MILAN (Reuters) – Small Italian vehicle filter supplier Ecofiltri contracted a state-backed loan last year, as did thousands of other companies struggling to stay afloat during the pandemic.
But instead of burning the money to pay the rent and overdue bills, Ecofiltri invests the money in a technological overhaul of its business. Already facing a long-term change in electric transportation, the company was motivated to act 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 that we hope to be able to patent to provide smarter products and services,” Simone Scafetta, co-founder of Ecofiltri, told Reuters. video call.
Italy ranked fourth in the EU in digital competitiveness in 2019, according to the Digital Economy and Society Index (DESI). By forcing a huge technological acceleration in the country, the pandemic offers Italy a unique opportunity to increase its weak productivity and economic growth.
To get a chart on the DESI 2020 index:
Faster economic expansion is critical for Rome to maintain the world’s third-largest public debt that the pandemic has inflated to 1.6 times gross domestic product (GDP).
Research from the Polytechnic University of Milan shows that Italy could add 1.9 percentage points on average to GDP growth if its small and medium-sized enterprises (SMEs) overcome a gap of 40% compared to Spanish counterparts measured by indicators ranging from of e-commerce capabilities or e-billing for big data use.
“But the trick only works if companies move from a reactive (crisis-driven) approach to technology to a strategic approach and the environment in which they operate evolves with them,” said Giorgia Sali, who runs the center of Politecnico research on SMEs and digital innovation.
For a graph of DESI index connectivity:
Italy estimates that its business in recent years fell behind the rest of Europe in terms of digital investment in an amount approximately equal to 2 percentage points of GDP.
The pandemic has brought a welcome change, with 86% of Italian respondents in a survey of medium and large companies commissioned by Dell Technologies who said they accelerated digital transformation plans in 2020, above 75% of the average European Union.
“The pandemic has forced Italian companies to face the country’s huge digital divide,” said Francesca Moriani, CEO of computer service provider VAR Group, adding that Europe as a whole is lagging behind the United States and the United States. China.
The euro area digital economy is only two-thirds the size of the United States.
Encouragingly, 92% of SMEs surveyed by the VAR group expect to invest in digital capacity in the next two years, despite the blow to pandemic sales.
RECOVERY FUND
Italy’s digital deficit has several roots.
In a country where broadband access is below the EU average, large companies that can maintain technology investment programs make up only a small proportion of companies.
Many companies are family owned and managed, so they often lack managers with the right skills to lead a digital transformation.
A study by the European Central Bank also highlighted funding constraints when companies rely mainly on bank financing, as in Italy, and said traditional lenders often have difficulty assessing the risk posed by projects based on complex technologies. .
Added to this is an aging population and a very low share of ICT graduates (about 5,000 a year compared to about 18,000 in smaller Spain, according to Eurostat data here) and Italy has lagged behind in the digital race.
To support the adoption of cutting-edge technologies by its companies and high-speed connectivity, Rome has allocated 46 billion euros in EU recovery funds that have not yet been disbursed for digital investments .
It also offers tax breaks to companies looking to increase digital spending and appointed former Vodafone CEO Vittorio Colao as technology tsar to oversee efforts in the coming years.
As in Greece, the push for modernization is also directed at public services, according to which Scafetta d’Ecofiltri was a bad example.
“We’ve given our staff palm trees and screens to share information seamlessly and interact with customers … people don’t add value walking side by side to carry paper documents, like you see state employees do,” he said.
Located in the central region of Abruzzo, Ecofiltri has found success in developing a process that gives a second life to diesel particulate filters.
To fund its projects, which include sensors to more easily detect problems with its filters and a digital warehouse management system to transmit information to its website and establish contacts with e-sellers such as Amazon, Ecofiltri took 100,000 euros last month September to Credimi, a fintech loan. firm.
Credimi states that digital innovation is a major driver of credit demand by SMEs.
“With a few exceptions, the pandemic has caught small and medium-sized Italian businesses unprepared, sending them up to date with digital progress,” said Fabio Troiani, Italy’s director general and global digital services. BIP Consulting, based in Milan.
“For some it has become a matter of life or death.”
FALLING BACK
Many smaller Italian companies face the challenge.
The proportion of SMEs using e-commerce in 2020 rose by 50%, to a third of the total, as e-buyers for the first time increased by 2 million during a nationwide shutdown last spring, according to data of Politecnico and the Netcomm e-commerce lobby.
To get a graph of SMEs selling online:
Politecnico data also point to a 42% jump in cloud services for SMEs, as remote workers increased 11.5 times to 6.6 million.
To date, Italian government programs aimed at encouraging digital investment have been undertaken mainly by larger companies.
The challenge is to incorporate companies on board such as Ecofiltri, which is one of more than 4 million Italian companies with less than 10 employees, or 95% of the total.
Small businesses find it difficult to attract people with the necessary skills in a country where ICT graduates only account for 1% of the total, the lowest in the EU, which contributes to Italy gaining the last position in the index. of human capital DESI.
“It wasn’t easy, but we’ve hired an engineer and the next person we hire must also be an engineer or they wouldn’t fit into our development plans,” Scafetta said.
Diego Ciulli, Google’s senior public policy manager, warned that not filling the digital divide in Italy when consumers around the world have scoured online channels would be more than a missed opportunity.
“The real risk is lagging behind,” he said.
“If Italian wine producers wait for trade shows to resume to find new foreign customers, while the French manage to sell their wine online very well, not only is the opportunity to grow lost, but the share is lost. market “.
Additional reports by Giuseppe Fonte in Rome; Graphics by Stefano Bernabei; Edited by Toby Chopra