Put simply, data is the lifeblood of the global economy. Data is both the genesis and the backbone of the “Internet of Things” (IoT) which is built on the movement of constant, real-time information, often across boundaries and borders. Indeed, cross-border data transfers and information flow are critical to many other technologies driving business and economic growth, from cloud computing and machine-to-machine (M2M) communication, to internet based messaging applications.
Fully half of all global trade in services now depend on access to cross-border data flows. M2M connections alone are forecasted to reach 1 billion by 2020, representing 10% of all mobile connections. Additionally, the GSMA predicts that the number of connected things will increase more than threefold worldwide between 2017 and 2025, reaching 25 billion.
The free flow of data benefits not only companies in the technology and digital sectors but also those in traditional industries like banking, retail and healthcare and the growing e-commerce sector. In fact, almost all industries depend on the ability to move data across borders or analyse it in real-time as a fundamental enabler of their supply chains, operations, value propositions, and business models.
51 percent of US firms which operated under the U.S.-EU Safe Harbor Agreement did so in order to process data on European employees, while about 75 percent of the value added by data flows on the Internet accrues to “traditional” industries, especially via increases in global growth. The trend is all the more important for developing economies, whose industrial bases are more heavily reliant on traditional industries. In countries like Bangladesh and India which have huge agriculture sectors, farmers depend on the mobile Internet to receive real-time data on everything from the latest market prices to weather forecasts, and also connect with local and foreign customers.
At the same time, digital platforms change the economics of doing business across borders, bringing down the cost of international interactions and transactions. They create markets and user communities with global scale, providing companies, especially micro and small businesses, with a huge base of potential customers and effective ways to reach them. Such businesses worldwide are becoming “micromultinationals” by using digital platforms to connect with customers and suppliers in other countries.
McKinsey Global Institute estimates that almost one-quarter, or 22 percent, of global economic output can be attributed directly to the digital economy. It also predicts that the application of digital technologies – such as cloud computing, data analytics, and IoT will increase global GDP by $2 trillion by 2020.