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e-Europe and the IST Programme

Rosalie ZOBEL
Director, European Commission, Information Society Directorate General
New methods of Work and Electronic Commerce

Abstract

At the European Summit Meeting in Lisbon in March 2000, EU government leaders set a new strategic goal for the Union for the next decade: "To become the most competitive and dynamic knowledge-based economy in the world". The Heads of State and Government made this declaration in the context of the discussion on the eEurope Initiative which they strongly backed at the Summit. The goal of eEurope is to accelerate Europe's transition to the information society, thereby achieving greater economic progress and social cohesion. This paper will describe the objectives and rationale of this initiative and explain the contributions of the Information Society Technologies (IST) Programme, and notably its Key Action II, New methods of Work and Electronic Commerce, in creating a more competitive Europe in the digital age.

 

1. E-commerce in the Knowledge and Information Society

Digital technologies pervade corporate organisations in all sectors of the economy. They enable, and demand, a radical overhaul of business structures, and even the very nature of doing business. This is a direct result of two fundamental developments: the exponential growth of the Internet, and the growing power of information.

The Internet is truly the engine of the new economy. It both responds to the needs of economic actors in an increasingly globalised economy, and it further amplifies the trend toward globalisation - not only of the economy, but also of people's ideas and ways of thinking.

The Internet is the new platform for people to interact and do business. It has transformed the patterns of commerce, giving birth to electronic commerce. Three types of e-commerce have been identified: first, business-to-administration, - B2A - which includes the citizen's interactions with e-government as well as business with government on the basis of e-procurement; second, business-to-business - B2B; and third, business-to-consumer -B2C. Of these, B2C can be seen as a mere "evolution" of traditional consumer interaction. The real e-commerce "revolution" involves B2B, which is the core of the e-commerce market, representing over 80% of the total. B2A is embryonic, but major advances are foreseen in communication between companies or individuals and government, especially regarding public procurement, taxation, and other business issues.

E-commerce is not only about doing business on the Net. It revolutionises corporate structures such as logistics, production, marketing, internal communications - turning companies into "smart organisations", knowledge-driven, internetworked, dynamically adaptive to new organisational forms and practices, learning as well as agile in their ability to create and exploit the opportunities offered by the new economy.

The second major development is the growing power of information. Information is the "fuel" of the new economy and is used here in its broadest sense, meaning not only data but knowledge, ideas, and brainpower. Intangible goods (i.e. content and software) represent an ever-growing share of the economy. The most successful organisations, not only businesses but also public administrations, are those which operate on the basis of collective intelligence. This means co-operating efficiently, sharing information, generating new ideas, and developing the capacity to exploit them. "Co-operative competition" amongst individuals is at the core, as a major driver for innovation and creativity.

There is an unlimited potential in digital technologies, not only for growth, competitiveness and jobs, but also for societal progress. Economic development no longer requires highly developed and densely populated areas in which to take place. Anybody, anywhere, can play an active role in the new economy. This means that economic activities can be better centred on the needs of individuals and communities and that remote regions are no longer at a disadvantage.

Achieving the potential of the Information Society depends, however, on fulfilling some essential conditions:

  • First, exploiting the full potential of the Internet requires a powerful and seamless communication infrastructure. Individuals and regions that are not connected will be left out of the digital age.
  • Second, people need new skills to play an active role in the Information Society, through "digital literacy". A reform of educational systems and the promotion of life-long learning are essential to ensure that young people who come on the job market are digitally-literate, and those already working become so.
  • Third (and this may be the most difficult to achieve), the digital age calls for a new mindset and new behaviour. In recent decades, the economy has been fairly static. Now the Internet has opened up an era of intense creative interactive thinking and economic growth. The digital age calls for dynamic and flexible minds, an entrepreneurial and innovative spirit, open-mindedness and vision.

2. Europe in the New Economy

With this in mind, let us consider how Europe is doing in the new economy. The telecommunications market is exploding. The liberalisation of telecoms in the EU in 1998 has created a very dynamic market, of which the fastest-growing segment is mobile communications, which is expanding exponentially. There are already 140 million mobile users in Europe - that's over one third of the EU population. The growth rate last year was 30%, making Europe the undisputed world leader.

Furthermore, we are on the verge of a major qualitative change in mobile communications. Mobile networks are being upgraded with the GPRS technology, which boosts transmission speed and quality. New, innovative services are rapidly gaining momentum, of which WAP is an example. Soon, we will see the development of broadband communications through wireless local loops, for which licences are being attributed. This will rapidly be followed by broadband mobile communications.

