WHITE PAPER e-Skills The Key to Employment and Inclusion in Europe

Sponsored by: Microsoft

www.idc.com

Marianne Kolding January 2007

Vladimr Kroa

EXECUTIVE SUMMARY
This white paper is based on a survey of over 600 employers in 10 European countries who were asked to rate the information and communication technology (ICT) skills of their staff and the future ICT competence needs of their sector. The results of the study show clear relevance to the current debate around Europe's competitiveness in the global market place and the EU's efforts to create growth and boost social inclusion through innovation and training under the renewed Lisbon Agenda. Specifically, the survey showed that: Investments made in the last decade mean that the European workforce has a good level of basic ICT skills. Inclusion measures have built the baseline for competitiveness at the bottom of the pyramid, although the education system is seen as being better at preparing applicants for white-collar work with ICT skills rather than blue-collar workers. It is clear that ICT skills are becoming an important entry ticket to the job market and crucial for people that want to move into better jobs. This is relevant across both blue- and white-collar positions. Future demand for skills goes beyond basic skills to advanced and e-business skills, and will continue to grow as a majority of staff is expected to possess them. This situation will become even more significant as three-quarters of respondents believe ICT skill levels of the workforce are crucial for the organisations' future in terms of competitiveness, innovation and growth. However, organisations are finding themselves in a catch-22 situation. Although ICT skill levels impact businesses' future competitiveness, innovation and growth, lack of time and money are barriers to ensure that employees will have these critical skills. Consequently, organisations rely on the individual employees to pick up skills as they go along, whereas few make use of more flexible delivery solutions such as e-learning that could remedy the situation. The need for and importance of ICT skills is deeply felt in traditional industries such as agriculture and transportation as a way to modernise processes and become more competitive.

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METHODOLOGY
This white paper presents the results of a special IDC study commissioned by Microsoft on the demand for information and communication technology (ICT) user skills in European organisations. The main objective of the study was to establish the extent to which organisations believe that employees that are NOT considered IT professionals or part of any IT department need to have ICT or e-business skills. The study has relied on the definitions put forward by the European e-Skills Forum (2004) established by the European Commission: ICT user skills: The capabilities required for effective application of ICT systems and devices by the individual. ICT users apply systems as tools in support of their own work, which is, in most cases, not ICT. User skills cover the use of common generic software tools and the use of specialised tools supporting business functions within industries other than the ICT industry. e-Business skills: The capabilities needed to exploit opportunities provided by ICT, notably the Internet, to ensure more efficient and effective performance of different types of organisations, explore possibilities for new ways of conducting business and organisational processes and establish new businesses. For the purpose of obtaining more granular information on the types of skills that are in demand now and will be in demand in the future, IDC defined the following subsections of ICT user skills: Skills to use technology-based devices, such as handheld devices for stock taking, cash registers or other devices used in your organisation Basic ICT skills (email, word processor and spread sheets) Advanced ICT skills (use of common generic software tools and specialised tools supporting business functions, such as accounting, sales and marketing, or production applications) This study draws on results of a large-scale user survey conducted in November 2006 in 10 European countries: Czech Republic, Estonia, France, Germany, Italy, Poland, Portugal, Romania, Sweden and the UK More than 600 telephone interviews were conducted with HR managers, line-ofbusiness managers, CEOs, CFOs and others involved in hiring new employees and determining the skills that they need.

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SITUATION OVERVIEW
Investments Paid Off: European Workforce Has Good Basic ICT Skills
Investments made in the last decade have led to a European workforce with a good level of basic ICT skills. Inclusion measures have built the baseline for competitiveness at the bottom of the pyramid. Basic ICT skills, such as use of email and basic word processing and spreadsheet applications, have over the last few years become part of a standard set of skills for the majority of participants in the job market. Indeed, results from our survey suggest that more than two-thirds (70%) of respondents believe the great majority (>60%) of current employees have the basic ICT skills necessary for email communication and use of basic office applications such as word processing and spreadsheets. Several reasons have contributed to the relatively high level of basic ICT skills attained by current employees and candidates. Firstly, the proliferation of computer use in private businesses and public institutions, particularly in certain vertical industries such as finance and in functional areas such as back-office administration, has reached almost full penetration. Consequently, use of ICT has become a main component of our daily business lives, a necessary skill needed in the job market. Secondly, the penetration of PCs in the home due to rapidly falling prices has made the device a commodity and people that do not possess even the most basic skills increasingly a rarity. Added to this has been the strong penetration of mobile phones and the expanded functionalities of these beyond simply making and receiving voice calls, such as text messaging, browsing the Internet and taking photos. These devices are being absorbed into our everyday lives and with it have come the skills to operate them. Last, and not least, public policies pursued at both pan-European and national levels, such as the Information Society push with the eEurope Action Plan, the Lisbon Agenda targets and EU efforts to promote a long-term e-skills agenda have elevated ICT onto a strategic platform through the recognition of its importance in the quest for improvement of Europe's competitiveness. All of the above elements have helped to create a firm basic ICT skill level in the European workforce, at least in the race for entry-level jobs. However, our survey shows that European workers still have to bridge a gap between the expectations of and requirements for ICT skills of their respective employers and their own actual capabilities. For instance, a majority of the currently employed workforce does not have adequate e-business skills that would empower them to leverage opportunities provided by the Internet. Relatively large differences exist among European countries here, with less than a third of employers believing that their staff have adequate skills in the Czech Republic, France and Portugal, compared to almost half in Sweden, as shown in Figure 1.

