Deutsche Bank : National IT Summit: Ensure progress away from the limelight as well!

October 21, 2014

The German government has invited interested parties to a National IT Summit. High-ranking figures from the political, business and academic arenas will meet to tackle the following assignment: "Working and living with digital change - together.innovative.self-determined". At the summit specific tasks are to be designated in order to boost Germany's capabilities in the area of information and communication technologies. The issues of broadband expansion and Industry 4.0 are pivotal to this assignment. Bold ideas and commitment are urgently required, but not intervention in competition taken for the sake of appearances. The objective is that decisive progress is made with digitalisation in Germany away from the summit limelight as well.

The German government has sent out invitations to what will be the eighth National IT Summit. After last year's break decision-makers from the worlds of business, politics and academia will come together in Hamburg to tackle the summit's assignment "Working and living with digital change - together.innovative.self-determined". At the summit specific tasks are to be designated in order to boost Germany's capabilities in the area of information and communications technologies. The key issues to be addressed are "Digital business in Germany", "Networked applications and platforms for the digital society", right through to "Innovative public-sector IT offerings" and "Digital networks and mobility". Given the plethora of tasks to be tackled the Industry 4.0 issue about enhancing Germany's appeal to investors is bound to decisively shape the debate.

A key element of Industry 4.0 is the smart factory. In the smart factory man, machine and resources communicate directly with each other using the same system (i.e. quickly and without errors in transmission). Smart products know their manufacturing process and future application. The concept covers not only the added value itself but also extends from the work organisation, the business models and the downstream services right through to invoicing and financing. Implementation entails production, marketing and logistics being linked directly via information technology, thereby incorporating all resources, production facilities and warehousing systems.

Industry 4.0 has enticingly big potential; this is, however, more long-term in nature. Germany's National Academy of Science and Engineering, acatech, estimates that productivity could rise by 30%. In addition, the Fraunhofer Institut forecasts that German value added is likely to increase by some EUR 270 bn by 2025, or by more than 10%. These estimates presume, however, that the outstanding issues concerning overall control, security, confidentiality, standardisation and legal framework will soon be solved.

Incidentally, this assessment of the potential is absolutely dependent on the performance of the data networks. Given the constantly rising IP volume, capacity bottlenecks in the data network are anything but a distant prospect, and indeed a current threat. Progress can be made with digitalisation only if high-performance data networks (especially with regard to system availability and speed) are available that allow business processes to operate reliably at all times. This makes it all the more disconcerting that German companies occupy only a midtable ranking in the EU-27 when it comes to the use of modern broadband networks and could fall further behind internationally in the foreseeable future. For the good of Germany as a business location the broadband network should thus be upgraded urgently. This requires major efforts, however - it is estimated that Germany alone needs to invest up to EUR 90 bn in the coming years. The National IT Summit offers the appropriate framework for network operators, policymakers, businesses and academics to agree on the specifications, so that these huge investments can actually be made soon.

The National IT Summit has the very ambitious objectives of finding good answers to the manifold burning questions associated with the digitalisation of commerce and society, which range from data security to the financing of the networks. For example, with the German government's Digital Agenda and the "Digital Network Alliance Germany" important steps have already been taken to provide political support for innovations in Germany. Nevertheless, further wholehearted steps must follow soon. Specifically, for example, the volume and efficiency of subsidy programmes should be boosted and obstructive competition between public-sector entities and the private sector should be eradicated. Public-sector initiatives are thus certainly necessary; they must, however, be circumspect. After all, over the long term the economy would not be helped by action taken for the sake of appearances that massively distorts competition. For the sake of Germany's appeal as a business location decisive progress must be made with digitalisation away from the summit limelight as well.

"This report was originally published in German on October 16, 2014 and translated on October 20, 2014."