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An appealing lifestyle and the presence of the world’s largest internet exchange make Amsterdam a good place to set up an IT company. And that in turn helps innovation in other sectors in the Netherlands.
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Last year 140 new international companies set up offices in the Dutch capital, Amsterdam. A substantial proportion of these newly arrived companies were IT/tech businesses.
The Amsterdam Metropolitan Area is rapidly becoming the software and IT capital of Europe – more than 50% of the Forbes 2000 companies active in IT and telecoms have a presence in the area. More of the IT startups – about 40% – originate from the US than any other country, with the remaining 60% spread across countries in Asia or Europe.
When international tech companies are choosing a European location, Amsterdam is in competition with cities such as Dublin, Paris, Barcelona and Stockholm. London and Berlin are also in the mx but they have a different character. According to Ruben Nieuwenhuis, private lead of StartupAmsterdam, “London is much more expensive than Amsterdam, and Berlin has a limited market and commercial sector.”
Along with London and Berlin, Amsterdam is one of the top three European hubs for IT startups. “However, we do not only compete with each other, we also work together by building a hub-to-hub network for European startups to make it easy for them to expand into cities like London, Amsterdam, Berlin, Dublin, Stockholm and Tel Aviv,” said Nieuwenhuis.
The world’s largest internet exchange is one reason many companies want to come to Amsterdam, said Dieter Oude Kotte, senior manager foreign Investments of Amsterdam Inbusiness. “Due to European privacy regulations, a lot of US companies move data to Europe.
“The short distance to the Amsterdam Internet Exchange also makes the city a good place to establish a datacentre or find a commercial datacentre.”
Suppliers as well as startups
And Amsterdam attracts IT suppliers too. Job Witteman, CEO at the Amsterdam Internet Exchange (AMS-IX), said: “Cisco wouldn’t be in Amsterdam without us. They can sell routers to parties connected to us.”
Another reason organisations come to Amsterdam is the network effect, according to Nieuwenhuis. “If there are a lot of companies in one place, it means that there are customers and employees.”
And it is not just startups that feel the pull. The availability of skills is the reason Oracle opened a second Dutch office in Amsterdam. The company is recruiting 400 sales professionals for its new office.
“Next to our office in Utrecht, we are also working on our presence in Amsterdam to add more talent to our Dutch workforce and in order to show our presence to the large companies that are located there,” said an Oracle spokesperson. “Amsterdam is a major metropolis with a highly skilled international environment.”
Dieter Oude Kotte at Amsterdam Inbusiness also cited the pool of highly skilled employees as the reason to open an Amsterdam office for more companies. “The quality of life, the cultural offerings and the fact that English is widely spoken are important reasons for professionals to come and live in Amsterdam,” he added.
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Shortage of IT personnel
But work needs to be done to keep attracting IT professionals if the city wants to retain its advantage.
“There is already a shortage of IT personnel, mostly back-end developers, and in the long term there could be the same problem with front-end designers,” said Erik Boer, founder and director at Amsterdam Center of Entrepreneurship.
Oude Kotte agreed: “There is a global war for talent, more specifically IT talent. Like in San Francisco, London, Berlin and many other global cities, there is a shortage of software engineers.” He added that Amsterdam had a good record for attracting IT talent.
Dutch cities also work together to make sure that companies have access to the best talent in the country. “Tesla is a good example,” said Oude Kotte. “It has a factory and logistics operation in Tilburg in the south of the Netherlands. It has chosen to establish its European headquarter with marketing and sales functions in Amsterdam because of the international character of Amsterdam.”
It is estimated that the new international companies will provide almost 3,000 jobs in Amsterdam, 769 of them in the IT and tech sector. Employment is one important motivation for the city to attract new companies; tax income for the whole country is another. “And the Netherlands has a competitive tax regime,” pointed out Boer. “It’s for a lot of companies a reason to open a location in the Netherlands.”
Another challenge is keeping the Dutch ecosystem varied, according to Boer: “We need all types of IT companies and currently the city has too much focus on companies making apps. The more different IT and tech companies are, the easier it gets for companies to work together.”
But Oude Kotte disagreed: “The city of Amsterdam is not focusing on app-making companies, but we do indeed have a focus on promising Dutch startups. We want to create a perfect environment for them to scale globally.”
The Dutch are known for their creativity, innovation and pragmatism. Dutch organisations are hungry for new technologies, which are a huge enabler for the development of new products and services and the optimisation of processes in a range of industries. This explains why such a small country as the Netherlands often contributes a relatively large proportion of the revenue generated in Europe by US and Asian IT companies.
“The Dutch are known for their open attitude,” said Oude Kotte. “We like to give feedback and we’re critical.
“Companies like to try their new tech concepts here and that helps other organisations, like financial institutions that can use the newest technology. Eventually, the total innovative capability of the Dutch economy will benefit from all those new IT companies.”