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FIGURE 1
Skill Levels of Current Employees by Country

Czech Republic

Estonia

France

Germany

Italy

Poland

Portugal

Romania

Sweden

UK 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Basic ICT eBusiness Advanced ICT

Source: IDC, 2006

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Is Education System Equipping People With Necessary ICT Skills?

The study shows that European employers do not believe that the education system performs particularly well in equipping future participants in the job market with the ICT skills that will be required. However, it is clear that the gaps are perceived to be larger in the part of the workforce that performs manual work (and generally have lower education levels) than for people in white-collar occupations (with generally higher education levels), as shown in Figure 2. This result, whether it is a perception held by European employers or reality, sends a signal to government bodies in Europe that more emphasis may be needed to ensure that the workforce has the ICT skills required in the future. This focus on e-inclusion, particularly among blue-collar workers, will increase as ICT skills become ever more important for traditional sectors, as shown below. Ultimately, a large gap in ICT usage skills could have a negative impact on Europe's competitiveness and ability to innovate.

FIGURE 2
Ability of Education System to Provide Employees With Necessary ICT Skills
Q: In your opinion, on a scale from 1 to 5 (where 1 is not at all and 5 is definitely yes) do you believe that the current education system prepares future applicants to have the ICT user skills needed for the following professions?

Information workers Business professionals IT professionals and developers Manual workers (blue-collar) employee Service sector employees 1 2 2.74

3.18 3.13 3.27

2.93 3 (Mean) 4 5

Note: N = 611
Source: IDC, 2006

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FUTURE OUTLOOK
ICT User Skills are Entry Ticket to Job Market
That ICT skills are the entry ticket to the job market was a significant message from the survey. There is a universal belief that ICT skills are a prerequisite to succeeding at work, regardless of country, type of industry or function held in the organisation. Overall, 40% of respondents interviewed said that a person without basic ICT skills would likely not be considered for a job (Figures 3 and 4). Depending on the position, this can increase to as much as 66% of respondents. Respondents from the "old" EU countries in Western Europe as well as from the more recent accession countries in Central and Eastern Europe do not differ here, nor are there significant differences among representatives of various industries such as finance, manufacturing or public sector in respect to the importance of having ICT skills in the future. In the current work environment, ICT skills are seen as key to be able to perform the job and those without ICT skills, particularly basic ICT skills, are severely hampered when competing in the job market. There is a broadly held view, in fact, by the majority of those involved in the hiring process that a lack of ICT user skills would either disqualify or impair (at various degrees) a candidate for a position. Not even a candidate's practical experience would significantly improve his/her chances of getting the job without ICT skills. However, school leavers/graduates are even more vulnerable in hiring situations if they do not have ICT skills than are experienced employees, particularly since the largest gap between employers' expectations of ICT skill levels and actual ICT skill levels is among this group.

FIGURE 3
Impact of ICT Skills on Candidates' Employment (School Leavers/Graduates)
Q: When hiring new employees, could you tell me to what extent a potential employee's lack of ICT user skills would impact his/her candidacy for a position with your company? Is this different whether you are hiring school leavers/graduates for entrylevel positions or whether you are hiring functional experienced employees?

Depends on the position (25.9%)

Candidacy will not be impacted at all (12.0%)

Candidacy will be minimally impacted (22.1%) Candidacy will be disqualified (10.0%)

Candidacy will probably be impaired (30.1%)

Note: N = 611
Source: IDC, 2006

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FIGURE 4
Impact of ICT Skills on Candidates' Employment (Functionally Experienced)
Q: When hiring new employees, could you tell me to what extent a potential employee's lack of ICT user skills would impact his/her candidacy for a position with your company? Is this different whether you are hiring school leavers/graduates for entrylevel positions or whether you are hiring functional experienced employees?

