Digital Business. Countries – leaders, issues, initiatives. Companies – shifts, implications for Executives

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APKIT, Committee on IT Development Monitoring
Digital Business
Countries – 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

3
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
‒ What is needed for global Digital Economy.
View from Facebook, Google, Microsoft, Vodafone
‒ Most digital countries in 2015 based on WEF Network
Readiness Index

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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

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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, …

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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

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Part I
‒ What is needed for global Digital Economy. View from
Facebook, Google, Microsoft, Vodafone
Readiness Index

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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]

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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

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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

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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
‒ What is needed for global Digital Economy. View from
Facebook, Google, Microsoft, Vodafone
Readiness Index

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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
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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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

32
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

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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

36
 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
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