Digitalizing Czechia: What do you need to know as a business?

eGovernment, eDoklad, eIdentita: What is that? 

In connection with digitalization in the Czech Republic, you may come across the following terms:

• eGovernment means handling the public administration agenda purely electronically, without having to go to a bureau (whether you are an individual or a company).
• eDoklad a.k.a. eObčanka is called an electronic ID card, which will allow citizens easier access to state services and other entities. In turn, it allows the state to securely identify your identity. Since 2012, when the first electronic IDs began to be issued, the state has already issued over 7 million without a chip (99%) and 32,000 with a chip (0.5%).
• eIdentita a.k.a. MojeID is a citizen's virtual key to communicating with authorities online. Thanks to eIdentita, you can set up a data box or request an extract from the Trade Register or Criminal Register via the Citizen's Portal, manage eRecept (electronic prescription from a doctor) or use remote access to the real estate cadastre.

However, it is not just about digital identification cards and handling of public administration matters via data boxes or online portals. The process of digital transformation of the Czech Republic includes everything from the development of technical skills of civil servants through the digitalization of invoices and other processes of small and medium-sized enterprises to the support of startups and cybersecurity. Digitalization is also one of the European Union's main objectives. In the spring of this year, the European Commission presented the so-called Digital Compass – the vision, goals, and ways to successfully achieve the digital transformation of Europe by 2030. The digital transformation of enterprises is one of the 4 pillars. We can therefore expect that digitalization will be not only demanded and supported but also mandatory.

It sounds ambitious and it will not be an easy process. Let's see how the Czech Republic is doing at the moment.

What stage is the digitization of Czech business at? 

According to the European Commission, the Czech Republic is improving in national digitalization, but it is still in 17th place in the European ranking. Finland, Sweden, Denmark, and the Netherlands have long been at the top, followed by Malta, Ireland, and Estonia. Member States' digital progress is assessed by the Commission based on the Digital Economy and Society Index (DESI) reports. The Czech Republic is strong in e-commerce and artificial intelligence, for example, it lags in the coverage of high-capacity networks and the digitalization of public administration, which, after all, also became apparent during lockdowns. The Commission, on the other hand, highlights the country's proactivity during the coronavirus crisis, citing the application of eRouška (app for digital contact tracing) and tutorials broadcast on public service television.

The biggest pain of the whole process is its slowness and cumbersomeness when positive foreign examples such as Estonia or Malta show how important the role of the state is during the process.

3 key roles of the state in digitalization of the country: 

1. Communicate the vision of the future. Entrepreneurs expect the state to communicate a clear reason. "During the first lockdown, we all saw how Czechs can innovate. What didn't work for 10 years was suddenly done in 10 days. We can follow the vision, but it is the role of the state to say what the future will look like,” perceives the CEO of the data company Keboola Pavel Doležal. The founder of the CzechSetGo initiative, Pavel Šiška, agrees: “Not everyone knows what the essence of digitalization is and what the state wants to achieve. There is a lack of a clear vision, comprehensive communication, delivery of know-how to the state sphere, and the motivation of officials. The state does not boast of successful projects." The digitalization of the Czech Republic is not just about simplifying the process of paying taxes in a few clicks. It is also about how to set up a better relationship between the state and the citizens so that each party better understands the other. 

2. Guarantee continuity of steps. In addition to defining a common goal, the state should create such an environment and mechanisms that it is possible for companies to fulfill the vision. According to the Digital Czech Republic strategy, approved by a government resolution in 2018, neither new nor current legislation must put further obstacles in the way of digitalizing public administration. However, mechanisms supporting the pace of digitalization are still rather lacking. "A huge opportunity is in opening the state in terms of opening data, systems, and clearly defined APIs [interfaces for applications], so that we can use the innovative potential of citizens, companies, and NGOs to create new services and make existing ones more accessible," says Šiška.

From the point of view of guaranteeing continuity, according to the Government Commissioner for Digitalization and ICT Vladimír Dzurilla, digitization is part of the program of all government parties, so even after the elections, it is expected to continue in the set direction. The Minister of the Interior is responsible for fulfilling the set goals.

3. Maintain qualified talent in state administration. According to the adviser to the Deputy Mayor of the Capital City of Prague, Matěj Chytil, there is a first need to motivate current professionals in the state sector to improve their digital skills. It is also necessary to attract digitally-native job seekers in the public sector from the ranks of the millennials and generation Z. He bases the importance of this step on the fact that if it fails, we run the risk that the digitization of the Czech Republic will not take place (or not well).

What will digitalization bring to small and medium-sized enterprises?

1. Competitive advantage or preservation of viability. Small and medium-sized enterprises represent the core of the European and Czech economies. With the advent of new technologies and revolutionary concepts such as Industry 4.0, Smart Factories, Internet of Things, and Cloud computing, the need arose to ensure their effective digitalization. According to analysts Michal Bokša and Stanislav Šaroch, the inability to adapt to these trends would lead to a reduction in their efficiency and competitiveness.

2. Simplification, acceleration, possible complete elimination of repetitive processes that lack logic. Martin Jahn, a member of the Škoda Auto Board of Directors, describes this with the example of electromobility: “All information about charging stations must be supplied to the Ministry of Industry and Trade in analog form, and the stations are only one data set. We have a total of 40 data sets and we employ 40,000 workers to process them all.” Jahn adds that an incredible number of processes are eliminated just by introducing something as simple as an electronic signature on an employment contract.

How will eGovernment contribute to the digitalization of accounting?

Accounting software helps automate routine activities and relieve companies from paperwork, but there is no solution available on the market for SMEs or a tool that can take accounting processes from A to Z. Electronic invoices are now standard and if stored well (in a standardized format on a medium that does not allow any changes to be made), companies do not have to reprint them on paper, however, neither the software nor the e-invoice yet digitalizes the accounts. According to UOL Accounting Founder Jana Jáčová, this is the so-called functional accounting standard: standardized principles and algorithms based on which accounting is done, which every company can do, either on its own or with the help of artificial technology.

The digitization of both companies and, in particular, accounting has a long way to go. On the other hand, today we can no longer imagine a future that is not digital. It is therefore impossible to avoid this, and the business in the form of simpler processes is desired by businesses, both large and small.

If we can recommend anything, it is not to wait for the introduction of standards by the state, but to take proactive steps to digitalize your accounting. There is still no tool available for SMEs on the market, companies such as Digitoo are currently developing it. "Once the state promotes standards across the board, it may be liquidating for smaller businesses that are not ready to pay for current software for large companies," says Digitoo founder Karin Fuentes. Digitoo aims to become not only a tool with which companies automate accounting, but also a communication channel – a place where all communication about invoices, documents, and reports takes place. "Think of it like an accountant version of Slack or Whatsapp for companies," adds Fuentes.

What can we guess will happen in the near future? 

The digital state is the first step towards the general application of digitalization, which makes it easier to penetrate other areas as well. After all, the Czech Republic emerged from the coronavirus crisis more digitalized than it entered. It is, therefore, possible that the pace of digitalization by the state will also accelerate with regard to the further development of the pandemic.