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Poland’s digital economy has grown by more than 7 per cent over the past three years, according to an analysis by McKinsey & Company. This continues a trend we first identified in 2016, when we calculated the value of the digital economy to be EUR 26.3 billion, and later in 2019, by which time it had already grown to EUR 32.7 billion.
Tomasz Marciniak, Managing Partner, McKinsey & Company in Poland
Ewa Granosik, Associate
Borys Pastusiak, Local Partner
Ewa Granosik, Associate
Borys Pastusiak, Local Partner
THERE IS NO FUTURE WITHOUT ENTERPRISE - Dziennik Gazeta Prawna Special Edition
Today, we believe that Poland’s digital economy may be worth as much as EUR 46 billion and that the country has strong foundations for unlocking further growth over the coming years. Because of those strong foundations, Poland, along with nine other countries in Central and Eastern Europe (CEE), can be considered a “Digital Challenger”.
According to our series of reports on this topic, Poland has demonstrated an ability to emulate the success of the “Digital Frontrunners”, a group of countries in Northern Europe with high digitisation rates.
Foundations for digital growth
What are those strong foundations built on? Partly the fact that Poland is the largest economy in CEE and already has solid technical infrastructure in place. Partly the fact that many large-scale digital investments are ongoing, and examples of digital entrepreneurship are visible everywhere. And partly the fact that Poland benefits from a large pool of home-grown specialists in information and communication technology (ICT), representing a significant advantage in the global competition for digital leadership. To build on these strong foundations, we need to understand where the opportunities for growth lie and which factors can act as enablers for this expansion.
Economic strength and technical infrastructure
Poland’s economy is the largest in CEE, surpassing EUR 500 billion in 2020. The country accounts for more than 36 per cent of the region’s GDP. Poland has also managed to build solid technical infrastructure, with 57 per cent of households enjoying average broadband speeds of more than 100 Mbps and fibre penetration expected to increase at a CAGR of 12 per cent by 2025, especially in large urban centres. The next generation of mobile broadband technology, 5G, will allow download speeds of up to 10 Gbps, further improving connectivity in Poland. It is expected to cover 90 per cent of the population and 58 per cent of the country by 2023.
Ongoing investments
The last two years have seen major investments in Poland by leading multinational players. In April 2021, for example, Google opened its seventh data region in Europe and the first in CEE in Warsaw. Earlier, in May 2020, Microsoft announced an investment of more than EUR 800 million in Poland to build data centres and open a CEE business region for its cloud product (Azure), collaboration suite (Microsoft 365) and other services. These investments are bringing major value to Polish companies and others in the region, including businesses that choose to use the new data centres as an alternative to building on-site infrastructure.
Digital entrepreneurship
Digital entrepreneurship in Poland is also on the rise. Domestic unicorns, such as Allegro and CD Projekt, serve as role models for a new generation of start-ups. Overall, Poland saw total venture capital investments in excess of EUR 850 million between 2013 and 2020, a figure surpassed within CEE only by Romania. In 2017, the Polish Development Fund (PFR), a state-owned development finance group, set aside more than EUR 500 million for a fund of funds (FoF) to invest in local venture capital funds.
This represented an unprecedented cash injection for the region and a massive stimulus for the early stage investment ecosystem.
Large ICT specialist pool
In addition to benefiting from its size, solid technical infrastructure, ongoing investment activity and vibrant start-up environment, Poland also boasts the fourth-largest pool of ICT specialists in the European Union, after Germany, France and Italy. Indeed, the country’s 550,000 specialists account for more than a third of all ICT specialists in CEE. The share of ICT graduates among all graduates in Poland is also on the rise, up from 2.9 per cent in 2014 to 3.8 per cent in 2019. However, there is still room for improvement when it comes to filling gaps in specialist ICT capabilities, such as cloud-related skills. Here, the private and public sectors are both taking action to upskill employees in the latest technology. More needs to be done in this area in order to avoid sought-after skills becoming even scarcer on the market.
Where does the potential lie?
To build on the country’s strong foundations for growth of the digital economy, we first need to understand where the opportunities lie. The COVID-19 pandemic has been a key factor in digitisation, accelerating the adoption of e-commerce by consumers. McKinsey’s pan-European Digital Sentiment Survey reveals a sea change in digital adoption rates driven by the pandemic. Thus, 53 per cent of Polish consumers using digital channels did so for the first time as a result of COVID-19 lockdowns. Similarly, on average, Poles started to access two or more new sectors entirely online.
In addition to benefiting from its size, solid technical infrastructure, ongoing investment activity and vibrant start-up environment, Poland also boasts the fourth-largest pool of ICT specialists in the European Union, after Germany, France and Italy.
Going forward, the rate at which industries gain new digital users may slow down, of course. Those sectors that saw the biggest increase in digital users are also the most likely to lose them as restrictions are lifted. In the healthcare sector, for instance, 26 per cent of respondents in our survey said that they would be using digital services less in the future. In education, the figure was 14 per cent, and in public services, 7 per cent. If consumers do continue to use services online, they say it will be due to the convenience of accessing a wider range of offers and industries.
In terms of customer satisfaction, the Digital Sentiment Survey shows that Poles are happiest with their online experiences in the banking, grocery, and travel sectors. The healthcare and public sectors, by contrast, show room for improvement.
Key enablers for Poland
A number of enablers have the potential to maximise Poland’s productivity gains from the digital transformation. One of the major ones is cloud computing technology. According to the latest McKinsey report titled “Cloud 2030: Capturing Poland’s potential for accelerated digital growth”, cloud computing could generate as much as EUR 27 billion by 2030, equivalent to 4 per cent of Poland’s annual GDP. Importantly, 82 per cent of that new value would likely come from new business and innovative solutions enabled by cloud architecture.
Other enablers will also be crucial to boosting Poland’s digital economy. They include the adoption of digital tools by small and medium-sized Polish enterprises (SMEs), implementing e-government solutions, improving digital awareness and skills within the workforce, and leveraging the country’s pool of ICT specialists.
With technological changes coming thick and fast, the time to act and realise the digital potential of Poland is now. Accelerating digital adoption by businesses, the public sector and individuals can unlock innovation and help Poland with its Digital Challenger agenda, and support its adaptation to a new, more digital, post-COVID normal.
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