Overview
Italy’s digital economy has grown significantly in recent years, led by factors such as increased broadband connectivity and internet penetration, government initiatives, and technological advancements. The digital economy is driving growth, productivity, and innovation across industries, but there is still untapped potential in key areas. The government recognizes the importance of the digital sector and, as part of its digital transformation efforts, has been actively investing to foster innovation and drive overall digitalization. Italy’s Recovery and Resilience Plan (PNRR), supported by the European Union’s largest allocation of pandemic recovery funds, and its specific digital initiatives (e.g., Digital Italy, Transition 4.0, Digital School, Digital Health) includes billions of euros for investments to accelerate the adoption of emerging technologies and improve the country’s digital capabilities and its global competitiveness. Italy has earmarked about €47 billion euro (26 percent) of its total PNRR allocation and another €5.5 billion euro in EU Cohesion Policy funding for digital initiatives. As investments continue, the digital market will benefit from the effects of the PNRR for years to come. These investments present opportunities for businesses to collaborate with the government, access funding support, and contribute to Italy’s digital transformation. U.S. companies are leading providers, and they have a strong presence in Italy in all segments of the market. The big players not only sell their products and services, but also invest heavily in research and development and support educational and training programs in Italy.
While Italy has made great strides in investing in and adopting digital technologies, challenges remain. There is a noticeable disparity in digital infrastructure between northern and southern Italy and some rural areas still face connectivity issues, limiting their ability to fully leverage digital technologies. There is also a digital skills gap, particularly among older individuals and those in traditional industries, and a resistance to change within organizations and among individuals.
Market Challenges
The EU digital economy is highly regulated and compliance with EU regulations may be just the initial step for U.S. companies selling to the Italian market. Companies should also be prepared to navigate Italy’s complex regulatory landscape and bureaucracy, which can be time-consuming and costly. For information about recently enacted or proposed EU regulations, see the Digital Economy section of the EU Country Commercial Guide.
Italy, like many European countries, has specific requirements regarding the storage and processing of personal data. While the EU’s General Data Protection Regulation (GDPR) and the EU-U.S. Data Privacy Framework provide a comprehensive framework for data transfers, the Italian Data Protection Authority may issue additional or sector-specific guidelines and regulations. It has been particularly active, for example, in oversight of emerging artificial intelligence applications. Some requirements relate to periods for data retention, the process for notifying authorities of data breaches, and obtaining consent, and can be more stringent for data processing in the healthcare, financial, and telecommunications sectors. Compliance with these requirements is one reason many companies have set up data centers or cloud infrastructure inside Italy.
The EU Artificial Intelligence (AI) Act, enacted in March 2024, seeks to set a global standard for AI technologies and divides AI applications into different risk categories. It outlines the regulatory framework within which member states will have to issue implementing decrees. Italy’s government has approved a draft AI law, whose rules are more restrictive than the EU AI Act, although it may still undergo significant changes before it becomes official legislation. We recommend that U.S. companies monitor these developments as well as other potential requirements specific to Italy as more EU regulations are implemented and the EU AI Act’s provisions begin to take effect.
In addition to regulatory challenges, U.S. companies should be aware that PRC companies are major players in the sector, including supplying telecommunications equipment and infrastructure for Italy’s 4G and 5G networks. Despite U.S. and EU security concerns, Italian operators continue to purchase digital technologies from untrusted PRC vendors. It has been difficult for U.S. companies to compete in tenders when lowest initial price is prioritized over value or technical capability factors. Trustworthiness is not commonly an evaluative factor in tenders.
Most laws are set at the EU level. The Digital Economy Chapter of our Country Commercial Guide for the European Union provides a more comprehensive overview.
Digital Trade Opportunities
Italy’s digital initiatives and strategies and its investments in digital infrastructure (e.g., fiber optic networks, data centers, cloud computing infrastructure) are driving demand for digital technologies from the private and public sectors. The government’s push for digital transformation across various sectors and a focus on Industry 4.0 is creating a need for digital solutions to modernize operations, improve efficiency and productivity, automate processes, and enhance competitiveness. There are opportunities in cloud computing, AI, IoT, Big Data, and cybersecurity and anything that enables digitalization. The expected growth rates are high because Italy needs to make up for gaps in the digital sector and the funds are available.
