Australia's digital competitiveness has declined for the third year in a row, according to the Institute for Management Development's World Digital Competitiveness Ranking which evaluates 64 countries. Australia dropped five places going from No. 15 in 2020 to No. 20 in 2021, with the country's biggest weaknesses being business agility and digital skills and training. IMD is a global educational institution.

The IMD ranking assesses the capacity of a country to adopt and explore digital technologies leading to transformation in business models, government practices, and society in general. The ranking is composed from three factors: knowledge, technology, and future readiness.

Australian organisations have invested in digital adoption as can be seen by the increase in the adoption of infrastructure as a service (IaaS), expected growth in the servers and storage market, and growth in the networking infrastructure market's revenue of 16.9% increase during the first quarter of 2021, generating$314 million.

But despite federal and state governments' investments and the acceleration of digital transformation in response to the COVID-19 pandemic, Australia continues to fall behind, including across different areas of IT. Experts have said that machine-learning adoption in Australia hasn't been as fast as expected and the skills gap, which was exacerbated by border closures, has raised salaries, resulting in an increase in IT services spending.

The good and the bad of Australia's digital competitiveness

One of the ranking factors is knowledge, which includes talent, training and education, and scientific concentration. Talent in Australia ranked among the top 10, scientific concentration was No. 18, and last was training and education, which ranked 37.

Under training and education, the worst performers were employee training and graduates in science, both ranking No. 58.

The Committee for Economic Development of Australia (CEDA) is the Australian partner for the IMD rankings. CEDA CEO Melinda Cilento said in a statement that the results highlight the importance of reopening the borders. "Continued skill shortages in the technology space will restrict the ability of businesses to embed digital improvements in everyday business processes and stunt future innovation," she said.

But there is an argument that if getting foreign talent is the solution, organisations could employ workers from other countries to work remotely, bypassing the border closures. Organisations have already started looking for IT skilled talent across the states and territories, with a report from recruitment firm Robert Half revealing the IT roles with the greatest remote-work growth being help desk support (up 471%), computer systems engineer (up 328%), and database engineer (up 317%).

Business agility, which falls under the IMD's future-readiness factor, is one of CEDA's biggest concerns, Cilento said, as it ranked No. 55, with executives ranking themselves particularly poorly for agility of companies and responding to opportunities and threats. Future readiness underpins a country's ability to sustain its digital competitiveness over time. In the latest IMD rankings, Australia registered the worst result in the history of the index.

Some of Australia's key strengths, the report said, includes its regulatory framework to support starting a business, its IT integration in terms of addressing software piracy, and e-government. They fall under the technology factor, which was the best of Australia's three factors. Nonetheless, IMD's ranking show that Australia's technological framework has a lot to improve. This includes communications technology (No. 57), internet bandwidth speed (No. 42), and internet users (No. 31).

CEDA has insisted that the federal government appoint a chief technologist who would work to build community trust and understanding in emerging technologies, including through transparent technology assessments, and would provide leadership across emerging technologies, knowledge, and future preparedness.

Coronavirus pandemic accelerated digital transformation-on the front end

But hasn't COVID-19 accelerated digital transformation? What about all the innovation hubs popping up? And all the money from budgets aiming at emerging technologies, artificial intelligence, and all the other hot topics in IT?

Gartner analyst Andy Rowsell-Jones told Computerworld Australia that the country has managed to provide digital services to deal with customers but "digitalisation of internal processes is where it's continuing to slip behind". The bulk of that pandemic-fuelled digital transformation took place on the front end, literally for customer-facing services. So, citizens and residents can now deal with government using some sort of digital means, doctor consultations can now take place over the phone, and even some court appearances can take place via Zoom.

But the back of house hasn't fared so well in terms of digitalisation. Still, based on a global report from Gartner, he said that internal processes are expected to improve "enormously", so there is the expectation that government is to start addressing some of those internal productivity issues.

Based on Gartner metrics, Australia is not as far behind other countries as the IMD report suggests, Rowsell-Jones said. "You have senior leadership that at least understand the importance of digital. You have a set of business processes that have been, to a degree, tested by being digital. If you have a hybrid workforce, you've been forced to fix processes that used to rely on physical signatures. You've been forced to fix processes that used to rely on face-to-face meetings. So a lot of the groundwork for the process is part has been done. And the third thing is that we've now got a workforce that's pretty well educated," he said.

"If we can get our act together, I think we have we have a good future. But the act has to be going beyond Zoom calls to customers. It has to be thinking about how you take the available technologies, the available ideas, the available business models and processes and apply them internally to drive efficiency," Rowsell-Jones said.