s about some form of data,” he says. “There is a lot of innovation that is driven by data; driven by data about consumer preferences [and] about decisions in production.”
Big data (which can be defined as extremely large data sets that can be analysed computationally to reveal associations, patterns, and trends) has surged over the past few years, particularly in the IT and manufacturing sectors where it is being used to drive innovation and efficiency gains. Over a quarter of all EU companies in the IT sector and 20% in transportation and logistics used big data in 2018, according to the OECD’s 2020 report.
As investment in infrastructure and skills begins to feed through to business outcomes, big data usage will continue to pick up, says Spiezia.
“Now that companies have done the necessary investments and tried to collect the relevant skills, the development is going to be faster,” he says. ““The stream of data becomes a continual source of improvement – for example, if you get data from the machine you can make innovation in the production process. Data becomes a continuous input in the production circle.”
The growing demand for data is reflected in the trends in acquisitions. In the five years to 2018, there was a fourfold increase in mergers and acquisitions activity associated with big data and analytics companies. Tech giants continue to dominate the space, with key acquisitions by the likes of IBM and Alibaba driving the average price of acquisitions above $3bn in some quarters.
Unsurprisingly, Covid-19 will slow the growth of the market for data this year. Europe’s data economy is expected to take a hit of 5.5% from the pandemic, down to an estimated €307bn from €325bn in 2019, according to the European Commission. But the region is expected to rebound quickly. The EC forecasts that growth in the data economy will return to its pre-pandemic growth path.
The pandemic could still do lasting damage, however, with budget cuts that disproportionately affect small businesses threatening to widen the gulf between large enterprises and SMEs, says Spiezia.
“There are a number of costs that are too large for a single small company to carry out [and] also a huge issue of attracting the right skills,” he says. “There are a number of exceptions, however. There are start-ups that see opportunities in small niches and are able to grow very, very quickly [and] also increasing awareness among small companies about the opportunity to co-operate around big data.”
Even pre-pandemic, the OECD identified company size as a key driver of big data adoption. While 33% of large businesses performed data analytics in 2017, that number drops to 12% when you look at all businesses across the OECD nations.
Structural differences between economies also account for differing levels of data adoption. Manufacturing hubs like Germany and consumer-orientated markets like the Netherlands are market leaders in the EU, says Spiezia.
While big data adoption is widespread across sectors, data sources vary. The IT sector, the most intensive user of big data, relies heavily on social media, with over half of IT companies in the EU already using social media data in 2018. This source is also used by half of businesses performing big data analytics in the OECD, which has given rise to an international debate about data privacy and the regulation of data sharing.
Sectors such as utilities and transportation focus more on geolocation from portable devices, which has historically received less regulatory attention. But the proliferation of contact-tracing apps in the response to the Covid-19 pandemic will likely change that.
Big data also faces challenges on the resource front. Like many other areas of emerging tech, the supply of skilled data professionals is not keeping pace with demand. Data positions were up 5.5% in 2019, representing 3.6% of the total workforce across the EU27 and UK, with an estimated 459,000 unfilled positions. This is a trend replicated across all regions of the world, with tech hubs like the UK and US also facing chronic skills shortages.
Big data may become the most important business asset in the post-pandemic world, but to tap its full potential, businesses must avoid getting complacent and ramp up investment to ensure a healthy supply of skilled professionals to address ever-growing demand.
Featured photo by Itzchaz/Shutterstock.