Cloud computing
Italy’s cloud strategy includes creation of a national cloud for the public administration, compliance requirements for cloud service providers, and incentives and support to encourage private businesses to adopt cloud computing. Overall, the strategy seeks to ensure that both the public and private sectors can benefit from cloud computing while maintaining data security, privacy, and national control. About 61 percent of Italian companies with 10+ employees had used cloud computing in 2023, allowing more flexibility and scalability while reducing technology costs. The greatest demand for cloud-based solutions is currently concentrated in the financial services, healthcare, public administration, manufacturing, retail, and telecommunication sectors. The increased popularity of cloud computing services, combined with concerns about data sovereignty and security, has led to a surge in demand for data center capacity in Italy, as cloud providers expand their infrastructure to meet customer needs.
Artificial Intelligence
Italy’s recently updated AI strategy focuses on making the country a global leader in AI research, development, and application, and leveraging AI technologies to improve productivity, public services, and economic growth. It is closely aligned with the EU’s broader AI strategy, sharing a common goal of promoting ethical, responsible, and human-centric AI development. The strategy supports the creation of AI applications and incentives for businesses (primarily SMEs) to invest in AI technologies. It also sets goals for the creation of Italian-language large language models. While only about five percent of Italian companies used AI in 2023, lower than the EU average of eight percent, Italy’s ongoing digital transformation and widespread adoption of cloud computing has made it easier for businesses to access AI solutions. AI is being applied by large companies in a wide range of industries in Italy, including manufacturing, healthcare, finance, and agriculture, but adoption by small and medium-sized enterprises (SMEs) still lags behind.
Because AI has the potential to automate many job processes, Italy is also looking to the adoption of AI to mitigate the impacts of a shrinking workforce. Policymakers hope new technologies may make possible the maintenance of economic output in the face of Italy’s falling birthrate and aging population.
Internet of Things (IoT)
Italy has started to embrace IoT technology in various sectors, including manufacturing, agriculture, healthcare, and transportation. Adoption rates are increasing but infrastructure gaps in rural areas and high costs still hinder nationwide 5G coverage and IoT access. Italian companies can take advantage of tax credits from the PNRR’s largest digital measure (€13.4 billion), Transition 4.0, dedicated to the digitalization of companies, by purchasing Industry 4.0 assets (tangible and intangible) such as IoT to improve production processes. Italy wants to digitize its otherwise strong SME sector and support investments in smart factories; however, many SMEs across all industries have either postponed these investments or only recently started the switch to smarter production processes. Italian cities are also expected to integrate more IoT devices and smart solutions to increase efficiency and improve sustainability and livability. The city of Milan, which uses IoT for smart parking, waste management, air quality monitoring, traffic management, smart lighting, smart buildings, and more, is leading the way.
Big Data
Italy’s digital transformation initiatives have created a demand for data-driven decision-making and insights in multiple sectors. The focus on Industry 4.0 and use of IoT devices has increased the demand for big data technologies to store, process, and analyze the large quantity of data produced. The retail, e-commerce, and financial services sectors are using Big Data to improve customer experiences and personalize services. The healthcare sector, primarily in regions with advanced healthcare infrastructure, also uses Big Data to manage patient data, personalize medicine, and improve clinical outcomes.
Cybersecurity
The significant growth of the cybersecurity market and demand for cybersecurity solutions in Italy can be attributed to several key factors. As the digital transformation advances, businesses and public institutions are relying more on digital platforms, cloud services, and connected devices, exposing themselves to a great risk of cyber-attacks. In 2023, Italy received 11 percent of all global attacks detected and was the fourth-most targeted country globally. Certain high-profile data breaches and cyberattacks have raised awareness of the importance of cybersecurity and prompted organizations to invest in stronger defenses. While large companies are investing the most, more SMEs are seeing it as a priority. In addition, organizations must invest in cybersecurity solutions to comply with data protection regulations like the EU GDPR.
The Government of Italy has prioritized cybersecurity as a strategic objective and has a cybersecurity strategy, supported by funds, that outlines the country’s digital roadmap. It was developed by the National Cybersecurity Agency and is aligned with the EU’s cybersecurity strategy. It seeks to make Italy a safer place for data by protecting critical infrastructure, government systems, and citizens from cyber threats.
Banks are the largest sector in terms of cybersecurity spending. Industry is second, although average spending is much lower despite the large number of companies that make up the sector. The public administration follows, which includes large administrations and local authorities. Spending in this sector is supported by investments related to the national cybersecurity strategy and by PNRR funding, with the aim of filling current vulnerabilities. Demand is expected to remain high in the coming years, with a particular focus on areas such as critical infrastructure protection, data privacy compliance, cloud security, endpoint security, network security, threat intelligence, and incident response.