The world as we live today is continually and rapidly changing. The yesterday’s myths are today’s realities. The only thing matters is that these myths make sense. One of the instrumental drivers for this change is digital transformation. It would be a myopic opinion if we view this transformation only in the parameter of internet. On a holistic view, it is about using latest technologies in doing what we are already doing to do better. The rise of digital economy is just one area of doing the things better.
No conceivable area is immune from change due to digital transformation and information and communication technologies (ICT). And global economy is no exception. Global economy is also getting affected by this digital transformation and that too at the speed of light.
Digital economy refers to the economic activities that originate from billions of everyday online transactions among peoples, businesses, devices, data and processes. The single most crucial factor of the digital economy is hyperconnectivity, which refers to the growing interconnectedness of people, organizations and machines that results from the internet, mobile technologies and the internet of things (IoT). The digital economy is massively challenging the conventional economy in how businesses are formed and interact; and how consumers get goods and services with ease and convenience at affordable prices. In 1995, the author Don Tapscott first coined the term Digital Economy in his landmark book “The Digital Economy: Promises and Peril in the Age of Networked Intelligence”.
Also read: E-Commerce: Challenges and Opportunities in 2021
The three main components of Digital Economy: The three main components of digital economy are,
e-business
e-business infrastructure
e-commerce
It is no wonder that we have observed exponential growth of digital aura and its effects over our lives in the last 15 years. Thanks to the genie of social media (Twitter, Facebook, LinkedIn, Instagram, and YouTube), consumers are now more informed and made rational choices. It hardly comes as a surprise that in the year 2019, 50% of EU businesses used social media, while 92% used at least one ICT security measure.
Digital economy has revolutionized the business arena and given prominence to many unconventional trends and start-up ideas. The genesis of almost all global corporations be it Google, Facebook, Apple, Microsoft, Tesla and Amazon are from the digital world. It would not be out of context if we discuss some of the merits and demerits of digital economy.
Merits of Digital Economy: Let us have a view on some of the important merits of the digital economy.
Enhanced use of internet: Digital economy is meaningless in the absence of internet. Internet has played a pivotal role in the daily lives of consumers around the world. This enormous growth of technology and the internet is now a worldwide network. Needless to mention, there is now a monumental growth in the investment on all the related stuff be it hardware, software, liveware, technological research and ICT. Just as internet is here to stay, so are web-based businesses.
Monumental growth in e-commerce: The digital economy has proved a crystal agent for the growth of e-commerce sector. It is no wonder that the businesses that made use of internet and embraced online activities have succeeded to unprecedented heights. Every business area be it selling, buying, distribution, marketing, have all benefited enormously due to digital economy.
The rise of digital goods and services: Digital economy has given rise to the digital goods and services. Now there is no need to buy CDs/DVDs to enjoy music or listen lectures. The same are available digitally even on your smart phones. The same goes true for services. Today, banking and insurance services are available digitally. It saves the consumers from taking the hassle of visiting the office premises.
Transparency: There is a high degree of transparency in the digital economy. Since the use of paper currency is quite minimal in the online digital transactions, it ensures a certain level of prohibition of black money and corruption.
Demerits of Digital Economy: Digital economy is not without its fair share of demerits. Some of its demerits are given below.
Loss of Mass Employment: A cruel reality of digital economy is that the more we rely on machines, the less we need human resources. The growth of digital economy resulted into the end of mass employment. As the processes get more automated, the need of human resource shrinks. Online shopping and banking are its glaring examples.
Less Availability of skilled experts: The development of digital economy demands high tech infrastructures, which require skilled and professional manpower to build and maintain it. They are not easily available, especially in remote and less developed areas.
Heavy Investment Outlays: For digital economy to prosper, heavy investment are required for strong infrastructure, high powered internet and ICT devices. All of this require heavy cost in the shape of time and investments. Even developed economies can benefit from their years of accumulation of knowledge and expertise. Developing economies, however, are forced to imitate and use the infrastructures developed by the first world.
There were two monumental events that have spurred the rise of global digital economy. First was the collapse of Berlin Wall in 1989, while the second was the invention of World Wide Web (www). The role of these events was instrumental in transformation and unlimited potential of globalization. All the global experts and analysts are optimistic about the direction it is heading to.
By our very nature, we all have the tendency to use the latest technology to increase productivity. And there is nothing wrong in it. In the digital economy, all the customers be it business to business as well as business to consumer alike-want to interact and communicate with businesses as and when they want and in a cost-effective manner with ease. Digital economy has made it possible beyond their wildest dreams.
