Bitkom - Of Bits and Bytes

The future is bright – the future is IT. That could be the summary of a recent Roland Berger/BITKOM study on the future developments for the digital economy. High-tech of the future, the authors prove, is more than just bits and bytes.

2007

These days, technology is everywhere. Where making a phone call once dialing on a rotary phone, today's technology-savvy consumer uses his computer to talk to the outside world, via Voice over IP (VoIP). Telecommunication and IT have also partnered comfortably in most people's living rooms, where digital video recorders are hooked up to PCs running on wireless LAN, which continually downloads the newest in gaming software. Bluetooth and WIFI have made wires and cables a thing of the past. Companies have been able to streamline their production processes through the use of these "smart" technologies and have been able to innovate more successfully.

These developments are increasingly becoming normal to us. We expect technology to revolutionize our daily lives one step at a time. Growth in the IT sector has been powered by these changing expectations and strong investment into R&D, but, as a recent study proves the growth potential for these technologies is far from exhausted. Companies stand to profit from investments into these areas, as long as money is spent smartly, and new developments are supported through beneficial regulatory policies.

The study, jointly published by BITKOM, the German association for information technology, telecommunications and new media, and Roland Berger Strategy Consultants highlights four meta-trends and outlines areas for strategic growth in the IT-field. In addition, the study also sets out the role the regulatory and political framework must play in supporting the development of the IT industry in Germany.

Using a scoring model, the authors evaluated 300 related technologies for their growth potential. They identified six growth areas that will have a profound impact on industry in the coming months and years:

• Embedded systems:
  These are hardware or software components that are integrated into electronic devices. This technique can be applied to various areas including consumer electronics, medical engineering, or plant engineering. The global market for embedded systems is estimated to grow by 56 billion Euro, from 138 billion Euro in 2005 to roughly 194 billion in 2010.
• Biometrics:
  Technology that can 'read' user-specific genetic information, such as iris-scans and fingerprints can not only enhance public security. It could be the ticket to personal identification in companies and in data protection. Whether or not biometric technology becomes the boom industry it promises to be depends on the success of government projects, including the biometric ID-card.
• TV of the future:
  Internet and mobile television units will be an integral part of Germany's media landscape of the future, the authors predict. Germany could see the development of 3000 IPTV-stations over the next three years. This, however, depends on the allocation of frequencies, an area in which the government has been none too forthcoming.
• IT Utility Services:
  These types of services give private companies and public administrators flexible access to computing power, programs or storage capacity without forcing them to upgrade their own IT systems. The authors predict that revenues in this sector will explode over the next five years – from 23.5 billion Euro global revenue in 2005 to 106 billion Euro in 2010.
• Service-oriented Software-Architecture:
  IT technologies that increase flexibility, in particular for service-oriented businesses, such as banks will see a sharp rise in demand, according to the authors. By 2010 global market volume stands to reach 38 billion Euro – an increase of 36 billion over just five years from 2 billion in 2005. Growth rates are in the three-digit area and German companies are well positioned to shape the development of this technology.
• Digital rights management:
  These technologies allow for copyright management for digital content and give administrators flexible rights in terms of usage and billing. While the global market stood at 500 million Euro in 2005, analysts expect this to rise to 2 billion by 2010.

Recommendations for the public sphere

Based on an in-depth analysis the authors give an overview of how strategic growth areas can be exploited. However, they argue that without investment in education and research and development, this growth potential will remain untapped. To increase the number of university students pursuing degrees in the IT industry, German schools need to introduce these technologies to children far sooner than is now the case. Teachers should receive additional training to facilitate the use of computers for children in kindergarten and elementary schools. For computers to become second nature to tomorrow's generation of researchers, science and technology teaching must be given a greater significance in the curriculum. Resources need to be mobilized to ensure that children have access to computers in classrooms and at home.

According to the authors, the German government must also step up its efforts toward cutting red tape and reducing friction between the federal, state and local levels in terms of the regulatory burden faced by companies and investors. The also argue that the rigid structure of employment legislation hampers efforts to redirect efforts toward the type of intense project-based work that often accompanies innovation in the IT sector. They strongly advise the German government to implement a more functional high-tech strategy that focuses on channeling funds to research and development to prevent the country from falling behind R&D giants such as Asia and the United States.

Germany, the authors conclude, has the brains and the potential brawn – given regulatory changes and greater investments in education – to build on its role as a strong player in the IT sector and to drive its global growth.