Tech for good: could Scotland become a leader in ethical digital technology?

There’s a digital divide in Scotland.

On one side is the private sector, with numerous good news stories, and on the other, the public sector, with some less positive developments.

On the public sector side, it was recently announced that the rollout of Reaching 100% broadband connectivity programme will not be completed by the 2021 deadline.

A number of delays to the bidding process means that a supplier contract will not even be signed until the end of 2019.

Meanwhile, there have been two critical reports on digital developments from Audit Scotland in as many weeks. The first was a progress report on the Scottish Government’s implementation of its 2017 digital strategy.

It noted that the government does know what has been achieved, either in terms of successes or gaps in progress, and that it lacks knowledge of how much money is being spent on digital, and what will be needed to deliver the ambitions outlined in the strategy.

There was another audit report last week, this time of the Scottish Public Pensions Agency’s (SPPA) plan to integrate its pension administration and payment operations.

It failed, leaving a £23m gap in its revenue and capital budget over the next five years, when the chosen supplier, Capita, was not able to provide a working system.

The auditor criticised the SPPA for not applying enough scrutiny to Capita’s bid, which it said was “abnormally low”, and for setting an “unrealistic timetable” for the project.

Auditor General for Scotland Caroline Gardner said: “The public sector is under pressure and we are seeing more instances of bodies embarking on IT projects without the necessary staff and assurance arrangements in place to manage them properly.

“In this instance, I found no evidence of a clear business case for a new integrated system, which was pursued at a time when the SPPA was going through significant change.

“The result was a project that failed to provide value for money and has considerably set back the SPPA’s planning.”

However, on the industry side, the outlook is altogether sunnier.

Recent reports found that Edinburgh is providing some of the highest paid jobs in the tech sector, with around 48,000 people employed and salaries nearly 15 per cent above average.

And the annual industry survey by tech membership body ScotlandIS found that 75 per cent of technology companies reported increased sales and 51 per cent increased profits in 2018, with even more, 83 per cent, expecting to increase sales over the next year.

Founded in 2000, ScotlandIS is around the same age as the parliament and chief executive Polly Purvis has been with the industry body since the beginning.

As she is about to stand down after six years at the helm, she looked at some of the key current and future developments.

Purvis predicts that big data is the next big area of opportunity, following on from the two key gamechangers of the recent past: the introduction of mobile phones that could handle data and cloud technology.

She explains: “More recently, certainly at the moment, I think there’s been a coming together of access to very large data sets which now are at a level which we didn’t used to have easily available in the late 1990s, early 2000s.

“And then if you combine that with the advantages of machine learning and with artificial intelligence, that’s clearly driving this new wave of data-driven innovation, data-driven everything and new products and services utilising data.

“And almost on a daily basis, we’re hearing of new breakthroughs of how you can bring those things together and create new products and services for everything from major multinationals down to the person on the street.

“I guess it’s a convergence,” she adds. “We’ve talked convergence. I think every five years there’s another talk about a new convergence.

“I think the convergence of low-cost sensors, big data sets, artificial intelligence and improvements to machine learning are definitely creating a new wave of technology breakthroughs.

“And I think we’re seeing that across all of the Scottish technology sector and increasingly, the adoption of digital technologies across all of the economy.

“So I think we’ll come to a period five years from now when we’ll go, that was actually quite a major change in the way everybody behaved and the way everybody used technology and the way technology has become more useful to all of us.”

This convergence, she explains, is about the coming together of a number of technological advances that make new developments viable.

For example, computer science departments have been teaching about artificial intelligence since the 70s and 80s, but up until about 2005-06 there wasn’t really the level of data needed to make it work meaningfully, Purvis says.

Add to that the development and improvement of machine learning and natural language processing over the intervening period and all the elements that go into making artificial intelligence effective are there.

“You get these individual technologies, which on their own you say, ‘Oh yeah, I could do X, Y and Z with that’, but a number of things will stop that actually happening, so if AI had access to big data, to enormous datasets, it has been a gamechanger.

“In the case of sensors, the miniaturisation of sensors and the reduction in the price point has been one of the things that has made those now more able to be ubiquitous.

“It is a convergence of those things coming together: process and technology, reductions in price point.

“And then an opportunity for people to play with the tech.

“Cloud computing is allowing people to experiment in a way that you couldn’t, because you had to invest in a major server and you wouldn’t do that unless you felt there was an income stream out the far end.

“Whereas now, you can get a well-known cloud provider’s services for 24, 48 hours, three months, actually, that’s relatively low cost, therefore, you can experiment.

“So I think all those things come together and then it provides an opportunity for people to go, ‘Ah, right, in those sectors one can do X, Y and Z’, and that, I think, underlies the innovation that’s happening at the moment.”

Purvis has been around long enough, she notes, to have worked through the dot.com boom and bust, with ScotlandIS being founded just when many tech companies were going under.

What is noticeable now is that although the economy is weak at present, the tech sector is still going strong. Has it become more resilient?

“There’s absolutely no doubt that in the dot.com bubble, investment prices just got overhyped, but you could argue that’s been happening in the tech sector for the last five years as well,” Purvis says.

