2. Recent Digital Developments
Advances in technology are transforming the economy and wider society. The rapidly evolving nature of digital means that new technologies are continually being developed and integrated into our daily lives. This section outlines key digital developments that are changing how we live, work and do business across Scotland.
2.1 Flexible Working And Workplace Innovation
Advances in digital technologies are innovating workplace practices through enabling employees to work remotely and more flexibly. Remote working allows people to work from home as well as from other locations with secure internet access, such as client sites. Workers can now access documents on smart devices, work through virtual networks, and communicate with colleagues across the globe. In 2014, 6 in 10 Scottish businesses stated that using mobile internet and technologies enabled staff to work remotely.  Remote working reduces the need for travel and time spent commuting, as well as potentially reducing the need for office space and overhead costs.
According to a study by British Telecom ( BT), productivity among homeworkers increased by between 15 and 31% due to increased focus and less office distractions.  In addition, it found remote working to be advantageous in recruiting and retaining staff. Monetary and environmental benefits from reduction in travel were also achieved. BT made a substantial saving of £500 million in their property portfolio and estimated that it saved around 97,000 tonnes of CO2 emissions.
The increased flexibility that remote working offers has the ability to increase labour market participation by providing greater opportunities for those who are restricted by traditional working hours or the need to be located in a particular location. This may benefit workers who live in remote areas or have other difficulties accessing a place of employment, as well as care providers in families with young children.
However, research by Timewise suggests that flexible working options are not yet widely available.  In 2016, only 8.7% of UK jobs paying over £20,000 per year were advertised with flexible working options.  As salary rises, the availability of quality flexible jobs declines, with few positions offered within engineering, management, health and education.  For employers in areas with skill shortages, there are clear benefits of accessing a wider talent pool through offering flexible working.
2.2 Cloud Computing
Cloud computing is a key technological advancement that facilitates greater remote working and collaboration. Cloud computing allows data to be stored and accessed through a remote server rather than on a computer hard drive. Well known clouds include Google Drive and Apple iCloud which allow files to be shared across devices.
Cloud technology provides benefits for both personal and business use. The ultimate advantage of cloud computing is potential cost reduction, as the technology is cheaper than investing in ICT equipment and operates as a pay-as-you-go service, offering greater flexibility. In addition, cloud computing can store significantly more data than a traditional computer, saving businesses the need to upgrade their hardware and therefore reducing IT costs further.
Cloud computing provides greater scope for collaborative working as users can access and work on the same document simultaneously. Clouds are accessible from a variety of devices, such as smartphones and tablets, and from any location with internet access, providing a convenient way to access information outside of the workplace. Cloud technology also offers added security benefits as information stored on the cloud remains even if the computer hardware becomes lost or stolen. Lastly, cloud computing is more energy efficient as it requires less electricity and air conditioning than computer hardware and scales down when servers are not being used, meaning that less power is consumed.
Although cloud computing offers numerous advantages to organisations, a survey of Scottish businesses revealed that only 25% of businesses were utilising cloud technology.  The most commonly cited reason for not taking advantage of cloud computing was because businesses felt that it was not relevant to them, indicating that the benefits of cloud computing may not be fully understood. A further 8% of businesses who did not utilise cloud technology, cited security and privacy concerns as a constraint.
2.3 The Internet Of Things
The Internet of Things ( IoT) refers to an expanding network of interconnected devices, enabled by the internet. It is estimated that by 2020 there will be 50 billion IoT devices, able to connect with one another on a constant basis.  Key examples include driverless cars and smart meters.
The IoT offers new ways for businesses to add value and for public services to become more personalised, however the constant connectivity and data sharing also creates new opportunities for information to be compromised, making security by design and cyber resilience even more important. Figure 2.3 depicts how devices can be connected, impacting our daily lives.
2.4 The Collaborative Economy
As well as changing the way we work, digital technologies are impacting the wider economy through disrupting traditional markets. An example of this is the rapid growth of the collaborative economy which connects individuals or communities via online platforms, enabling the sharing or provision of goods and services, assets and resources without the need for ownership. Figure 2.4 illustrates leading collaborative economy businesses that are significantly impacting major sectors.