Digital TV too is evolving very favourably. Europe has already closed the gap with the USA with its 10 million subscribers, and the European market is growing faster. This enables the development of Internet access and interactive services via a whole new set of access devices.

In the last 18 months, Europe's situation in terms of venture capital has improved significantly. Venture capital is now readily available for fast-growing start-ups, which are now mushrooming in Europe, notably in the Internet and e-commerce markets. As elsewhere, these are being created both by young people and by established professionals. The leading start-ups already have market values of several billion Euros.

An increasing number of companies, in all sectors of the economy, are now aware of the importance of e-commerce. According to Andersen Consulting, 80% of European top managers recognise the importance of e-commerce for their competitive edge - not only for marketing and sales, but also for purchasing and procurement. They expect to use e-commerce intensively by 2004. This may sound like great news, but 2004 is very late. Too late.

This may explain why Europe currently lags the USA in e-commerce growth. According to estimates, the EU e-commerce market is only a third that of the US. But things have started to change in Europe, and we are heading in the right direction.

On average, Internet penetration rates in the EU remain lower than in the United States. Actually, the situation is very diverse, with some EU countries matching the US and others being well behind. But this is no reason for pessimism - as Internet penetration figures could soon become irrelevant in Europe. This is because they are based on the US model of Internet access via a computer, whereas as we have seen above Internet access platforms in Europe will be more diversified, with mobile devices and interactive digital TV playing a crucial role. Soon, more people will be accessing the Internet via a mobile terminal than a PC. Europe is already moving into the post-PC era.

It is already clear that the Internet will be the most important economic development in Europe in the year 2000. It is therefore realistic to say that Europe is now en route to the digital age, though many difficulties remain: communications prices are still too high; the Internet services sector is still insufficiently developed; e-commerce growth is slower than in the USA; SMEs are slow to embrace digital technologies; regional discrepancies persist; and the digital skill gap is widening - to the extent that while 15 million Europeans are still out of a job, companies find it difficult to recruit IT capable personnel. There is still a lot of work ahead.

 

3. The eEurope initiative

The eEurope initiative was launched in December 1999 by the President of the European Commission. The goal of eEurope is to accelerate Europe's transition to the Information Society - thereby achieving greater economic progress and social cohesion.

After the eEurope initiative was launched and following its positive reception from the Member States, the European Parliament and key actors, the European Commission submitted a Progress Report to the Lisbon Summit of March 2000. At this Summit, the Heads of State and Government committed themselves to a number of measures, including target dates, to bring eEurope forward.

The European Commission then produced the eEurope Action Plan which has been endorsed at the Feira Summit on 19-20 June. It sets out a strategy to address key barriers to the uptake of the Internet in Europe and ensure that the conditions are set for a decisive move towards the new economy. It proposes that Member States and the Commission bind themselves to achieving the following three objectives quickly: a cheaper, faster, more secure Internet; investing in people's skills and access; and stimulating the use of the Internet. All key elements should be in place by 2002. The thrust of the plan is to accelerate legislation, roll out infrastructure and services across Europe and open co-ordination between Member States - including benchmarking activities by the Commission.

 

4. The IST Programme

IST is one of the thematic programmes of Europe's 5th framework programme of research. With more than 3.6 Billion Euro of Community funds, it is the largest programme, but also one of the richest in terms of the strengths and diversity of skills it addresses.

Framework 5 is different to its predecessors. The Council decided that it should be made up of thematic programmes of research. For the IST programme, this means that all research is to be carefully focussed on finding solutions for those technological barriers that still inhibit the emergence of an Information Society. It does not mean funding all research opportunities in the ICT sector, but only those areas where European intervention makes good strategic sense, and where the added value of our limited financial contribution can really have a significant impact on the rate of technological development.

A further facet of Framework 5 is ensuring that all research is strongly geared to supporting the mainstream policy objectives of Europe. Research is by its very nature forward thinking and ground breaking, and it is particularly the case in the ICT industries that policies and regulation must evolve in response to rapid technological change.

The IST programme is one integrated Research and Development programme aiming at focusing European efforts in order to ensure that Europeans both develop through, and benefit from, the transformation from an industrial to an information society. The Programme is doing more than simply develop technologies: it will help ensure that all of Europe's citizens and companies benefit from the opportunities the Information Society will provide. The Programme has been structured in order to features a small number of key actions, each of which encompasses the complete range of Research and Development and take-up activities from basic research through to demonstration projects.

