Monday 30 January 2017 6:00 am Scottish Development International

Why could digital tech reach over $2.7 trillion by 2020?

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Whether it’s big data, artificial intelligence (AI), cloud storage or cyber security, the effects of digital technology development are all around us. Recognised as the third industrial revolution, we are experiencing one of the most transformative periods in history.

Digital – transforming our industrial society

In 2001, a group of software developers met at the lodge at Snowbird ski resort in Utah, USA and published the Manifesto for Agile Software Development. This triggered an acceleration in the development of digital services globally.

Research by Nesta indicates that the growth of the tech start-up sector has led to corporates investing in a range of digital transformation strategies, such as tech incubators and innovation centres.

Scotland has established tech start-up communities in Edinburgh, Glasgow and Dundee. Edinburgh in particular is seen to be leading the field – this year readers of European Business Magazine voted Edinburgh the best European city to locate a technology company. And it’s clear why – the city is home to Codebase, the UK’s largest technology incubator, plus a range of innovative digital tech companies and universities conducting cutting-edge research.

According to IDC, over the next four years worldwide spending on digital transformation technologies and services is expected to grow from around $2.4 trillion in 2016 to more than $2.7 trillion in 2020.

Fintech – powering financial transactions

PWC has revealed that over the next three to five years, the cumulative investment into the fintech market is estimated to be worth $150 billion globally.

Changes in market dynamics, especially around regulation, will cause the financial services sector to focus on developing a range of digital services.

Some of the priorities for the key financial services sectors will be:

  • Asset management – data analytics
  • Banking – operational simplification
  • Blockchain – trusted distributed ledger of transactions 
  • Insurance – self-directed services
  • Payments – identity authentication and protection

Laws and regulation can often be seen as a barrier to innovation. However, one local business, Amiqus Resolution, has seen an opportunity in regulation. It has developed a proprietary platform, AmiqusID, that allows users to do anti-money laundering compliance online.

Due to the pace of change in the industry, collaborative partnerships are increasingly important as traditional financial organisations seek to scale their services.

Collaboration has been a key catalyst for Edinburgh-based Nile, a service design agency that works with a range of leading financial services businesses including Prudential Insurance, Royal London and RBS.

Find out more about fintech industry in Scotland.

AI – adding insight to data

AI offers companies an opportunity to create value by removing time-consuming, administrative tasks.

Forbes & Forrester predict investment into AI platforms will grow 300% in 2017, compared with the amount spent in 2016.

Through the use of advanced analytics and machine learning technologies, insights created from the analysis of data will drive faster business decisions.

The potential of the future applications of AI and data technologies has helped to create the Edinburgh Centre for Robotics and Edinburgh Data Science, two initiatives focused on bringing the data science community together.

Industrial Internet of Things – making industry mobile

The Internet of Things (IoT) is the concept of connecting any device to the internet.

A new market sector called the Industrial Internet of Things (IIoT) has emerged, which focuses on combining cloud computing, LoRaWAN™ (low power wide area networks), analytics and business intelligence systems to create new human-to-machine interactions.

Stream Technologies, Semtech Inc and Boston Networks have collaborated with the Scottish Innovation Centre for Sensor and Imaging Systems (CENSIS) to establish a Scotland-wide IoT network based on the LoRaWAN™ specification.

Business Insider predicts that an estimated 24 billion IoT-enabled devices will be installed by 2020. And analysis from Strategy Analytics indicates that the IoT market could grow to $550 billion by 2025.

Virtual and augmented reality – the interactive experience

Consoles and PCs used to be the dominant video game platforms, but now the total revenue from games played on mobile platforms has surpassed that of consoles and PCs combined. Revenue from mobile games now accounts for 37% of the total gaming software sales worldwide. (Source: Games

In the next few years we can expect to see e-sports, gaming through virtual reality (VR), massive multiplayer online games and augmented reality (AR) dominate game design. The result? AI, data science and cloud storage could improve interactivity and gameplay.

Facebook recognised Scotland as a leader in this field when it acquired Two Big Ears, a student spin-out from University of Edinburgh, which developed the 3DCeption Spatial Workstation for creating interactive 3D audio applications and tools for VR and AR devices.

Find out how Scottish companies are changing our perceptions of reality.

Security – maintaining our identity

The security and privacy of personal data are major technology issues that have an impact on the adoption of new online services.

Identity verification is now a vital component in the security procedures of financial services organisations. DirectID, a product created by Edinburgh-based ID Co, combines bank-verified identities and live financial data into a single platform, helping organisations reduce fraud.

Security services that prevent data loss will continue to show strong growth in a market that is estimated to reach $81.6 billion in 2016. (Source: Garter)