Hungarian Microenterprises Have a Significant Lag in the Digitalisation – Századvég Research on the Digital Readiness of Microenterprises

Take-aways of the event:

• The COVID-19 pandemic did not have a significant effect on the digital transformation of microenterprises.
• Handling the question of digital transformation cannot be solved through simple, one-off interventions and requires complex approaches.
• Dedicated institutional approaches are expected to lead to better results: the main role of the institutions is to find a way to make information transparent and easily accessible for everyone.
• Large gaps are visible between Member States and regions with future perspectives increasingly depending besides the EU cohesion policy on national interventions.
• In addition to interventions for upping the skills of microenterprises at both national and the EU level, it is crucial to increase the digital knowledge of the individuals, which affect both the supply side (availability of skilled workforce) and the demand side (customers taking in digital solutions).
• Dedicated institutional approaches are expected to lead to better results: the main role of the institutions is to find a way to make information transparent and easily accessible for everyone. The German (BNetzA/Ministry) example is worth considering.

Mr. Gabor Kelemen presented research that targeted self-employed persons and microenterprises (0-9 employees) in Hungary. The research showed, that the

digital adaptation/willingness of microenterprises is much lower than the general SMEs’

average, also, that these companies underestimate the needs of digitalization. Though microenterprises own a variety of devices (smartphone and laptop), they use predominantly mobile internet, while their use of fixed broadband remains in the lower range. The take-up of digital solutions, apps, software is also very low: with the exception of some eGovernment services (where use is mandatory), the use of digital services is rather uncommon. The majority of the businesses buy online, but their online selling is negligible: more than 80% of microenterprises do not sell anything through the internet.

The research also looked at the effect of the still-present pandemic. It pointed out, that the pandemic did not have a significant impact on the digital readiness of microenterprises. While some impact is visible regarding the use of digital equipments, no significant impact can be observed on the usage of digital services: e.g. the majority of respondents already had a fixed internet subscription before the pandemic, with the number of subscribes barely increasing. Similar ratios are noticeable when the use of eGovernment services, electronic financial services, online utility and convenience service are examined.

For microenterprises, the primary reason for not using digital services

is that the businesses believe they do not need them; also, a common response is that they are not familiar with these services or cannot use them. It is striking, that a significant share of businesses is reluctant to use digital services, while many believe that they do not need them at the moment.

Ms. Yvonne Finger, Head of SMEs Digitalisation Strategy at the German Federal Agency for Networks (Bundesnetzagentur, BNetzA) pointed out, that the digital inclusion of SMEs is not only a key political priority, but also a major practical challenge. Digital transformation is essential for innovative and competitive SMEs and requires not only an overarching strategy at the company level, digital skills and investments, but also confidence in IT security and electronic data protection. To encourage all these aspects of digitalization, both at the level of the

Federal Government and the Authority newly established, dedicated units

were set up. The Authority’s unit aims at gradually establishing

BNetzA as a competent body in the field of SMEs’ digitalisation,

supporting this digital transformation through e.g.,

• monitoring developments in SMEs’ digitalisation process;
• collecting and disseminating relevant information (e.g. best practice examples, results of studies and availability of funding programmes);
• supporting the federal ministry for the implementation of relevant digital funding programmes;
• acting as a central contact point for SMEs;
• consolidating information (acting as a one-stop-shop), matching, mapping.

As part of the Digitalization Strategy, the

BNetzA is also supporting the implementation of the GAIA-X funding program,

which aims at becoming a European Cloud alternative.

 Mr. Bernd Schuh, Chairman of the Board at Österreichisches Institut für Raumplanung (ÖIR) focused in his reflection on the possibilities of agri-microentreprises in the EU.

He pointed out, that the stance of agri businesses is dependent of the regional differences and will be driven by the change in agricultural activity which is expected to significantly differ in different areas between 2020 and 2040; i.e. a decrease in agricultural activity is expected in the case of Hungary.

CHANGE IN AGRICULTURAL LAND, 2020-2040

Digital readiness in microenterprises goes hand in hand with the sector’s development, while differences (large gaps) remain between EU Member States and the regions. The digital knowledge and preparation in the agriculture sector increases when more and more farmers are entering the digital market promoting their products and services through it. The possibility of digital solutions extends beyond regular online services, where a good example of the opportunities ahead of the businesses is ‘remote farming’. Future perspectives are, however, increasingly dependent on national interventions which increases the need for discussion on the role of cohesion policy as well.

Mr. Vilmos Both, Board member of the Hungarian IT Association IVSZ, highlighted that the digital skills of workforce and the business owners is key to SME digitalization. The lack of digital skills and IT expertise deprives SMEs -and within that, microenterprises twofold:

• on the one hand, these smaller businesses -who already face competitive disadvantages- cannot hire quality workforce;
• on the other, due to the lack of basic digital skills in the population few people make use of available online services, thereby there is no demand pressure on the companies to advance their own digitalisation.

The problem is reflected in Hungary’s mere position in the DESI index (rank 21, below EU average), with Hungary scoring especially low in Human capital and Integration of digital technology.

DIGITAL ECONOMY AND SOCIETY INDEX (DESI) 2020 RANKING

The lack of digital workforce is threatening the competitiveness of all businesses in all sectors – concordantly it has a significant effect on the Hungarian national economy as a whole. IVSZ believes that a systemic development of and support to the digital economy -focusing on new technologies such as 5G, IoT, MI, blockhain- can give a major boost to the Hungarian economy, with its contribution to the national gross value added potentially doubling in the next 3-4 years, providing HUF thousands of billions of additional GDP beyond the organic growth path.

The participants of the webinar agreed that the digitalisation of microenterprises and the development of the digital ecosystem requires state intervention. The development of digital skills of the workforce is key to SME digitalization, as well as for a successful digital transition of the national economy. The current shortage may well be improved through a comprehensive state intervention at all levels of the educational system, including an increase not only in the number of IT engineers and IT professionals, but also the participants in adult education.

You can watch the event’s recording here: