Ahead of the Shaping Scotland�s Future debate, Sunday Herald Technology Editor Iain S Bruce examines the challenges facing our economy

THERE'S a wind blowing from the east, and with it comes the greatest threat that Scotland has ever faced. It is a global challenge of such power and fury that it threatens one out of every five Scottish jobs. Yet the country has neither the tools nor the expertise to fight it off.

There can be little doubting the threat posed by the shifting face of global business. Asia already out-produces Europe, with China responsible for half the world's clothing and electronics output and India running 75% of the planet's outsourced services. This change in third world fortunes comes as technology reduces the vast distances between international marketplaces to a mere mouse click.

If Scotland is to survive and prosper in the face of the rising challenge it must be equipped with the infrastructure and the knowledge required to compete. Yet while European Commission findings indicate that 20% of all European jobs are at risk from predatory international competitors, 37% of European citizens still have no computer skills at all. Given that China's output of ICT engineering graduates this year has been greater than the combined total expected to graduate in France and Germany for the next decade, nobody's betting that the situation is likely to improve.

Scotland must also digest the news that its connection to the global network is fast falling behind. With the 42% of Scots using broadband services at home experiencing an average connection speed of four megabits per second, in Japan people are starting to log on to 90mbps connections, leading a digital race in which the UK is currently running a laggardly 12th behind Korea, Norway and New Zealand.

As Gordon Thomson, chief of operations for Cisco Scotland and Ireland says: "You cannot underestimate the scale of the challenge that Scotland will have to meet in the 21st century. The pace of change and the competitive pressures that businesses and individuals will have to deal with is quite staggering, and while we have so far not done too badly in terms of getting on board the digital bandwagon, complacency is not an option.

"Studies show that 50% of productivity improvements happen because of intelligent use of technology, and as matters stand Scotland is simply not keeping up with Eastern competitors. We need to have in place a national technology strategy designed to ensure that our people are not limited in their ability to compete, and unless government acts to put such a framework in place the situation is only likely to worsen. We need to design and implement a blueprint for our approach to the 21st century as a matter of urgency, because continuing the current ad-hoc approach to development could prove to be economically disastrous."

The gap between where Scotland's IT capacity stands and where it will need to be is starkly outlined by Cisco's latest research, which indicates that between now and 2011, the volume of traffic shooting through the world's networks will quadruple. While business use of the internet is predicted to keep growing, the social-networking boom and an explosion in consumer demand for internet TV will fuel an increase in demand for which the existing infrastructure hasn't the capacity to cope. And while it is true that BT's 21CN project to make its entire network digital by 2011 will triple maximum broadband speeds to 24mbps, there are many who believe that that will soon look clunky as new major demands on internet capacity arrive.

Bob Downes, director of BT Openreach Scotland, says: "The increasing demands for capacity are unlikely to go away and if Scotland really wants to grab all the benefits offered by communications technology it is going to have to address the issue urgently. Earlier this year the Scottish government opted not to push for high-speed broadband and many within the industry criticised them for it. They will need to rethink that stance because waiting to see what happens and falling behind the curve are often the same thing."

The technology market is a sector bursting with vested interests, but from all reaches of the industry a consensus is emerging that the development of the nation's 21st-century infrastructure can no longer be left to the chance actions of private enterprise. Unless planning to meet the demands of the digital age begins now, we're likely to get it wrong.

This is a concept not lost on other small countries. New Zealand has been working on its own national IT strategy for more than five years and claims to already be reaping the benefits. Since the mid-1980s, Singapore's government has enacted a succession of clearly stated strategies and targets that have moved the tiny state to the forefront of the internet race. With the latest of these blueprints - the iN2015 Masterplan - well under way, its population of 4.6 million is rich in IT skills, well accustomed to the multifaceted benefits of e-government (using the internet to connect the government and public services to the population) and motivated to make its mark on the global marketplace.

Our governments may differ in terms of authoritarian approach, but the similarities of scale and the challenges both nations face cannot be ignored. It is true that Scotland has to live with the UK determining communications policy through the regulator Ofcom, but Holyrood still has an important role to play in lobbying for and encouraging demand for the most advanced infrastructure possible.

A key plank of the iN2015 Masterplan is the establishment of an ultra-high-speed, pervasive, intelligent and trusted telecoms infrastructure. Singapore's network will be in place by 2012, delivering speeds up to one gigabyte per second. In Scotland, the previous Labour administration's decision not to step up investment in high-speed broadband - despite Scotland being one of the first UK regions to undertake research into the impacts of such infrastructure - has been criticised.

Thomson says: "As matters stand we have no chance of enjoying one gigabyte broadband speeds by 2012 or even 2015. Some might ask whether we need such capacity. The real point is that while Singapore is giving its people unlimited potential to exploit whatever benefits or applications appear in the near future, Scotland is limiting itself. Given the pace at which technology has developed over the past 10 years, this makes no logical sense."

The second major aim of Singapore's digital blueprint is the development of an ICT-savvy workforce. Scotland's efforts in this area have been boosted by initiatives such as the Industry Alliance for Jobs - a joint effort between Microsoft, Cisco and learndirect scotland to deliver IT training to 100,000 Scots by 2010 - but many have questioned the wisdom of leaving such matters to private enterprise rather than public policy. Encouragingly, however, the current administration is well into the consultative stage of its own attempt to harmonise the aims of the national education framework with the needs of the economy, though firm results have yet to emerge.