“Some of the valuations of companies coming to listed markets, it’s just astonishing, bearing in mind they’re not bringing in profit.

“But you know, if you look at someone like Amazon, that’s been a long, slow burn for them and now they are a profitable business and they very much understood the need to build scale that in some cases, the investment model is changing.

“Having said that, I think the continued growth of the tech sector now is more robust and is based, on the whole, on more resilience and it’s partly because the whole economy is going digital.

“It’s not just new vanity projects, it is actually concentrated demand and also, an understanding of how some of these things work.

“There are some fabulous companies in the dot.com bubble who actually led the way in how you might deploy technology.

“They went bust because they didn’t necessarily have all the bits in place, but people have then built on the lessons learned from that and so I think there is a greater understanding of how you do some of these things.”

One part of the IT sector that has particularly been a focus over the past two years is fintech – financial technology – with the body, FinTech Scotland, set up 18 months ago to grow the sector, seeing four-fold growth in that period.

But is there a risk that this has been overhyped, particularly at a time when Brexit may make it more likely that financial institutions could relocate out of the UK and that the financial sector may shrink?

For Purvis it’s about “getting the balance right”.

“I think I can say there are great opportunities in fintech, but there are great opportunities in a lot of other areas as well and we need to make sure we’re putting the same level of emphasis on some of the other opportunities that are out there,” she says.

Stephen Ingledew, chief executive of FinTech Scotland, notes that, despite what the name suggests, fintech is not just about the financial services sector, but “impacts everybody’s lives” and that it also involves legal technology, technology for government and the public sector, as well as work with the third sector and charities such as Money Advice Scotland and Citizens Advice Scotland.

“Fintech is not an industry, it’s actually a movement and it’s pervasive across all sectors,” he says.

What makes Scotland good for fintech is that it’s “greater than the sum of the parts”, suggests Ingledew.

He cites its financial services heritage, innovative culture, technology at the core – particularly around data innovation, its strong academic base, supportive public sector and Scottish Government, and “just overall environment, really, of wanting to embrace a more progressive way, that technology is used for human good rather than just technology for technology’s sake”.

FinTech Scotland’s role is as a “strategic enabler, strategic connector” that brings together all the players into one ‘ecosystem’.

Ingledew likens the organisation to a football coach, not on the field playing, but spotting the opportunities and coaching from the side-lines.

“So, the analogy I use is, think of a team, you know, Team Scotland, all the players are on the pitch [and] we act as a coach on the side of the pitch trying to get those players to play better together as a team rather than just be strong as individuals.

“So that’s across universities, education, big companies, small companies, government, all together pulling in the same way.

“You can do that by standing back and seeing where the opportunities are bringing together big and small into one place.”

The sector has quadrupled to over 100 companies since Fintech Scotland was set up in early 2018.

That includes new homegrown, Scottish businesses and those from other parts of the world – California, Hong Kong, London – moving to Scotland to grow their businesses, which is the other part of Ingledew’s role, making links internationally.

“We’re very much a collaborative model. We’re not looking to be better than any other part of the world, it’s more about who do we collaborate with around the world,” he says.

Skills and diversity are areas that are repeatedly flagged up as needing attention, and while much work has been done, more is needed.

On gender diversity, Purvis notes: “I would think we were being very complacent if we think we had solved that problem.

“We have seen the beginnings of some statistics that suggest we have begun to change, but we’re moving the dial from 18 per cent females in the tech workforce up to 23, so it’s not a huge change and if we want to get us to 50, there’s a long way to go still.”

She notes there is even more to be done to bring in people with disabilities and ethnic minorities.

Purvis adds that while much has been done to increase digital skills for the industry, the sector has grown even more, expanding beyond just software development companies and into all parts of the economy, from tourism to food and drink to farming, so that it’s a “never-ending journey”.

But one area of the technology that has had less attention until recently is the need for the development of technology to be ethical and do good, and both Purvis and Ingledew have ambitions for Scotland to lead on that.

Purvis says: “I think the other issue is around how we use that data and are we building tech for good and how do we use ethics in this space?

“And I think that’s, again, something that Scotland might use as a differentiator for the whole economy and the whole digital economy is, let’s be in that space which is tech for good, where what we do is ethical use of data and to create new ethical products and services, not to exploit people […].

“I think this is a new area of expertise that I think [involves] people thinking just a bit beyond ‘Well, I’m clearly an ethical person’, to putting structures in place to make sure that we are creating the right sets of ethics and everybody has a shared understanding of what they are.”

Ingledew agrees: “It’s not only important, but in a way, there’s an ethics but there’s also a social dimension.

“This isn’t just about an economic improvement of growth and jobs – very important – there’s also a big social dimension in terms of how do we make sure it’s much more inclusive, much more diverse, not just left to a few.

“We have a little saying that fintech’s far too important to leave up to just the financial services industry.

“It’s got to be inclusive to all, and that’s reaching out to consumer groups, particularly those that have been left out in the past, through Money Advice Scotland, Citizens Advice Scotland, to make sure their needs are being addressed by this opportunity with new technology and money […].

“Technology’s a change in the way we lead our lives, the way the business operates, so in a way, you need to work at it together rather than sort of think someone will solve it later on down the road.”