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Regulation and education are biggest barriers to digital transformation

(Image credit: Centrigent)

Digital transformation is not a project or one-time installation but it is an ongoing and continuous evolution, an industry expert said.

It [digital transformation] is disrupting the whole economy and impacting all sectors alike. All the sectors need to automate to cut costs, stay competitive and improve customer experience.

“It is gaining traction in the Gulf countries but at different levels for different entities. The pace of technology development has outpaced the adoption in the industry, which means there is an industrial divide now,” Jay Srage, CEO of technology advisory services company Centrigent and head of operations and lecturer at Michigan Ross Business School, told TechRadar Middle East.

Centrigent was started in 2017 to help enterprises and governments to accelerate the adoption of emerging technologies while the school educates top-level executives on building sustainable strategies in preparation for the digital era in healthcare, retail and finance sectors.

Srage was the former president of Qualcomm for Middle East, Africa and Eastern Europe.

What is digital transformation?

Srage said that digital transformation is beyond 5G and includes data science, AI and cloud computing. The whole idea of the UN and WEF (World Economic Forum) is to connect every person on the planet but now there is an “industrial digital divide”.

“Regulation and education are the biggest barriers to digital transformation in the region. Self-driving cars are out there in 2017 but not here yet and people don’t know what machine learning is and don’t know the difference between machine learning and deep learning. The emerging technologies are very complex and difficult to understand,” he said.

He praised the EU for putting regulations on AI, drones, data privacy and 5G much faster than any other regions.

“In the Arabian Gulf, regulation is not there yet but they are taking baby steps. In the UAE, one of the mandates for AI is to stimulate their ecosystem and which requires regulation. RTA [Road and Transport Authority] of the UAE is talking about flying taxis and it requires regulation before implementation,” he said.

In the UAE, he said that digital transformation has started but at different levels.

“The sectors which have the highest digital maturity globally are telecom, banking and automotive while in the UAE, it is telecom, banking, and oil and gas,” he said.

Four technologies that define digitization

Right now, Srage said that there are multiple technologies but the four technologies that have emerged to define digital transformation are 5G, AI, data science and cloud computing.

Out of this, he said that AI is most prominent.

According to research firm International Data Corporation (IDC), the AI investment in the Mideast and Africa is expected to be $263m this year compared to $200m last year. This investment is expected to grow between 25 per cent and 30 per cent annually.

The AI investment in the UAE is expected to be $56.03m this year compared to $37.54m last year, registering a growth of more than 49 per cent.

Srage said that 5G is going to be the most “disruptive technology” this year but machine learning has gone into the second phase of disruption.

“The first phase is the hype and the second phase is where you have products but not relevant and cannot be applied. The third phase is when you get relevant products.

“5G is more mature but you are not going to see it at the industrial level soon. It will benefit consumers because of the speed. When the integration of AI with 5G happens in the next two years, you will see safe self-driving cars and it will expand into other sectors with relevant and powerful applications,” he said.

5G going to be the catalyst for IoT

When asked about the internet of things (IoT), he said that IoT has been there from 2008.

“It never picked up steam because the network did not provide adequate security and latency. 5G is going to be the catalyst for IoT. The IoT was seen as a standalone technology but now it is an application through hardware or software,” he said.

According to IDC, digital transformation in the Middle East will grow 19.55% to reach $24.84m this year compared to $20.79m last year.

 “You have solutions for digital transformation come into play and the industries want to adopt it but either they are not fast enough or does not know how to even do it. It can be divided into two sectors, those who want to do digital transformation and don’t know how and those who decide to just move around.”

Moreover, he said the ones that are adopting are also very few and the third category is who does not know how to get started.

Lack of industrial grade AI solutions

In the last two years, Srage said that there have been really good solutions available in the market but many industries haven’t heard about these solutions and don’t know where and how to apply.

However, he said that 60 per cent of the claimed AI solutions is not “real AI “and they are just automation or rule-based solutions.

“Today, there is very few commercial or industrial grade AI solutions available. For AI to work, you need a quality set of data for machines to learn and for that, you need one or two years of data for AI to start generating accurate forecasting. Accuracy is very important when it comes to AI,” he said.

The big question, he said is how to bridge the availability of solutions into the marketplace.

In the Middle East, the UAE has set a very high digital agenda and outpaced the industry in digitization.

“You have AI solutions in healthcare but you don’t see it applied in the hospitals. There are VR and AR solutions for retail but you don’t see it in the malls,” he said.

According to Srage, the top three industries - telecoms, banks and automotive - are adopting these technologies at a faster pace but within these sectors, some are adopting and some not.

“Automotive makers such as Audi, BMW and Mercedes Benz are very active in connecting cars with 5G and AI, and processing the data through cloud computing solutions but other carmakers are not adapting fast enough,” he said.

Different levels of adoption

The UAE government is boosting momentum for AI integration, Srage said, but “when you look at the industries, you see different levels of adoption”.

In the telecom sector, key players in the Gulf countries such as Etisalat, du and STC are at the forefront of adoption, he said and added that banking sector has started to adopt but in certain key areas.

Moreover, he said that in the UAE, there is a strong government framework to go paperless by 2021, UAE’s Centennial 2071 project and Saudi Arabia’s 2030 vision, but the industries are not keeping pace.

“The UAE government has smart city, education and digitization of services in mind when it comes to digital transformation while for Saudi Arabia, it is the education sector.

“When it comes down to industries, they are the first to digitize as they get a lot of consumer data. It is different for different industries, some see the internet as a digital option and some telecom operators see data as an option. Each industry is digitizing in its own manner,” he said.

Who is responsible for digital transformation?

Digital transformation rests on C-level executives and not on chief information officers.

It starts with the CEO, Srage said, and the CEO has to connect to different departments to understand.

“You cannot have someone from the company to do it because they don’t have the background. So you need to have a consultant 4.0 to come in and work with all the sections to create a strategy, digital audit, plan, integration and then education,” he said.