‘Digital Fragmentation’ Poses Threat to Businesses’ Global Growth and Innovation According to Accenture Report
December 06 2017 - 3:59AM
Business Wire
Four steps companies can take to align
cross-border use of technology innovations with national
policies
A new report from Accenture (NYSE: ACN) warns that ‘digital
fragmentation’ – the rise in restrictions on the free flow of data,
IT products, IT services and IT talent across country borders – is
disrupting the global business environment and could inhibit
companies’ strategies for growth and innovation.
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CIOs and CTOs confirm that digital
fragmentation is disrupting the global business environment and
could inhibit companies’ strategies for growth and innovation
(Photo: Business Wire)
The report, “Digital Fragmentation: Adapt to Succeed in a
Fragmented World,” argues that national policies causing ‘digital
fragmentation’ are often created with good intentions, such as
improving data privacy and cyber security. It maintains that
greater collaboration between companies and governments can help
such policies meet their objectives while stimulating, rather than
inhibiting, innovation and the use of new technologies.
The report reveals that 74 percent of more than 400 chief
information officers (CIOs) and chief technology officers (CTOs)
surveyed expect to exit a geographic market, delay their
market-entry plans or abandon market-entry plans in the next three
years as a result of increased barriers to globalization. It shows
that the number of restrictive trade measures adopted by G20
members has quadrupled from 324 in 2010 to 1,263 in 2016; and the
number of countries with data privacy laws has tripled from 34 in
1995 to more than 100 in 2015.
As a result of such developments, the trend of ‘digital
globalization,’ powered by the free flow of data, is giving way to
‘digital fragmentation.’ More than half of the business leaders
surveyed believe that the increasing barriers to globalization will
compromise their ability to: use or provide cloud-based services
(cited by 54 percent of respondents, versus 14 percent that
disagree); use or provide data and analytics services across
national markets (54 percent versus 15 percent); and operate
effectively across different national IT standards (58 percent
versus 18 percent).
“Moves against globalization are forcing companies to make
fundamental changes to key strategic and operational plans across
global IT architectures, the recruitment of IT talent, the physical
location of IT and cybersecurity,” said Omar Abbosh, Accenture’s
chief strategy officer. “Regulation can provide critical safeguards
in the digital economy. But it should be designed to stimulate,
rather than inhibit, growth and innovation. Stronger dialogue
between business and government is required.”
According to the report, more than half of business leaders
surveyed believe that these increasing barriers to globalization
will force their companies to rethink their: global IT
architectures (cited by 60 percent of respondents); physical
IT location strategy (52 percent); cybersecurity strategy and
capabilities (51 percent); relationship with local and global IT
suppliers (50 percent); and geographic strategy for IT talent
(50 percent).
Ninety one percent of survey respondents also expect increasing
barriers to globalization to raise IT costs over the next three
years. Areas most affected will be sourcing inputs such as IT
talent; the need to multiply IT infrastructure, such as data
centers; and compliance with multiple national IT standards.
“Contrary to the rhetoric of many digital evangelists, national
borders do matter,” said Armen Ovanessoff, principal director at
Accenture Research. “Business leaders are waking up to their
responsibility in helping shape the rules of our digital future.
Given the transformations taking place in artificial intelligence,
bio-technology and the Internet of Things, it’s clear that this is
just the beginning of a complex journey that demands cross-border
and cross-sectoral cooperation.”
Many companies are beginning to plan their response to
increasing fragmentation, according to the report. Four in five
(80 percent) of the companies surveyed said they are already
factoring obstacles to globalization in their strategic planning.
About half (51 percent) are already reorganizing their global IT
architectures and governance structures in response. Two thirds (67
percent) are now investing in automation to offset labor
restrictions.
The report makes four recommendations to help business leaders
recalibrate their digital transformation:
- Add a new lens to
the strategic process. Dedicate greater resources to
reviewing the business impact and responses. For instance, should
the company reallocate investments and global functions differently
across markets and jurisdictions?
- Map and de-risk
data flows. Protect flows of information critical to
management decisions and business operations. Assess how data
regulations such as national cross-border restrictions and
requirements will affect business models. Re-evaluate where and how
to maintain different types of data – which could mean trade-offs
between security and ease of accessibility.
- Build local
advantage. Striking the right balance between centralization
and local investment is vital. Organizations must become part of
the fabric in the local economy within their key markets; this
includes the development of local talent and the cultivation of
relationships with local technology partners and policy makers. The
right degree of centralization of IT strategies, processes and
infrastructure across markets must also be assessed.
- Use technology as
part of the solution. Technologies offer solutions. For
example, 3D printing can help manage global manufacturing activity
more flexibly. Artificial intelligence can help address
restrictions on talent migration. And blockchain technology can
provide more secure, decentralized and distributed systems for data
protection and cybersecurity risks.
Methodology
Accenture Research partnered with Roubini ThoughtLab to survey
402 chief information and chief technology officers in Brazil,
China, Germany, Japan, India, South Korea, the United Kingdom and
the United States. Industry sectors represented include services,
technology, manufacturing, resources/commodities,
retail/distribution, and digital platforms. Approximately
38 percent of the companies have annual revenues between
US$250 million and US$4.9 billion; 36 percent
between US$5 billion and $19.9 billion; and
26 percent have annual revenues of at least
US$20 billion. Accenture Research also conducted in-depth
interviews with experts on policy, economics and digital
business.
About Accenture
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
consulting, digital, technology and operations. Combining unmatched
experience and specialized skills across more than 40 industries
and all business functions – underpinned by the world’s largest
delivery network – Accenture works at the intersection of business
and technology to help clients improve their performance and create
sustainable value for their stakeholders. With approximately
425,000 people serving clients in more than 120 countries,
Accenture drives innovation to improve the way the world works and
lives. Visit us at www.accenture.com.
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AccentureAnthony Hatter, +44 7810756
138anthony.hatter@accenture.com
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