MILAN (Reuters) – The small Italian car filter supplier Ecofiltri took out a government loan last year, as did thousands of other businesses trying to drift during the pandemic.
But instead of burning the cash to pay arrears of rent and bills, Ecofiltri is investing the money on a technological overhaul of its business. The company has already faced a long-term switch to electric transport after the virus crisis reduced the number of drivers on the road.
“We have expanded our facilities, purchased high-tech equipment and even created an R & D department where we are working on three projects. We hope to be able to do our patent to deliver more intelligent products and services,” said co-founder of Ecofiltri , Simone Scafetta, told Reuters. video call.
Italy is ranked fourth last in the EU for digital competitiveness in 2019. According to the Digital Economy and Society Index (DESI), by forcing the country to make a major technological acceleration, the pandemic offers Italy a once-in-a-lifetime chance to increase productivity and economic growth.
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Faster economic expansion is essential for Rome to maintain the third largest government debt in the world, which inflated the pandemic to 1.6 times its gross domestic product (GDP).
Research by Politecnico University in Milan shows that Italy could add an average of 1.9 percentage points per year to its GDP growth if its small and medium-sized enterprises (SMEs) bridge a 40% gap with Spanish counterparts, measured by fluctuating indicators of e-commerce capability or electronic billing for the use of big data.
“But the trick only works when companies move from a (crisis-driven) reactive approach to technology to a strategic approach, and develop the environment in which they work with them,” said Giorgia Sali, who heads Politecnico’s research hub on SMEs and digital innovation.
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Italy estimates that its businesses have lagged behind in the past few years in terms of digital investments with the rest of Europe by about 2 percentage points of GDP.
The pandemic brought a welcome shift, with 86% of Italian respondents in a survey of medium to large enterprises commissioned by Dell Technologies saying that they are accelerating digital transformation plans in 2020, above a 75% European average.
“The pandemic has forced Italian companies to face the huge digital gap in the country,” said Francesca Moriani, CEO of IT services provider VAR Group, adding Europe as the United States and China.
The digital economy of the eurozone is only two-thirds the size of that in the United States.
Encouragingly, 92% of SMEs surveyed by VAR Group expect to invest in digital capacity over the next two years, despite the pandemic of the pandemic.
REPAIR FUNDS
Italy’s digital deficit has a number of roots.
In a country where broadband access is below the EU average, large enterprises that can sustain technological investment programs form only a small part of the enterprises.
Many businesses are family owned and operated, which means managers do not have the right skills to lead a digital transformation.
A study by the European Central Bank also highlighted funding constraints when businesses mostly rely on bank financing, as in Italy, and said that traditional lenders often struggle to evaluate the risk associated with projects based on complex technologies.
Add to that an aging population and a very low proportion of ICT graduates – around 5,000 per year compared to around 18,000 in smaller Spain, according to Eurostat figures here – and Italy has fallen behind in the digital race.
To support the adoption of leading-edge technologies by its companies and ultra-fast connectivity, Rome has earmarked € 46 billion in yet-to-be-disbursed EU digital investment recovery funds.
It also offers tax exemptions to businesses that want to increase digital spending, and has appointed Vodafone’s former CEO Vittorio Colao as technology tsar to oversee the coming years.
Just like in Greece, the modernization test is also aimed at public services, which according to Scofetta of Ecofiltri is a bad example.
“We have given our staff palm tops and screens to share information incessantly and communicate with clients … people add no value to walking next door to carry paper documents, as you see government officials do,” he said.
Ecofiltri, located in the central Abruzzo region, has achieved success by developing a process that gives diesel particulate filters a second life.
To fund its projects, which include sensors to more easily detect problems with its filters, and a digital warehouse management system to send information to its website and link with e-sellers such as Amazon, Ecofiltri raised 100,000 euros in September last year borrowed from Credimi, a fintech lender. firm.
Credimi says digital innovation is a key driver for the credit demand facing SMEs.
“With a few exceptions, the pandemic caught small and medium-sized Italian businesses unprepared, and it scrambled to catch up with digital advancement,” said Fabio Troiani, CEO of Italy and Global Digital Services at BIP Consulting in Milan.
“For some, it has become a matter of life and death.”
FALL FURTHER BEHIND
Many smaller Italian businesses are tackling the challenge.
The share of SMEs using e-commerce in 2020 rose by 50% to a third of the total, as the first e-shoppers rose by 2 million last year during a nationwide exclusion, according to the data of Politecnico and the e-commerce portal Netcomm.
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Politecnico data also indicates a 42% increase in cloud services for SMEs, as remote workers increased by 11.5 times to 6.6 million.
To date, Italian government programs aimed at promoting digital investment have mostly been taken up by larger enterprises.
The challenge is to bring on board companies like Ecofiltri, which is one of more than 4 million Italian companies, with less than ten staff members, or 95% of the total.
Small businesses find it difficult to attract people with the necessary skills in a country where ICT graduates make up only 1%, the lowest in the EU, which contributes to Italy ranking last in the DESI Human Capital Index.
“It was not easy, but we brought in an engineer and the next person we hire must also be an engineer, otherwise they will not fit into our development plans,” Scafetta said.
Diego Ciulli, senior public policy manager at Google, warned that the failure of the digital loophole in Italy when consumers worldwide turned to online channels would be more than a missed opportunity.
“The real risk is falling further behind,” he said.
“If Italian wine producers wait for trade shows to resume to find new foreign customers, while French are very good at selling their wine online, you not only lose the chance to grow, but you also lose market share.”
Additional reporting by Giuseppe Fonte in Rome; Graphics by Stefano Bernabei; Edited by Toby Chopra