 

5. Key Action II: New Methods of Work and Electronic Commerce

The mission of KAII is to support the development of Information Society Technologies and policy to enable European workers and enterprises to increase their competitiveness in the Global Information Society, whilst at the same time improving the quality of the individuals' working life, and consumer confidence.

Although many aspects of the work to be covered in the Key Action II have their roots in the previous activities of the ACTS, ESPRIT and Telematics Applications Programmes, the overall Key Action is one of the innovations of the new IST Programme. Not only does it bring together the closely related developments of New methods of Work, Smart organisations, Electronic Commerce and Trust, but by setting objectives in terms of these developments it draws together many different areas of technology development and social change.

Both 1999 and 2000 have been marked by a rapid acceleration in the development and adoption of new business solutions and practices for e-business. As enterprises, workers and consumers world-wide are awakening to the opportunities of the digital economy, there is a growing realisation that the transition has barely started and that a vast number of challenges remain to be addressed before potential benefits fully materialise.

Challenges range from building a global infrastructure that promotes trust and confidence to the research, development and broad take-up of novel technologies, applications, business process and organisational practices aimed at empowering individuals- entrepreneurs, workers or consumers - and enterprises, small and large, as participants in the global economy.

In spite of its relative novelty, Key Action II has attracted a strong response to the three calls for RTDs and Accompanying Measures projects so far. The total number of projects selected for funding to date is 170 with a total contribution of more than 200 MEuros.

5.1 Key Action II in 2001 and beyond

The Fifth Framework Programme covers the period 1998-2002. Key Action II will soon enter the last phase of the programme and the transition towards next Framework Programme. The main lines of action for the programme are described in the yearly IST workprogrammes, which constitute the basis for calls for project proposals. The Workprogramme 2001 is at the time of writing still being prepared, and so the information contained here describes its expected evolution. Readers are encouraged to refer to the official document on www.cordis.lu/ist/home.

It is expected that Key Action II will focus its 2001 activities in the context of the eEurope initiative, on ensuring that Europe plays a prominent role in shaping and capitalising on the next wave of innovation in e-Work and e-Commerce. In 2001 the Key Action will strengthen its focus on long-term/high-risk research complemented by high impact take-up activities supportive of eEurope objectives. The expected timescale for exploitation of the research is envisaged to be 5 to 10 years.

Key Action II will aim at supporting even more innovative projects which complement and extend what the market is already providing. Selected projects should both incorporate a clear multiplier effect in order to offer benefits beyond the project partners, and involve key players capable of influencing technology, industry and market developments. Priority will be given to projects addressing interoperability and pre-standardisation issues with a mid- to long-term perspective. These projects should facilitate the emergence of new platforms on which individual companies could later develop and embed their own products and services.

Calls in year 2001 will not favour short-term technology developments based on proprietary solutions whose benefits would be limited to the participant organisations, nor pilot applications which would be just another example of the thousands of cases of e-commerce or e-work already ongoing in Europe. Though such efforts are worthy, they are not the best investment of public money intended for research and development.

Innovative research on e-Business and e-Work as described above will be complemented with socio-economic research and promotion of early and broad adoption through take-up actions and large-scale demonstrators and testbeds. Support measures will facilitate the establishment of working groups and thematic networks to link Key Action II activities with major external efforts.

Key Action II will reinforce its already strong synergy with IST Cross Programme Actions in areas such as regional and sectoral testbeds, smart cards, dependability, socio-economic analysis and indicators, advanced interactions, etc.

As in 2000, the structure of the Work programme will most likely reflect the three layers at which Key Action II intends to contribute: Technology, Strategy and Adoption. This structure helps Key Action II players better concentrate their efforts and present proposals more focused on the targets that this Key Action wants to achieve at the end, namely:

  • A new generation of systems and services for new methods of work, smart organisations, digital markets and trust and confidence;
  • Strategies, concepts, and policy contributions to support implementation on the above subjects; and
  • A representative set of trials and testbeds showing innovative patterns of progress towards the digital economy. This may be considered as a European testbed of the digital economy.

 

6. Conclusions

In 2003 Europe will have the biggest Internet population worldwide. The number of users will be triple that of 1999 and the value of the transactions will multiply by 20. In most of the EU countries the on-line population will be above 40% of the total, and the companies doing business on-line will represent 80% of the GDP. The challenge Europe faces is to become a world leader in e-commerce. Through the IST programme's Key Action II: New methods of Work and Electronic Commerce and the eEurope initiative that the EU has put in place, Europe hopes to succeed in this goal - for the benefit of all.