Boost global internet access to foster economic growth

26 October 2015 Consultancy.uk

Internet access is enjoyed by 2.7 billion people, bringing with it considerable economic benefits. These benefits are however, skewed towards the more developed countries and growth rates for internet access world-wide are slowing, research by McKinsey and Company shows. According to the firm, focus should be put on reducing infrastructure costs, lowering the costs of inputs and enabling network sharing to open up internet access to more users.

The Internet, in the decades since its inception, has grown astronomically in any number of terms, with the number of people connected to the Internet now at around 2.7 billion. In 2010, the GDP contributed by the Internet and its wider ecosystem is estimated to have accounted for $1,672 billion of the global economy or an average of 2.9% of total GDP. The distribution of both Internet users and GDP benefit is however skewed towards wealthier regions, finds a report from McKinsey & Company titled ‘Creating the Next Wave of Economic Growth with Inclusive Internet’. 

The economic value generated annually from the Internet in developed countries is estimated at $1,488 per capita, while in developing countries this is just $119. The disparity in benefits is aggravated by the fact that the majority of the 4.2 billion people that are not connected are living in developing countries. In addition, fixed-line Broadband uptake remains something mostly enjoyed by wealthier countries.

Fixed-line broadband uptake

The benefits of wide spread internet proliferation are expected to be considerable. A 2009 World Bank study finds that for every 10% increase in the number of high-speed internet connections there is an additional 1.3% points in economic growth. The study further shows that the internet has the potential to transform agriculture, retail, healthcare, and other sectors in Africa through contributing $300 billion to GDP by 2025 compared to the $18 billion today.

Growing to be online
There has been considerable growth in the uptake of internet connections in recent years, with an estimate that between 500 million and 900 million more individuals will gain access to the internet by 2017. McKinsey finds five key factors related to the increase in growth, which include the increase in mobile network coverage opening up more mobile internet connections. Further, internet services costs tend to fall over time, while incomes are increasing, creating conditions in which internet access becomes more affordable. Urbanisation also plays a role as it allows more people to gain access to internet services due to infrastructure for services often being concentrated in cities. The rise of the middle class is another key factor driving up internet penetration, with their disposable income invested in internet services – the developing world’s middle class grew from 5% in 2005 to 25% in 2009. The fifth factor is the utility of the internet, which has also been on the rise; the increasing economic as well as entertainment potential offered through various channels makes its use ever more valuable for users.

Physical and practical barriers
However, while the number of users is set to increase in terms of hundreds of millions, the total number of non-connected people still stands at 4.2 billion and the rate of uptake has slowed in recent years. Between 2005 and 2008, the three-year compound annual growth rate was 15.1%, which between 2010 and 2013 dropped to 10.4%. At the same time there has been a widening gap in mobile internet uptake, with developed countries continuing to grow faster than developing countries.

The widening digital gap: Mobile broadband penetration

In a study of 20 countries* selected for the size of their offline population (at an average 74%), McKinsey explores the barriers holding back greater internet services uptake. The consulting firm finds that the central reasons holding back wider uptake are primary related to infrastructure, education and income. In terms of infrastructure, 64% of the offline population lives in a rural setting, which even in developed countries is seen as a limiting factor for uptake. Low income accounts for 50% of the lack of connectivity, with 1.6 billion people in the 20 countries unable to afford a connection. Retail research shows that mobile broadband uptake increases rapidly when the cost reaches around 3-5% of income – however, the average cost in the 20 countries for mobile broadband stood at 9%, and reached as much as 40% for the poorest segment. Literacy was also noted as an issue, with large proportions of the unconnected segment either illiterate or ICT illiterate, which created a barrier to uptake.

While the barriers remain, they are not insurmountable according to McKinsey. By focusing on reducing the infrastructure costs, lowering the costs of inputs and enabling network sharing, access to internet services may be opened up to more users at a lower cost. Further, the researchers cite the creation of shared access points such as libraries, as well as developing basic ICT skills and incentivising the creation of local content, as ways to foster further internet uptake by unconnected and often marginalised people.

* Bangladesh, Brazil, China, the Democratic Republic of Congo, Egypt, Ethiopia, India, Indonesia, the Islamic Republic of Iran, Mexico, Myanmar, Nigeria, Pakistan, the Philippines, the Russian Federation, Tanzania, Thailand, Turkey, the United States, and Vietnam.

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”