The chart that A.T. Kearney has drawn up about the ICT market in Europe contains lots of white space. The ten leading companies are listed there, split across nine areas of the ICT industry. Two companies are listed under “IT services” – Cap Gemini and Atos. Three are listed under “communication equipment and services” – Eriksson, Alcatel Lucent, and NSN. The category “software” contains just SAP, while STMicroelectronics is the only company in the “semiconductor” industry. In all the other categories – such as telephones, consumer electronics, PCs, laptops, and tablets – there is not a single European company in the top ten. And, according to forecasts, the future isn’t looking bright. Apart from one category, A.T. Kearney expects that Europe will have a sinking share of the global market in the coming two years.
A.T. Kearney partner Axel Freyberg is convinced that this is down to the fragmented European market. He explains, “While the United States has one market, Europe has 27.” That doesn’t make it easy to act in concert. Above all, Freyberg would like to see European – rather than national – institutions supporting individual ICT sectors in a targeted way. In contrast, one of the ways that other regions such as the United States, South Korea, or China create a basis for their high-tech industry is by actually using the technologies of domestic companies, Freyberg has observed.
Presence on the U.S. market is essential
Apparently, the United States in particular still plays a key role in the global economy. As documented by the international Monitoring Report Digital Economy 2013 published by the German Federal Ministry for Economic Affairs and Energy, the United States is still the clear leader in the global ranking. The United Kingdom is the first European country in the listing, and is ranked fourth in the table overall. Germany follows in fifth place. Under “average performance” – an indication of the strength and the attractiveness of the market – the United States dominates again. The United Kingdom and Germany are in fifth and sixth place respectively. It therefore seems logical that SAP has decided to focus particularly on the U.S. market and to operate with the American-born Bill McDermott as its CEO. “A global company needs to be successful in the United States,” says Freyberg, who is head of Communications, Media, and Technology Practice EMEA at A.T. Kearney. But, at the end of the day, the CEO’s country of origin doesn’t play a decisive role. Instead, it’s much more important for the customer base to be right. Not least for this reason did SAP buy the cloud specialist SuccessFactors and the purchasing platform Ariba. Ericsson, too, acquired the mobile communications business of the North American telecommunications and data networking manufacturer Nortel a few years ago. The goal is obvious: to have a greater presence on the U.S. market.
Next page: The Horizon 2020 innovation program
Last year, the European Union launched a new research and innovation program called Horizon 2020. Its aim is to secure Europe’s global competitiveness. Between now and 2020, Brussels will be investing €80 billion in promoting and financially supporting new ideas and projects – in addition to the investments from the private sector. However, Freyberg believes the approach is too academic. “There’s too much focus on research and promoting small enterprises. There’s not enough targeted cooperation with large companies to retain and support their international competitiveness,” he explains. “We need to keep hold of the lighthouse companies, the early adopters, because otherwise the whole sector could be doomed,” says Freyberg, appealing to the politicians responsible for economic policy in particular.
The European Union politicians therefore have the task of ensuring that Europe is not cut off from the rest of the world. The global market is too important for that. But Europe as a whole must also be strengthened using regional funding. Nevertheless, there are positive examples of things developing a certain momentum of their own in Europe. For example, a software cluster has developed around the headquarters of SAP in Walldorf, Germany. In addition to SAP, there is Software AG, the Karlsruhe Institute of Technology, and the universities in Kaiserslautern and Darmstadt. Yet, in other regions of Europe – particularly in Scandinavia – there are similar clusters of excellence in which experts don’t just get together to address specific topics by chance, but converge for strategic reasons. In Kista, for example, a district located northwest of the Swedish capital Stockholm, an increasing exchange between science and industry has been taking place thanks to Ericsson. And the situation is similar in Espoo in Finland, where many former Nokia employees have joined forces to set up their own companies. For instance, former Nokia employees founded a new cell-phone provider Jolla, which used the Linux-based operating system MeGoo for mobile devices, originally developed by Nokia with Intel. Jolla has been active on the cell-phone market since 2013 and picked up MeGoo’s community-driven successor to develop end devices based on its own Sailfish OS. The MeGoo operating system was cancelled by the Linux Foundation in favor of Tizen from Intel and Samsung. Tizen now also serves as the operating system for Samsung’s smartwatch.
Melting pot for developers and innovative business ideas
Berlin, meanwhile, is now seen as a not-so-brand-new melting pot for developers and innovative business ideas. As a prime example, Freyberg names the company Rocket Internet, an “Internet incubator” that aims to provide operational support not only to get ideas to the market fast but also to make them internationally successful. The online fashion shop Zalando, for example, stemmed from this concept. “The idea is to develop a sort of ‘machine’ that industrializes the success and rapid internationalization of young enterprises using functional experts,” explains Freyberg.
Next page: How Europe can become competitive
A strategic master plan for Europe
Only the sum of its individual parts will ultimately make Europe strong and fit for competition on the global market, Freyberg is convinced, and he demands a strategic master plan in which the European Union specifically backs the ICT sectors that have growth potential and supports leading companies through targeted industrial policy. “Because what are best clusters worth if there’s an ultimate lack of leading companies to act as lighthouses for the entire sector?” he ponders.