To date, digitisation in the EU is uneven, although there are signs of convergence. While the frontrunners have remained unchanged, there is a substantial group of Member States that cluster around the EU average.
Importantly, most of the Member States that had a lower level of digitisation 5 years ago, are progressing at a faster pace than the rest, indicating an overall EU convergence towards digital.
Among these countries there is Italy, which is catching up and, looking at the progress of its Digital Economy and Society Index (DESI) over the past five years, it is advancing at a remarkable pace.
Indeed, Italy ranks among the overperforming countries in the digital transition, with an average yearly relative growth greater than 11% in the period 2017-2022. From its 25th position in 2020, today Italy ranks 18th out of 27 EU Member States based on the DESI score.
As the third largest EU economy, Italy’s progress in the digital transformation over the coming years is crucial to enable the potential of its ecosystems. The NRRP, the largest in Europe, endows the country with the necessary funds to accelerate the digitisation of the public infrastructure: around 25% of it, roughly €48 billion, is devoted to the digital transition.
Source: Digital Economy and Society Index 2022 – Italy
So said, corporate digitisation is one of the main opportunities that Italian SMEs can capture at the present. Technology is now an integral and transparent part of our lives, and it is governing most of the processes, businesses included.
Despite this, smaller companies struggle to modernise their production and operational processes by incorporating digital technologies in a pervasive way. The digital transformation requires, in fact, a change of mentality and a particular attention to all those aspects of change management that are fundamental to engage the whole organisation, favouring the success of the digitisation initiatives.
Digitising means going far beyond the possibility of removing paper documents from offices or make more efficient the flows of information.
Rather, it means adapting back and front office business processes to a new process logic, that is agile, integrated, secure, resilient and data driven.
This trend in SMEs has the value of a real strategic change. Digitising means being able to anticipate and better satisfy the needs of the customers and, in some cases, it completely transforms the business by reinventing it in the name of innovative strategic models.
However, although significant public intervention and the support of innovative ecosystems, the reality suggests that Italy still shows weaknesses and barriers to digitisation, particularly for SMEs. And such impediments risk to cut off enterprises from newly transformed ecosystems and from opportunities entail in the digitisation itself.
There are several gaps that limit the ability of SMEs to adopt digital solutions. Such gaps include the awareness of Italian SMEs and entrepreneurs, that are investing less in digitisation than other companies in the EU. This leads to lower levels of adoption and less sophisticated digital technologies. Due to the complexity of the ecosystem, it is difficult for SMEs to explore the different options and for other digital actors to help them.
But the gap could be analysed also considering the lack of technological competences: according to the available data, Italian SMEs have limited expertise compared to comparable SMEs in other EU countries, notwithstanding the slow increase in demand of IT engineers and developers within companies.
In addition, the offer of digital solutions from large technology providers is fragmented and not always adapted to the specific needs of SMEs. Smaller technology providers face significant challenges that prevent them from being as effective as possible in delivering innovative solutions to SMEs.
Another critical issue is funding, given as the availability of bank credit is often an obstacle for SMEs willing to digitise. Although financial institutions support companies in accessing resources for their digitisation investments, there is no clear evidence of “digitisation-specific” financial instruments.
Some recommendations from the Innovation Finance Advisory of the European Investment Bank (EIB), pertaining the Italian context, relate to the increase in awareness and digitisation capabilities of Italian SMEs, first by providing a single source of information for all enterprises wishing to digitise, by coordinating the resources of all stakeholders in the ecosystem (e.g. trade associations, digital innovation hubs, centres of expertise).
But also, through the acceleration of the process by leveraging public procurement and large companies, that could impact their supply chain and the actors involved therein.
Another key aspect is to strengthen the availability of credit through the banking system, to finance the digitisation and innovation of SMEs. For example, the EIB could expand its thematic lines for SMEs and include digitisation in Italy. It is important to emphasise that this initiative could benefit from the resources made available by the European Union’s Resilience and Recovery Facility in the form of guarantees, first-loss tranches, or subordinated tranches.
Moreover, some institutional investors at European and national level could enhance the availability of capital through investments in the equity capital of innovative Italian SMEs: particularly, with a greater channel of funds towards private equity and venture capital funds, managers could direct strategic investments into the share capital of Italian SMEs, so that to finance the digitisation process, and gain tech competences to unlock new market opportunities.
In summary, Italy has taken significant steps to simplify and incentivise the use of digital public services, although results are not yet fully visible in DESI indicators.
With the support of the NRRP, the country is stepping up efforts for the efficiency and security of digital infrastructure, the interoperability of data and information across public administrations and corporations.
To overcome the delays accumulated over the years, sustained implementation of the planned measures remains crucial, as well as continued attention for simplification and for the acquisition of digital skills by state employees and the new generations.
Sources: Innovation Finance Advisory (IFA), EIB, EU Commission
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