Digital Development: Faring Well, but Room for Improvement

Microsoft’s model analyzed data from, among others, Eurostat, the World Bank, the OECD, Euromonitor, and the Digital Economy and Society Index (DESI) to create 55 parameters that describe the digital maturity of the Hungarian economy.

The purpose was to give a snapshot of the size of the digital sector and to see how businesses, the labor market, digital public services, infrastructure, and human capital compared to other CEE countries and some of the European digital frontrunners. Microsoft says that the insights provide an overview of Hungary’s strengths as well as development opportunities and can serve as a basis for making critical business and national economy-level decisions.

Hungary ranks way above the average, set at 100 points by the Digital Futures Index, in several categories. For one, proportionally, Hungarian businesses employ most IT professionals. The country also scores particularly high on connectivity, smartphone usage and remote working maturity, Christopher Mattheisen, managing director of Microsoft Magyarország, highlighted.

Furthermore, relatively low living costs and well-developed digital infrastructure are attracting digital nomads in record numbers. The size of the digital economy surpasses that of automotive, accounting for 6% of GDP, and a McKinsey report estimates that it can add some EUR 9 billion to the economic output by 2025.

As far as businesses are concerned, the Digital Futures Index finds that more investment leads to more innovation, and cloud technology boosts not only innovation but also productivity.

Drive Transformation

“It is more important than ever that senior managers in the age group 45-64 are digitally-savvy and can drive digital transformation within their organization,” Mattheisen said.

Part of the long-term success is hybrid working. Team collaboration is typically boosted by flexible working conditions that help retain talent as well.

“A new generation of workers take the existence of hybrid working culture and infrastructure for granted,” Gabriella Csanak, director of marketing and operations at Microsoft Magyarország, explained.

Training is another issue of which the importance can’t be emphasized enough. Return on investment into technology has substantial yields only if skilled labor is available that adopts and runs it across the entire spectrum of the operation, Microsoft says. Employing “learning managers,” who arrange technology-related training, should be prioritized. This can be part of the life-long learning concept that still needs to be embraced on a larger scale.

Adult training and reskilling should involve as many people as possible at the workplace since knowledge transfer can enhance productivity. The most successful businesses adopt technology such as AI, the Internet of Things and the Cloud in their everyday practices.

“In Hungary, there are great IT specialists, but even more companies need to invest in Cloud and training,” Csanak said. He added that this is indispensable for better exploiting digital solutions and minimizing worker fluctuation.

Room for Improvement

In some areas there is definitely room for improvement. Gender diversity, for one, is 40% lower than the average, which screams for making IT more attractive for women. The number of students with STEM studies is 27% lower than the CEE average. The level of digital skills in the 16-29 age group is similarly alarming. On the other hand, the ICT-related labor shortage is at a record high. In addition, less than 10% of businesses provide compulsory IT training for their workforce. For the sake of comparison, in Estonia, the figure is 35%.

The level of digitization of public services received a score of 84; its improvement is important because it triggers an entire cycle of processes. People get used to using digital services, which affects their needs and demands in general and that, in turn, creates more demand for digital services.

“The result is bigger digital wealth,” Mattheisen said.

Digital literacy goes hand in hand with better quality of life. The findings of the Digital Futures Index indicate that quality of life is higher where the elderly and women have better digital skills. This is also connected with sustainability: the more mature society is in terms of digital knowledge, the more sustainable lifestyles can be maintained.

Harnessing the power of data can accelerate positive trends. As Mattheisen noted, no business is immune to change, and those that have regarded their data assets as a strategic tool all along have fared better. Sophisticated data analytics will provide added value on all levels, from the government to businesses and citizens.

All in all, those countries that are better off in terms of digital transformation also score better on indicators that reflect economic and social development. In other words, they are “greener,” more innovative and competitive, and they have a higher living standard. In Hungary, the continuous cooperation of government and the market is a precondition for progress, Microsoft says.

This article was first published in the Budapest Business Journal print issue of December 17, 2021.