Digitalization Hungary: Lack of skilled workforce slows down digitalization

Editor: Lina Klass

Hungarian enterprises have not managed to improve their digitization scores. However, there are more complex interpretations of this process today. People are increasingly of the opinion that digitization represents a competitive advantage on the market.

"Digitization is the driving force of growth." - Dale A. Martin, CEO of Siemens Hungary
"Digitization is the driving force of growth." - Dale A. Martin, CEO of Siemens Hungary
(Source: Siemens AG)

GKI Digital first conducted a survey aimed at the digitization levels of Hungarian companies in 2016. This was also when research introduced the concept of the Digitization Index, a general metric on a scale of 1 to 5. The assessment takes into account the degree to which digitization is deemed to be important at a given company, as well as the current level of this process. It also examines the company’s perception of its own readiness, its plans related to digitization, and finally the future opportunities and obstacles perceived. Two years ago, the survey revealed a digitization index of 3.5 for Hungarian domestic middle and large enterprises, which is a strong medium score. A new survey saw light recently, in which enterprises achieved the same level. However, according to Norbert Madar, business unit manager of GKI Digital, today they see the process and their own place within it in a much more complex manner.

The representative survey examined companies operating in five sectors: energy, health, transport, industrial production, and real estate development. This year, the target group also included representatives of the small enterprise sector in addition to medium and large companies.

Digitization no longer (only) means the replacement of analog systems

Digitization no longer (only) means the replacement of analog systems.
Digitization no longer (only) means the replacement of analog systems.
(Source: Siemens)

Digitization means somethings else to companies today than it used to two years ago. The process has different interpretations by sectors and company sizes. Small companies consider simpler and smaller investments as digitization investments, while large companies tend to think of these as complex, large scale investments.

Although in 2018, the Digitization Index was unable to improve on its score of 3.5 from 2016, the background of this value is completely different from before. The index of the newly involved small enterprise sector is 3.2, medium companies achieved 3.5, while the large enterprise index rose to 3.7.

“As far as the companies are concerned, digitization formerly primarily represented the replacement of analog processes and the upgrading of electronic systems. In addition, they also expected that the introduction of digital processes will lead to a clearer overview of their processes’ efficiency. Today, when asked about digitization, most respondents mention the interconnection of their existing software, its management as part of a single network, as well as digital data collection and analysis. It is clear that they have a much more in-depth overview of digitization processes, and that they strive to leverage the benefits inherent in digitization by using data. According to 61 percent of companies, digitization has had a positive effect on increasing their efficiency”, said Norbert Madar, who provided details of the research’s result.

Where hardworking, professional hands are still needed

Domestic companies tend to increasingly feel that the circumstances for implementing digitization related enhancements have improved. In addition, they also feel that they are more prepared to take further steps. However, this process is significantly held back by one factor, which is the lack of workforce.

The lack of a highly trained workforce still has a complex negative impact on the digitization efforts of companies. Planned enhancements are harder to carry out, but trained workforce is also needed for the everyday operation of areas that have already been digitized.

The fact that digitization is otherwise powerfully transforming the labor market does not have a fundamentally helpful effect in this regard, as its dominant area, automation does not decrease the total number of jobs, but merely transforms them. In addition, experts from Siemens believe that it may even increase the headcount, especially in IT type areas, where labor shortage is even more severe, if possible.

Small companies have yet to see the competitive edge in digitization

A high level of digitization mostly appears in the energy sector as a competitive advantage, where 30 percent of stakeholders attribute a medium level of competitive advantage to the process, with two-third believing this to be on a high level. Digitization represents the lowest competitive advantage to small enterprises, as they typically do not compete on an international stage.

"Digitization is the driving force of growth." - Dale A. Martin, CEO of Siemens Hungary
"Digitization is the driving force of growth." - Dale A. Martin, CEO of Siemens Hungary
(Source: Siemens AG)

“Digitization is the driving force of growth, making it possible for companies to make their operations more efficient, flexible, and fast, which is essential in today’s market environment. And the true competitive advantage of digital transformation will be possessed by those that recognize it and are able to leverage the numerous new inherent business opportunities”, said Dale A. Martin, CEO of Siemens Zrt., speaking about the survey.

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