With our lives turning digital, coronavirus may have accelerated a revolution. But we need to make sure no-one gets left behind.
Those of us who can are teleworking and our kids are tele-learning. Our lives have changed due to the Covid-19 crisis and become more digital. But have our lives changed forever? And what does this mean for digitalisation globally? In this episode of Does This Change Everything? we find out what has changed for the service providers who bring us all these digital services, and what will change for the policy makers who oversee this industry.
We spoke to Benoit Denis, the European Investment Bank’s senior economist in digital infrastructure.
Read Does This Change Everything? from the European Investment Bank, the EU bank. Subscribe to the podcast on iTunes, Acast, PlayerFM and Spotify
Has the coronavirus changed everything for the digital sector?
There is no doubt the coronavirus crisis will have considerable impact on the information technology and communication market. For one, when manufacturing plants close, or hotel reservations are down to zero, you can imagine that IT projects that are not absolutely necessary are stopped or at least paused. Many purchases of new IT equipment will likely be postponed for the time being by these businesses.
However, at the same time, the importance of digital infrastructure and solutions for resilience have become clear. You mentioned how you’re working from home, and we’re recording this interview from our homes. Suppliers whose activities are linked to the digital workplace are experiencing strong demand since the outbreak. For instance, the growing number of homeworkers increase demand for solutions and equipment. This applies not only to the purchase of laptops, and corresponding software licences, but also to the installation of the necessary infrastructure, including [virtual private network] access and security solutions.
We can also highlight that all cloud-based collaborative tools are experiencing exponential growth in demand with large accounts that are needed quickly.
So how are companies managing this increased demand? Do they have to install additional servers to increase this cloud capacity?
Most companies were not prepared to have 100% of their staff telework at a single moment. Companies and public organizations would typically dimension their system for having 20-30% of staff working remotely. So obviously they need to increase the bandwidth of their internet connections. Very often, if part of staff are working with desktop computers, they also need to be equipped with laptops. And obviously all those laptops also need to be equipped with necessary software licenses, including for security solutions. And then there’s the whole virtual private network, the access we are using to connect to the servers, which have to be increased as well. So that is the immediate response that requires significant investment.
So companies have made investments and these will be there to stay. Do you think companies and people will continue to make use of those new ways of operating even after the pandemic has passed?
Obviously the world will never be as before, including in the digital sector. We understand better now that digital infrastructure and services are a resilience factor in the case of pandemics, but it can also be the case in an economic downturn, or a cyber-attack. So there will be a strong trend to be better equipped, for now and in the future.
There are a lot of services that we are adopting that will certainly stay for longer. For example, some companies had previously been reluctant to allow their staff to work remotely, even as the climate action benefits of remote working were identified as high. Now people, equipped with the right tools, are demonstrating that it is possible to work efficiently from anywhere.
Likewise, the financial, economic and social benefits of teleconsultations had long been demonstrated, but still many countries did not allow their reimbursement. Now, in a matter of a few days after the coronavirus arrived, those benefits were suddenly understood, and teleconsultations are now eligible for reimbursement, in many countries. I doubt this will go back after the outbreak. We are really undergoing a change in how we consider IT solutions – we see them now as a tool for resilience.
And at the same time, people – the clients, the users – who might have been reluctant to try out new ways of living their lives, have been forced to try them. Do you think they might actually enjoy some of those digital solutions? Do you think they are gaining positive experiences?
Well, we are working in a very difficult situation at the moment. Obviously, the kids are at home, getting supplies is not always easy, and we are limited in all human interaction. So we’re going through the worst case scenario. But we are demonstrating that it is possible to remain operational in a more digital manner,
Definitely people are taking on new habits. Some people were very reluctant to have meetings over the phone or videoconference. They may increase their use even when back in the office. They understand that it’s a way of working that delivers quality. So it will be a big step into a more digital economy.
What will be the necessary steps for the industry to adapt to this new reality? We are seeing reports of service providers like Netflix having to limit the quality of their streams, so clearly there are issues around the infrastructure not being able to fully cope. There’s been talk about how 5G will improve connections, but what else should be done?
The ICT industry usually adapts very rapidly to changing environments. This is because, apart from the infrastructure, in which the demand grows exponentially all the time anyway, the industry is highly dematerialized, many of the assets are intangible. You just mentioned the example of Netflix, which is able to reduce the quality of video streams in order to limit bandwidth, so there will be some adaptations, but those are manageable.
Most importantly, ICT will support all other industries to adapt to this new situation, to mitigate unforeseen risks, and to secure resilience.
But you are right to point to the infrastructure. The pandemic outbreak has brought the world’s digital divide into focus. Internet is a vital communication tool for people and communities affected by the pandemic, but we should not forget that not everyone has access to the internet. There are 3.6 billion people in the world who remain offline, and even in Europe only about a half of rural households have access to high-speed broadband. So the crisis highlighted the importance of digital infrastructure and the potential severity of the digital divide.
Just as an example: as schools and workplaces close, those without reliable access to the internet are unable to access education content, and are unable to work remotely. Likewise, people might not have access to teleconsultation services. In recent weeks, the use of those services has swollen, for good reasons. First, people fear infection when going into crowded medical centers, and secondly medical staff need to prioritise people that they consult physically. So people without broadband connections may miss critical medical consultations and services. Obviously, this is not a situation that we could accept. This digital divide is now, more than ever before, under the spotlight and we will have to drive investment in this area.
And we should not only consider telecom infrastructure. We now see that digital healthcare systems clearly facilitate the pandemic response through surveillance, contact tracing, facilitating the exchange of information, so significant investments may have to be done also on that front.
The European Investment Bank is probably well placed to be involved in those investments. Are you prepared to have a lot more work coming your way in the near future?
The EIB is the international financial institution with the largest exposure in the digital sector, so obviously we will have a major role to play. We have good experience in financing digital infrastructure and we have set up innovative finance instruments in this market, across Europe and outside Europe. Certainly we will continue on that front.
And on the digital solutions front as well, we have already been very active in recent years, and we can see our services will be more solicited. We have already had some clients, banks, who called us saying that they are not able to operate remotely, that they are not equipped for it, so they clearly need to quickly invest in such solutions.
Read Does This Change Everything? from the European Investment Bank, the EU bank. Subscribe to the podcast on iTunes, Acast and Spotify.
