Commentary

Unleashing Europe’s digital potential

June 1, 2023

Nyhavn warmly illuminated beside the sailing ships moored beneath sunset skies in the heart of Copenhagen, Denmark.

Digitalization has been a driving force behind growth in many industries, creating new opportunities and increasing efficiencies. The benefits of a thriving digital society are immense, including improved productivity and cost reduction. Unsurprisingly, the global market for digital transformation is enormous and rapidly growing. In 2022, this market was valued at close to US$750 billion and is projected to experience a compound annual growth rate of 26.7% from 2023 to 2030

The IMD World Digital Competitiveness ranking evaluates the capacity and readiness of 63 countries to adopt and explore digital technologies for societal enhancement using 54 different criteria. Denmark was named the most digitally advanced country in the world by the International Institute for Management Development (IMD) last year, marking the first time a Scandinavian country surpassed the US in this ranking. The US secured a respectable second place, thanks to its large and expanding tech industry and robust digital infrastructure. Denmark’s top position can be attributed to its readiness to embrace digital transformation, business agility and IT integration. The country also excels in delivering online public services and a remarkable 94% of its citizen are connected and considered tech-savvy.

In other parts of Europe, the digital landscape is uneven, with varying levels of digital readiness, infrastructure availability and digital skills among countries. However, efforts are underway to bridge the digital divide and drive transformation across the European Union (EU).

The European Commission has long been working on the “digital single market” and, in 2020, unveiled the Recovery and Resilience Facility (RFF). This €750 billion initiative aims to address the economic and social consequences of the COVID-19 pandemic and will be distributed among member states. At least 20% of the recovery funds must be allocated to projects that digitize economies and societies. 

The initiative’s goal is to expand digital infrastructure, support digital skills and education, promote digital innovation and entrepreneurship, and enhance digital public services. The EU’s vision is to become the most connected continent globally by 2030, ensuring every household has access to high-speed internet coverage by 2025 and gigabit connectivity by 2030. The EU is also committed to supporting the expansion and improvement of 5G infrastructure across its member states. For instance, Greece’s recovery and resilience plan includes €1.3 billion allocated to the digital transformation of the public sector and €500 million for promoting digital transformation in the education and health systems.

We believe that Netcompany, a recent addition to our international portfolios, is well-positioned to benefit from Europe’s digitalization. 

Netcompany, a Scandinavian provider of next-generation IT services for public and private customers, aims to support its clients in gaining competitive advantages and enhancing efficiency through digitalization, customized application development and business process re-engineering. The company has established a highly differentiated business model that is repeatable and scalable, enabling the delivery of projects on time and within budget. In its most recent fiscal year, Netcompany reported revenues of DKK 5,545 million (US$797 million) and an EBIT of DKK 839 million (US$121 million).

Originally based in Denmark, Netcompany has expanded its operations to Norway, the Netherlands and the UK. In 2021, it further expanded into Continental Europe through the acquisition of Intrasoft, gaining access to EU institutions and government tenders. By leveraging the combined platforms, competencies and strengths of both companies, we believe Netcompany is well-equipped to capture market share in Europe’s digitalization journey.

Global Alpha Capital Management Ltd.
June 1st, 2023