Thirdly, by the time it is completed in 2015, the Singaporean gambit is expected to create 80,000 new jobs and triple the value of ICT exports. Critics would claim that there are no comparative targets for Scotland, but to date results have been encouraging. The value of Scottish exports from the telecommunications industry doubled to £90 million between 2002 and 2005 and that growth is expected to continue as Scottish Enterprise keeps its focus on developing the high-tech sector. An estimated 10,000 to 12,000 entrants are expected to join the IT workforce in Scotland every year for the next decade.

With an eye on the long-term, the iN2015 document also aims to expand broadband take-up to 90% of the population and achieve 100% computer ownership for all homes with school-going children. With broadband available to 90% of Scots and take-up at 42% this seems achievable, but while many commentators have applauded Holyrood's website and e-petitioning facility as examples of good e-government, alarm has been raised over a lack of coherence when it comes to expanding the use of IT in children's education.

Arguably most critical, however, is the goal Singapore has identified as its strategy's primary target. By 2015 it intends to be the world leader in using technology to benefit the economy and society, spearheading the transformation of key economic sectors, government and society through more sophisticated and innovative use of technology. Its recommendations include the use of personalised services to enhance healthcare, education, tourism and e-government, seamless delivery of financial services and supply chain management. This is pure marketing, and it is something Scotland needs to learn how to do just as well. Scotland is great at inventing things and producing talented, able people, but falls down when it comes to commercialising these assets on the global stage.

"There have been some positive efforts, but Scotland has a lot to learn about talking up its strengths and marketing itself," says Steve Leach, chief executive of international digital marketing experts Bigmouthmedia.

"We need to learn lessons from other small countries, identify our key strengths and stop being shy about promoting them worldwide. With a platform to launch themselves from, innovators and entrepreneurs would face far less of an uphill struggle."

Neil MacCallum, head of policy and strategy at the Scottish Chambers of Commerce, said: "Globalisation is not going to go away. We need to improve competitiveness and efficiency on a national scale, and that will not be achievable unless the very best systems are in place and ready to go."

If we were to write it now Scotland's digital report card would read: "B+ for effort, but must try harder." Most would agree that it's a fair start, but the full ramifications of the technological age are only just beginning to become apparent, and the challenges will only get tougher. If we're going to keep heading in the right direction, say the experts, we should plan the route now.

"The digital age is generating increased levels of information that can be overwhelming if not properly managed and it is everyone's responsibility to take this on board - both businesses and those in the public sector," says Raymond O'Hare, regional director of Microsoft Scotland. "Government needs to look at technology as the fifth infrastructure after road, rail, sea and air."

Tickets are still available for our debate, Shaping Scotland's Digital Future, at Glasgow Royal Concert Hall, 9am-11.30am on Wednesday.

Call 0141 302 7407 or visit sundayherald.com/digitalfuture to register online.

How Scotland compares

SCOTLAND Households with a PC: 69.1% Average broadband speed: 3.8Mbps Broadband penetration: 42% SINGAPORE Households with a PC: 78% Average broadband speed: n/a Broadband penetration: 67.1% FINLAND Households with a PC: 69.4% Average broadband speed: 9.2Mbps Broadband penetration: 50.1% NORWAY Households with a PC: 76.7% Average broadband speed: 6.2Mbps Broadband penetration: 55% NEW ZEALAND Households with a PC: 74.6% Average broadband speed: n/a (*) Broadband penetration: 31.7% EU Households with a PC: 57.2% Average broadband speed: n/a Broadband penetration: 31.4% US Households with a PC: 71.3% Average broadband speed: 4.3Mbps Broadband penetration: 48.9%

The Cutting Edge

HUNDREDS of miles from the nearest mainland settlement, buffeted by howling 100mph winds and cut off from the rest of Scotland by a pounding, merciless Atlantic - to the outsider the Shetland Isles must seem like the edge of the world.

The islanders might be outnumbered 10 to one by their archipelago's famous colony of puffins but they are also the most internet-savvy people in the UK, with more than 54% of Shetland homes and businesses now connected to broadband. Since May 2004, when BT Scotland teamed up with Highlands and Islands Enterprise and Thus to extend Scotland's first offshore fixed-line broadband service to Shetland, Orkney and the Western Isles, the population has embraced the digital revolution.

"The internet has transformed life here. We can work on the mainland without leaving home, buy anything we need and do business wherever we want. That might not sound like much to some, but when I was growing up none of it would have been possible," says Davy Thomson, the native Shetlander in charge of the BT Openreach team responsible for keeping the Islands' users online.

Wiring the Shetlands' 12,000 homes to a choice of some 400 communications providers has been a massive challenge. To connect the local network to the rest of Scotland via microwave link, the 19-strong Openreach team routinely battles extreme weather conditions, hopping across the 15 islands on a network of flights and ferries and occasionally chartering speedboats in order to reach the archipelago's least populous parts.

It might seem extreme, but many commentators argue that the Shetland scenario serves as a technological example to the rest of Scotland, and this has not been lost on Orkney, Moray and the Highlands - all of which boast broadband penetration rates significantly above the national average.

Using a modern network that only exists thanks to a unique partnership between BT Scotland and local enterprise boards, the Highlands and Islands has now grasped the digital challenge.

While its medical community provides online diagnosis and support across the stormiest of seas and locals successfully market four annual music festivals, Shetland's businesses are exporting everything from foodstuffs to fiddles.