Depends on the position (25.2%)

Candidacy will not be impacted at all (17.8%)

Candidacy will be disqualified (9.8%)

Candidacy will be minimally impacted (21.6%)

Candidacy will probably be impaired (25.5%)

Note: N = 611
Source: IDC, 2006

Demand Will Continue to Grow for ICT User Skills

Future demand for ICT skills goes beyond just basic skills to advanced and ebusiness skills and will continue to grow as a majority of staff is expected to possess ICT skills. Even though the importance of ICT user skills is deemed quite high now, it will further increase. Results of the study suggest that in the future having just basic ICT skills may no longer be enough for a large part of the workforce. Case in point is a finding that 39% of respondents indicated a need for people with specialised skills that are pertinent to their industry and particularly in industries such as wholesale, utilities and telecommunications, as shown in Figure 5. The need for specialists was most acute in countries such as the UK, Germany and France, but also in Portugal and Romania.

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FIGURE 5
Future Need for ICT Skills
Q: Could you indicate if you currently need more people with these skills?

Use of technologybased devices Use of applications specialised for our industry Use of our backoffice packages

66%

34%

61%

39%

68%

32%

Use of the Internet

81%

19%

Use of email

82%

18%

Use of standard office applications 0% 20% We have enough

79%

21%

40%

60%

80%

100%

We need more people

Note: N = 611
Source: IDC, 2006

At the same time, a third of employers need more people that can use technologybased devices, often applied to update and modernise manual processes, for example, stock taking, meter reading etc. The demand for these skills is particularly strong in industries such as wholesale, retail and utilities. Almost a third of employers are also looking for more people that can use back-office applications. It is clear that the impact that ICT has had on how European organisations are running business processes continues to increase. As indicated earlier, having basic ICT skills is no longer enough for many of Europe's workers. The Internet created a paradigm shift that changed the way we conduct business and this is reflected in the requirements for current and future employees.

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Organisations Tie Future Success to Employees' ICT User Skills

European employers are making a very clear connection between the success of their organisations in the future and the level of ICT user skills of employees. Threequarters of organisations believe that ICT user skills among their employees will be crucial for their future in terms of competitiveness, innovation and growth (Figure 6). Added to this, in relation to our comments above, a third of respondents believe that ICT skill levels will be an important factor in how the organisation is run in terms of how business processes can change as a result of ICT use.

FIGURE 6
Impact of ICT Skill Levels on the Organisation's Development
Q: In the coming years do you believe that your employees' levels of ICT or e-business skills will impact your organisation's growth plans or other strategic decisions made at the executive level? (Multiple answers)

Will play a large, significant role in the future of our company Will be a factor that will influence our decisions on business process changes Will have little or no impact on the decision-making process at all Will impact our plans for innovation Will essentially decide the competitiveness of our company Will influence whether we outsource certain functions of our company or not 0% 5% 10% 15%

33%

33%

27%

24%

19%

18% 20% 25% 30% 35%

Note: N = 611
Source: IDC, 2006

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But Time and Money May Get in Way of Success

Having said this, it is clear that organisations may well believe that their future is tightly linked with the ICT skill levels of their employees however, they are not making the investments in the skills that should be a necessary consequence of this view. In fact, 60% of respondents claim that lack of time for training is getting in the way of ensuring that employees have the required ICT skills. While having high levels of ICT skills may help the organisation to innovate, change business processes and promote innovation that could potentially create more time for training through efficiencies, organisations seem to be caught in a catch-22 situation. Almost 60% of respondents say they rely on on-the-job training for development of ICT skills, which can often be translated to mean "individual employees will pick up the skills they need when they need them," rather than formalised training programs. Indeed, only 2% of respondents say they take advantage of more flexible training delivery methods such as e-learning to help address the issue. This is a critical situation and one that indicates that European organisations may be held back in the future by a lack of ICT skills outside the basic skills already available. In IDC's opinion, a collaboration between European employers, government bodies, the education system and the ICT industry itself may be needed to overcome this potential obstacle to innovation and competitiveness in Europe.

