The digital sector in Scotland is something of an anomaly.
Coming out of the coronavirus crisis it is in a far better place than most others, and far from needing a bailout, it is itself being looked on as a key part of the bailout, the hope of growth that can help to turn round Scotland’s economy as we look to post-COVID recovery.
Already worth £7.5bn to Scottish GDP annually and employing 100,000 people, it has a lot riding on it, but is in a relatively robust state despite all that has been thrown at it in recent months.
“Where we are at the moment is actually in a more positive position than the majority of other sectors,” says Jane Morrison-Ross, chief executive of technology industry body ScotlandIS.
“We set up a cross-sector steering group a few months ago now, but we’ve been working with energy, food and drink, scotch whisky, travel, transport and a number of other sectors to understand more about the issues across the landscape.
“And something that has become really clear is the majority of other sectors are suffering quite a lot more, but they all recognise that digital technology is really important in helping them to recover and future fit to protect them from anything like this happening again.”
In general, the sector is “still buoyant” and most companies are still growing, Ross says.
Around 64 per cent have or are planning to recruit before the end of the year and 73 per cent were predicting profitability growth by year end, while fewer have made staff redundant than in other sectors.
“During the crisis, particularly in the midst of the worst of it, I think 21 per cent had or planned to make staff redundant at that point, so not all had, but comparatively to other sectors, again, it was pretty low.
“A number did take advantage of the furlough scheme, but the majority of them did it as a precautionary measure rather than they had to because they were teetering on the brink.
“I think the one thing the crisis did do was highlight the need for other companies and organisations to make better use of digital technology.
“So, for companies that were supplying any solutions, either in response to COVID or in response to the needs of other companies to keep going through COVID, for a lot of them, their sales actually increased.
“So, yes, we are fortunate, and it has been a lot more positive [than might be expected].”
Certain parts of the sector were initially hit hard, particularly those that sold products such as websites or e-commerce for the retail industry, but that has turned around as businesses right down to the smallest SMEs changed their business model to begin trading online.
The predicted increase in e-commerce post-COVID is now 168 per cent.
A more expected area of expansion relates to home working, but this is not just limited to the obvious beneficiaries such as Zoom, according to Morrison-Ross.
“I think we’ve seen a big increase in opportunities for companies that set up those services, everything from connectivity through to enabling software, even things like CRM systems and using databases and things differently to help companies track all of their business online.
“Some of it’s very simple, some of it’s the basic building blocks that maybe some companies haven’t quite got around to, you know, databases, procurement systems, payment systems, online payments even, that sort of thing.
“And then making sure staff have got the right equipment so everybody can use Skype or Teams or Zoom or whichever, other platforms are available, whichever suits their business model, and then the staff training on the back of that.
“I think one of the things that was really positive was the recognition from a huge amount of companies that giving people a laptop and telling them to get on with it wasn’t enough.
“So a lot of companies seemed to put quite a lot of thought and support in from the fairly early stages of the crisis into staff training to use the new technology and channels, but also staff wellbeing and how they communicated with their teams and their staff.”
But it’s not all about financial gain. There has also been a great deal of simply mucking in to help.
“You know, there’s a lot of companies pivoted to help with the supply chain around PPE and things like that, or to help with apps for health and social care or home care.
“There were a lot of companies offering solutions for free. And we set up the business hub in the early days and there were a lot of – I mean, hundreds – of companies in Scotland offering their products and services for free to other companies in Scotland who weren’t in the tech sector.
“So, we saw a lot of altruism in the early stages too, a lot of recognition that to get through this, we all needed to collaborate and support each other.
“That mood didn’t disappear. And I think that’s been a hugely positive thing to say.
“I find myself talking with other organisations based in other parts of the UK or internationally, and quite often we talk about the culture in Scotland being a little bit different, the culture being quite collaborative, and open to partnerships and open to doing things a little bit differently.
“And I think we really did see that over the last few months. You know, we saw the proof that actually what we talk about is true.”
Among the initiatives is the Scottish Tech Army, which mobilised the digital community to volunteer its skills and knowledge to finding solutions to some of the problems presented by coronavirus.
Within just one month of its launch on 28 April, it had more than 700 volunteers and over 30 projects on the go.
Projects include a COVID-19 dashboard for Scotland that presents the data on the coronavirus pandemic in an interactive format, a mobile device management policy for the Govan Community Project and helping Young Enterprise Scotland to move its courses online.
The sector as a whole has been named as key to the future economic growth and recovery, and the recent Scottish Technology Ecosystem Review, which was commissioned by the Scottish Government in response to the coronavirus crisis, took a much wider look at what was needed for the future expansion of the sector in general.
In an interview with Holyrood in June, Mark Logan, who led the review, explained his thinking: “We would be blind to ignore the fact that we have this unprecedented situation in front of us, but if you think about the sequence here, phase one is the crisis we’re currently in.
