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Can a digital single market give Europe the lead?

The objective of the European digital single market looks hard to achieve. A focus on digital platforms could provide a way

“Your objective is to make Europe a world leader in information and communication technology, with all the tools to succeed in the global digital economy and society.” That is what EU Commission president Jean-Claude Juncker wrote to Andrus Ansip when he became vice-president for the digital single market last year.

It will not be easy. Arguably, Europe is already a world leader in digital concepts. It is, after all, where the World Wide Web was invented. But it is not a leader in commercial exploitation, and that is what its digital single market is intended to change. 

According to taxation experts Taxamo, US-based online services account for 54% of the European digital market. The trend even seems to be towards the US. For example, US Apple has just announced a new digital music streaming service, which is expected to make inroads in a market segment currently led by European Spotify.

Apple and Spotify are both examples of platforms. The goal of a platform, according to IT business guru Marshall van Alstyne, is to consummate matches between producers and consumers of value. The platform helps users to find content and resources. The platform business model will inevitably beat the product-based business model because it harnesses new forces.

Platforms often go further than provider-consumer matchmaking. They enable users to combine resources from different providers to create new things. For example, there is an app that disc jockeys can use with Spotify to play and mix tracks to create sessions, and to share them as playlists on social media. Platforms are replacing products as the focus of business in the digital age.

Combine digital products

Businesses increasingly want to combine digital products and services. This applies not only, or even mainly, to music, but to data of all kinds, and to programs that use the data. A company might, for example, want to use cloud storage, combine data from social networks and news media, and process it with analysis and visualisation programs, in order to generate reports on market perceptions of its products, and forecasts for future sales.

This is now possible on some platforms and with some kinds of program and data. But although platforms are enabling this kind of digital composition, they are limiting its scope and usefulness. This is because a single platform is rarely enough to support all the components of a solution. 

Even the complete Apple platform, which of course supports much more than music, is unlikely to be able to do so. Users want to mix and match programs and data from different platforms, which is often not possible.

The EU strategy

On 6 May this year, the European Commission published its strategy for achieving the single digital market. It is something of a mixed bag, with 16 different initiatives in a wide range of areas.

One of the initiatives is to analyse the role of online platforms in the market. This analysis will cover issues such as the non-transparency of search results and of pricing policies, how they use the information they acquire, relationships between platforms and suppliers, and the promotion of their own services to the disadvantage of competitors. 

These are all important issues, but they are not by themselves enough to enable users to mix and match data and services across platforms. This will need some technical standards too.

Can Europe take a lead?

It will not be easy to make Europe a world leader in commercial exploitation of information and communication technology. Platforms are the new digital business focus, and analysing their role is the right starting point. 

However, the analysis must not just be an excuse for attacking US suppliers, as some commentators have suggested. It must consider the positive aspects of platforms, and how they can work together and deliver greater business value.

If Europe can take a lead in this, European companies will gain a commercial edge. Perhaps Mr Ansip’s mission will then at least be possible.

Chris Harding is a director at The Open Group

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