ICT User Skills Will Play Part in Advancing Traditional Industries

The need for and importance of ICT skills is deeply felt in traditional industries such as agriculture and transportation as a way to modernise their processes and become more competitive (see Figure 7). This is in direct recognition of the empirical evidence that ICT contributes to increased productivity and ultimately to economic growth. This perceived importance of ICT has been described and evidenced, particularly in ICT-intensive industries such as telecommunication, ICT-producing sectors and business services, as a factor directly contributing to productivity gains and GDP growth. Deployment of ICT, however, is only one piece of the puzzle and would not have any real impact without a labour force that is skilled to use the technologies and take advantage of the possibilities represented. Over the years, less intensive industries in terms of IT use (such as agriculture, construction, transportation, retail and wholesale) have been increasing capital investments in ICT technologies, partially as a mean to compensate for loss of labour force, which has been particularly dramatic in the EU accession countries. This increase in technological investments, however, needs to be matched by ICT knowledge and skills of workers employed in these industries. The challenge faced by these industries is twofold. To start with, traditional industries have historically found it difficult to attract and recruit technologically minded candidates. Furthermore, the complexity of ICT in these industries is strongly increasing, leading to requirements for a broad variety of ICT skills that is similar to that in the ICT-mature industries such as banking. For example, today's modern farmer needs not only basic ICT skills but also has to understand back-office applications such as accounting software and be familiar with GPS and other technology-based devices, while being able to use the Internet is almost taken for granted.

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FIGURE 7
Importance of ICT Skills for Traditional Industries
Q: Within your organisation, do you expect ICT skills to become more important, less important or their relevance will not change over the next 12 to 36 months? (Respondents answering "more important")

Agriculture, construction or mining

62% 67% 65% 69% 61% 62% 35% 29% 65% 64% 58% 69% 57% 58% 0% 10% 20% 30% 40% 50% 60% 70% 80%

Wholesale

Government, education, healthcare

Utilities

Retail

Transport

Average

12 months 24 months
Note: N = 611
Source: IDC, 2006

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CONCLUSION
This white paper illustrates the following: It is already clear that ICT skills are an important entry ticket to the job market and crucial for people that want to move into better positions. This applies to both blue- and white-collar positions. This situation will only become more pronounced, as ICT skill levels increase in value in the future, particularly ebusiness and industry-specific ICT skills. The survey clearly shows that organisations across the board believe ICT skills are critical elements for their future development. Three out of four respondents believe that their employees' ICT user skill levels will influence the organisation's competitiveness, its ability to innovate and its growth. However, time and money are perceived to be in the way of making these critical investments into employees' ICT skills. This is a critical situation and one that indicates that European organisations may be held back by a lack of ICT skills outside the basic skills already available. According to the survey, European organisations believe that the education system is not providing school leavers with the required ICT skills. Whether this is a perception held by European employers or reality, sends a signal to government bodies in Europe that more emphasis may be needed to ensure that the workforce has the ICT skills required in the future. Traditional industries such as agriculture, construction, transportation, wholesale and retail are increasingly investing in ICT and are increasingly looking for employees with ICT skills across the board. These industries also face the challenge of attracting technologically minded candidates with a broad spectrum of ICT skills. Overall, the survey reveals that there are no major differences among EU countries, though some regional and especially country-specific differences do exist. No clear divide exists between east and west or between the new accession EU members and the traditional Western European countries as examples show that leaders and laggards come from both sides of the line: The proportion of employees using computers and technology-based devices was highest in Estonia, Sweden and Germany and respondents in these countries were also firm believers in the importance of ICT skills. On the opposite side of the spectrum were France and the Czech Republic, where lower proportions of employees used computers and respondents were less assertive about the importance of ICT skills. The European workforce shows a good level of basic ICT skills across all countries in general, with Poland topping the list and the UK and France being at the tail end of this ranking. Larger differences exist in e-business skill levels, with Sweden and Italy having the most skilled labour force, with the Czech Republic and France trailing.

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In summary, the study clearly shows a labour market where ICT user skills will increasingly be demanded, almost without regard to the job function. So far, the European workforce has generally been able to live up to employers' expectations. However, the increasing requirements for more sophisticated skills such as ebusiness skills and the use of industry-specific applications (including technologybased devices) may not be met so easily. Organisations clearly do not perceive that the education systems in the different countries are supplying all the necessary skills and they also claim not to have the time or money to provide their existing employees with the necessary training. This signals a serious gap in the future and one that is even more severe as European organisations are clearly banking their success on these skills being available in the workforce. In IDC's opinion, a collaboration based on a long-term shared agenda between European employers, government bodies, the education system and the ICT industry itself may be needed to overcome this potential obstacle to innovation and competitiveness in Europe.
Andr Richier, Principal Administrator, European Commission, Enterprise and Industry Directorate General, Innovation Policy Directorate, Technology for Innovation, ICT industries and e-Business, was consulted on the content of this white paper.

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