EU losing ground in technology innovation race

Study finds just nine out of 100 top ICT firms are based in Europe, due to lack of funding and skilled workers

Just nine of the top 100 ICT companies worldwide are now headquartered in Europe, as a study reveals the region is losing ground due to shortages in funding and skilled labour.

The Rebooting the European High-Tech Industry study, conducted by A.T. Kearney found little more than 10% of global ICT revenues, from the top 100, are generated in Europe.

Europe is set to lose another company from the top ICT 100 when Microsoft acquires Nokias’s devices and services division this coming Spring, leaving Europe with no representation in the top 10 list of global handset makers.

The study found that an increase of M&A and the faster-paced growth of Asian and US technology businesses means many European industries are dependent on non-European firms for production research and innovation.

To conduct the study, A.T. Kearney investigated nine sectors within the ICT industry: IT services, IT hardware, software, communications equipment and services, consumer electronics, handsets, PCs/laptops/tablets semiconductors, and electronic components.

Axel Freyberg, co-author of the study and EMEA leader of A.T. Kearney's communications, media, and technology practice said Europe is losing ground due to a fragmented market, shortage of funding and a lack of skilled engineers and flexible labour laws: “A strategic master plan is missing in which the EU is placing major bets to grow promising ICT sectors, and in which an industrial policy is designed to help leading players maintain and expand their positions and create scale.

“Europe’s brightest spots are in B2B, and there are some leaders in smaller sectors that don’t make the top 100. However, in total, Europe has few large-scale ICT companies big enough to act as consolidators in each segment’s endgame. This leaves the others vulnerable to buyouts by larger rivals from other regions.”

Europe’s predicted global CAGR between 2011 and 2015 will grow at 2.2%, which is less than half the rate at which North America (5.2%) and Asia’s (5.4%) global sales will grow, the study found. 

Thomas Kratzert, A.T. Kearney partner and co-author of the study, said: "European companies, particularly IT service providers, are more beholden to regional demand trends than their American and Asian counterparts, and therefore could lose market share due to this shift."

According to Kratzert Europe’s unique characteristics, history, and culture make it impossible to replicate conditions where ICT businesses have succeeded in North America and Asia: "Europe’s distinctive structure is both a strength that breeds competition and a weakness that reduces returns."

January this year saw the launch of Horizon 2020, a EU research and innovation programme offering €80 billion of funding between now and 2020; however A.T. Kearney partner Herve Collignon, a co-author of the study, believes more can be done: "Policy makers can do their part to make rejuvenating the ICT industry a top priority. Government bodies, ICT companies, investors, and industry associations can work together for a long-term master plan."

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