Is the current world situation having negative impact on digitization?

The general conditions for the economy are currently characterized by numerous crises: war in Ukraine, interrupted supply chains due to corona lockdowns in China, exploding energy costs and galloping inflation. According to the latest Bitkom survey, these general conditions are having a negative impact on digitization efforts in Germany. For example, the clear majority of companies expect supply chain disruptions (95%), high inflation (92%), rising energy costs (78%) and the Russian attack on Ukraine (57%) to slow down digitization.

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Growing importance for corporate success

Nonetheless, companies attribute an important role to digitalization for future business success. 69% state that digital business models will be of very great or great importance in five years. Although nine out of ten companies have encountered unexpected difficulties with digitization in the past, 61% say that digitization has strengthened their competitiveness. 51% believe that digitization increases their own employer attractiveness.

Given the enormous importance that companies attribute to digitization for their economic success, it is all the more surprising that they want to scale back their spending on digitization. In 2022, 43% say they will spend more money on digitization than in the previous year. For 31%, investments will remain the same and 22% will reduce spending on digitization. In 2023, on the other hand, only 18% are planning to increase investments, and a third of the companies want to cut back on spending. The uncertain economic situation certainly plays a role here, to which many companies are reacting with savings. However, it is precisely investments in digitization that would be beneficial to becoming more efficient, more competitive and more resilient.

Digital technologies, products and services

Digital technologies are now part of the standard repertoire of most companies. 74% are using or discussing and planning to use analytics and big data. That is 12% more than two years ago. Other relevant technologies include the Internet of Things (66%), 5G (51%) and artificial intelligence (37%).

10% of companies have launched new digital products in the past five years, 7% have replaced existing products with digital ones, and 14% have added digital products to their existing product portfolio. New digital services have been offered by 33% of companies during this period, 56% have supplemented existing services with digital ones, and 10% have replaced existing services with digital ones. 3% of companies say they have not developed any digital products or services since 2017.

Small share of revenue

However, revenues are largely generated in the analog world. 5% of companies generate at least half of their revenue with digital products and services. For 52%, they still account for one-fifth of sales. 95% of companies are convinced that digital business models will become increasingly important for their own economic success. Accordingly, they will be of great importance (26%), very great importance (38%) or crucial importance (31%) in five years’ time.

Obstacles to digitization

But what are the reasons for the failure to develop digital products and services? The most common reasons cited were lack of time (61%), lack of skilled workers (53%), data protection requirements (45%) and lack of financial resources (29%). However, given the overwhelming importance predicted for digitization in the coming years, companies should urgently take the time to drive digitization forward. The shortage of skilled workers can be overcome by working with external partners. “Digitization is the best means of resilience and resistance to crises of all kinds,” emphasizes Bitkom president Achim Berg. “We must do everything we can to ensure that the digitization progress made during the pandemic does not fizzle out now, but is followed up and reinforced.”