On March 23rd, the Spanish Digital Economy Association (Adigital) and Boston Consulting Group (BCG) presented the third edition of the Digital Economy in Spain report.
The study analyzes the evolution of digitalization in Spain's economy in 2022 and delves into two key aspects for economic growth: firstly, the digitalization of small and medium-sized enterprises (SMEs), due to their significant weight in the economic fabric of Spain, and secondly, the scalability and growth of Spanish technology-based companies (known as scaleups), as interrelated vectors that allow for the growth and digitalization of other productive sectors.
In this article, we share a summary of the most relevant data observed in the report, which will surely help you make decisions in your digital strategy. The complete report can be downloaded from this link.
The digital economy in Spain represents 22.6% of GDP.
The Spanish 'digitized' economy, defined as all economic activity based on digital goods and services, reached 22.6% of total GDP in 2022, 0.6 percentage points higher than in 2020 (22.0%), and almost 4 percentage points higher than in 2019 (18.7%). The estimated direct impact of the digital economy on GDP in 2022 is 11.2%, 0.3 percentage points higher than in 2020 and 2.2 percentage points higher than in 2019.
To explain this evolution, it is necessary to analyze the behavior of both the digitalization of the economy (numerator) and Spain's GDP (denominator). On the one hand, the value of the digitalization of the economy between 2020 and 2022 has had an accumulated growth of 19%, characterized by the increase in digital adoption by users and companies.
On the other hand, Spain's GDP, which suffered a pronounced decline (-10.8%) as a result of the pandemic, has recovered between 2020 and 2022 with a variation of 15.9%, in line with expectations. In this sense, when calculating, the weight of the digital economy in Spain may appear to slow down the pace of growth, but it is not the case when looking at absolute values.
César Tello, General Director of ADigital, has said:
"The impact of digitalization has such a broad and cross-cutting spectrum that it affects all dimensions of economic life. It is essential to continue measuring and monitoring this impact in order to chart a roadmap that makes our country a space of leadership thanks to technology, taking advantage of our particularities and strengths".
The challenge of digitizing SMEs.
According to the study, in Spain, small and medium-sized enterprises represent 99.8% of the entire business fabric. That's why their digitization is a key factor in increasing their contribution to the economy.
To analyze the degree of digitization of Spanish small and medium-sized enterprises and compare them with their European counterparts, the team that conducted the report selected the 7 most relevant parameters for the use of ICTs from the OECD (Organization for Economic Cooperation and Development), and grouped them into two major areas:
- Digital transformation of internal processes, which includes the use of ERP, CRM, and cloud services, and
- Digital capabilities and data analysis, which includes the use of big data, IoT, Artificial Intelligence, and ICT specialists.
In general, Spain has a lower percentage of digitalization than the European countries analyzed in digital capabilities such as the use of CRM, big data, purchase of cloud computing services, use of IoT, use of Artificial Intelligence, and employment of ICT specialists. On the contrary, we obtain the best results in the use of ERP software.
According to the report, in general, Spanish SMEs have a weaker financial position than large companies, which translates into greater volatility and lower economic resilience, mainly due to the inability to benefit from economies of scale, limited resources to invest in innovation and digitalization, and greater difficulty accessing credit in Spain, expanding into international markets, and professionalizing.
Scaleups and unicorns are becoming increasingly relevant in the economy.
The report also focuses on studying scaleups and unicorns, which have become one of the main drivers of the digital revolution in the business sector, with a ripple effect in five key areas:
- Attraction of investments: Scaleups are creating a virtuous circle of attracting national and international investments, which in many cases amplify the development of digital technologies.
- Digital talent: Scaleups are key in generating qualified employment and developing digital talent in regional hubs as well as promoting the creation of young, diverse, and creative teams.
- Multiplying effect of entrepreneurship: The growth of resources available to scaleups and their successful use cases in Spain are generating a virtuous circle in which successful entrepreneurs channel part of their wealth into investing in projects, promoting new venture capital funds, or supporting ecosystem development.
- Development and use of technological toolsCreated from innovation and research, these require significant initial investments but are easily scalable and internationalizable once created. Many Spanish scaleups are growing thanks to the development and use of strategic digital technologies such as Artificial Intelligence, 5G, cloud infrastructures, or SaaS.
- Digitalization and technological advancements in strategic sectors: The emergence of scaleups and unicorns in the Spanish business fabric is promoting the creation of new economic sectors, in niches that had not been exploited until now. Additionally, scaleups are forcing incumbents to innovate to remain competitive in the sector, driving sectors that historically had reduced digital maturity.
When talking about scaleups, Pablo Claver, Managing Director and Partner, Leader of the Organization and People Practice for Iberia and South America at BCG, stated:
"A series of macro trends are changing the needs in the labor market, creating a mismatch between the capabilities of the workforce and the needs of companies. Scaleups must become key figures in driving the generation of digital talent, which directly influences the successful transformation of other companies, as well as the growth of a country's economy."
In conclusion, as revealed in the published report, it seems crucial to prioritize the digitalization of SMEs, given their high weight in the Spanish business fabric, as well as to boost the growth of the scaleup and unicorn sector, so that they are able to extrapolate their characteristics to the rest of the country's productive sectors, generating virtuous circles of growth.
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Retail trade represents 4% of Spain's digitized GDP.
The growth of digital sales in retail has increased the value of digitization by €1.7 billion (+40% vs. 2020) in Spain.
To ensure that the impact of digitization continues to grow, Spanish companies and retailers face a series of challenges they must overcome if they want to reach the same level of digital maturity as other sectors such as financial institutions. These challenges include:
- Data integration and omnichannel: In many cases, channels remain fragmented and separated, with different value propositions between the digital and physical retail channels. Omnichannel is a key element of retail, allowing the consumer to choose how to interact with the retailer and have a consistent experience.
- Digitization of internal processes to optimize costs and improve efficiency: According to a 2021 SAS report, 66% of retailers admit to not understanding external demand and data well enough to make accurate predictions, and 94% of the sector admits to having problems with excessive inventory. It is therefore crucial to optimize the distribution chain to avoid inventory deterioration or overcosts, accurately calculating demand using internal and external data.
- Personalization in digital sales: This is crucial when profiling and finding an appropriate approach to the consumer. In this process, small retailers with physical channels have certain advantages when digitizing their channels due to their understanding of customer behavior.
- Sustainability as a key element of the entire process: The paradigm shift in European and Spanish regulation regarding sustainability and the growing consumer commitment to the environment create a scenario that increasingly urges companies to commit resources to an ecological transition if they want to remain competitive.
About the study
The first part of the study, which includes a series of methodologies for calculating the contribution of the three components of the digital economy, concludes with the results of the size of the digital economy expressed in terms of gross domestic product (GDP). It distinguishes:
- Direct impact: study of the wage bill and gross operating surplus generated by the digital economy, with an impact of approximately 11.2% of GDP, 0.3 p.p. higher than in 2020 and 2.2 p.p. higher than in 2019.
- Indirect impact: study of the effect on the supply chain due to digital activity, resulting in an approximate impact of 10.8% of GDP (1.7 p.p. higher than 2019 and 0.3 p.p. higher than in 2020).
- Induced impact: study of the increase in disposable income of workers with digital skills, with an approximate impact of 0.6% of GDP, having remained constant compared to previous years.
- You can download the study by clicking here.
If you need advice on the digital transformation process of your business, remember that you can contact us today here.
Digital Marketing Manager at Orienteed.