“And government and other bodies are of course looking at interventions and support that we can give to not just tech start-ups but beyond.
“Phase two, you might call recovery and convalescence, how we help those companies get back on their feet and wean them off life support, if that’s what they’re on.
“And then phase three, I would call strategic. So, if COVID had never happened, what should we have been doing that we weren’t doing to make the ecosystem work better.
“And my review is very much centred on phase three … And in that regard, I really applaud the Scottish Government’s vision here … I’m very impressed that that the government’s lifting its head away from [the crisis] and looking a bit ahead and saying, after this, how do we give ourselves the best chance to recover and grow.”
Morrison-Ross says they were “incredibly welcoming” of the review and it was “fantastic” that the Scottish Government was putting that priority on the industry and the potential for the industry to help drive economic recovery.
The review came up with wide ranging recommendations, everything from making computing a core science subject in schools to setting up a network of start-up accelerator hubs around Scotland to reducing train fares between Glasgow and Edinburgh so that it would be more viable to commute between the two cities.
The Scottish Government accepted all 34 recommendations of the review at the beginning of September and announced £4m of funding for the five technology start-up hubs.
Finance Secretary Kate Forbes said the hubs were “laying the groundwork for Scotland’s digital future.”
But does this idea of digital being the linchpin of future economic recovery and growth put too much pressure on one sector?
“I don’t [think so],” says Morrison-Ross. “The general mood, I think, is very much, I’ve got mental image of people rolling up their sleeves and saying, right, let’s get on with it then.
“And that seems to be the mood, you know, the organisations are rising to the challenges, whether it’s companies that are specialising in digital health and med tech that are deeply involved in how we build on this situation and put better processes and solutions in place so that we can manage anything like this better in the future, there’s a lot of buoyancy.
“We’re seeing a huge amount of growth in areas like space tech and climate geospatial technology… And I think they’re kind of well-kept secrets that that people don’t yet know that space tech and climate tech in Scotland are actually ahead of lots of other countries.
“Gov tech’s another really key emerging sector. And I think when you think that government spends around £877m a year, it’s always been a hugely important one for SMEs.
“And I think there’s real appetite from companies to engage and communicate more with the government and public sector – I hate to use the hashtag, but you know that Build Back Better one – there’s a real enthusiasm for being heard and contributing to how we do that.”
There’s “masses of innovation quietly happening” in cyber security and online safety too, Morrison-Ross says, and if anything, the sector has started to innovate in a more accelerated way in response to the situation.
Another area that has accelerated in response to the situation is dialogue between the Scottish Government and industry.
In May, ScotlandIS launched the Digital Nation Challenge in partnership with the Scottish Government.
The challenge called on companies to submit ideas that will help increase the pace of Scotland’s digital progress and develop critical national digital and data infrastructure, reflecting, for example, the greater use of video conferencing and other digital tools that support collaboration, the need for government organisations to re-imagine how their services can be delivered online at scale and for the public sector to work in ways that crosses traditional organisational boundaries.
The aim is to create “digitally enabled Scotland” where digital connectivity, data and digital systems are recognised as part of the critical national infrastructure.
Following the survey, Morrison-Ross and Scottish Government digital director Colin Cook released a joint statement announcing that some of the ideas put forward would be put into action right away, while others had “heavily shaped” a consultation paper on a new digital strategy for Scotland and would feed into future Scottish Government plans for digital.
Digital Nation “opened real channels for communication, but more than that, real channels for industry to tell the government what they thought needed to happen to enable Scotland digitally”, says Morrison-Ross.
There are further announcements to come, but so far, the feedback from government has been “hugely positive”, she says.
All this is key, coming as it does ahead of the launch of the updated Scottish Government digital strategy.
While the previous strategy in 2017 focused on areas such as broadband rollout (still ongoing due to delays), public sector transformation and better use of data, a consultation paper on the new strategy, published last week, covers areas including digital inclusion, digital public services, the green economy, growing the tech sector, supporting SMEs with digitisation and digital ethics.
Morrison-Ross says she’s “excited and hopeful” about the new strategy. She would like to see it shaped by engagement with the sector, but she believes that is happening now in a way that it hasn’t before.
She’s also keen to see a national approach that looks at everything from enabling infrastructure through to emerging technologies.
“One of the things that we fed back on the back of the Higgins report was … while we were very supportive, was that we felt there wasn’t enough emphasis on SMEs, which are really the powerhouse of the Scottish economy, but also on enabling technologies like IoT and 5G and the importance of harnessing those properly, as well as the space tech, the climate tech, the gov tech.
“So I think what we hope we will see in that digital strategy is something that encompasses emerging technology as well as the building blocks and infrastructure, and that takes into account that engagement with industry, and looks ahead for ways that we can use the technology to reduce the impact of climate change as well.”
Either way, the outlook looks positive for an industry that certainly isn’t standing still or bending under the weight of expectation being placed on it.