Figure 2.4: The Collaborative Economy
|Uber||The world's largest taxi company owns no taxis.|
|Airbnb||The largest accommodation provider owns no real estate.|
|Skype||The largest phone company owns no telecoms infrastructure.|
|The most popular media owner creates no content.|
|Netflix||The world's largest movie house owns no cinemas.|
|Apple & Google||The largest software vendors do not write the apps.|
Pricewaterhousecoopers ( PwC) has estimated that key collaborative economy sectors could generate £9 billion of UK revenues and $335 billion of global revenues by 2025.  Additionally, a 2014 report by Nesta revealed that 25% of UK adults used the internet to share resources over the last year. 
A recent Eurobarometer poll found that a third of 25-39 year olds have used a collaborative economy service and were three times more likely to do so than those aged over 55. 
Disruptive technologies bring significant benefits to consumers, competition and the economy through lower prices, greater choice and better service. Furthermore, disruptive technologies generate greater efficiency by allowing people to share underused resources through online platforms. This allows individuals to benefit from more flexible working arrangements, as well as new ways of supplementing their income. A key characteristic of disruptive technologies is the speed with which they transform markets. This is particularly important when compared with the speed of regulatory changes, in which agility is important to respond to market developments.
The benefits of the collaborative economy must be balanced with the need for regulation and for these new businesses and traditional operators to be treated fairly with no unfair competitive advantage.  A key element of debate surrounding disruptive technologies is the degree to which they should be regulated. As online platforms are a new phenomenon and aren't defined in the same way as traditional businesses, they are not necessarily bound by the same rules and regulations. Similarly, recent debate has centred around how the emergence of these new business models are impacting on employment practices. Concerns have been raised around whether new operators are gaining an advantage through how they classify their workers. The UK Government's Taylor Review is considering how employment regulation may need to change in order to keep pace with emerging business models. 
2.5 The European Digital Single Market
Access to the European Single Market is a key benefit of Scotland's European Union ( EU) membership, allowing us to trade freely with member states. However, the EU's regulation of the digital environment has not always kept pace with digital advances, impacting European companies' ability to compete internationally.
In May 2015, the European Commission published its strategy for creating the Digital Single Market.  This aims to allow consumers and businesses to trade online across borders, regardless of their place of residence or nationality. The commission outlines 16 key areas of work that will be taken forward in coming years to create the conditions required for EU citizens and companies to take advantage of the opportunities provided by developments in digital technology. Issues covered include reform of VAT regulation, a review of cross-border broadcasting regulations and proposals to enhance online security.
The European Commission estimates that the Digital Single Market has the potential to contribute up to €415 billion per year to Europe's economy and create hundreds of thousands of new jobs. A digital single market generates opportunities for Scottish businesses to grow and access a market of over 500 million customers, as well as increasing the choice of services available to consumers.
2.6 Smart Cities
Our world is becoming increasingly urban. In 2015, 85% of global GDP was created in cities  and 1.5 million people are joining the global urban population every week.  Within Scotland, our seven cities are home to many high growth sectors and world-leading academic institutions that foster innovation and inward investment.
However, increased urbanisation places huge demands on our infrastructure, public services and the environment. Smart cities present a way of using digital technologies to manage resources and infrastructure in a sustainable way, making our cities more efficient and greener places to live and do business. The evolution of 'big data' means that we are able to collect and analyse information on a greater scale than ever before, providing scope to deliver innovative solutions to city problems.
Smart city technology can reduce litter in cities through using sensors to recognise when to collect full bins and share information about traffic congestions and the availability of parking spaces. Energy consumption can be reduced through dimming streetlights when nobody is around, controlling temperature in public buildings and notifying maintenance staff to water leaks as soon as they occur.
It is estimated that cities consume 75% of global natural resources and account for 80% of the world's greenhouse gas emissions.  Smart city technology has the potential to help improve air quality, cut pollution and reduce traffic congestion and energy use. By monitoring flows of information, digital technology allows supply and demand of resources to be better aligned, improving efficiency and optimising the use of scarce resources. Smart city technology gives us greater insight into the way cities work, allowing us to better prepare for the future.
Email: Deborah McGovern