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There is life in Finland’s IT sector despite Nokia and Microsoft layoffs

Regional development organisations in Finland describe how despite massive job cuts Nokia and Microsoft have provided the foundations for IT industry development

This article can also be found in the Premium Editorial Download: CW Nordics: CW Nordics: Finns turn IT layoffs to their advantage

Another year, another round of layoffs in the tech sector. This has been true in Finland since 2011, and 2016 is no exception.

In April, Nokia announced 1,032 Finnish job cuts after its merger with French network giant Alcatel Lucent. At the same time, Microsoft scaled down its smartphone business globally and reduced its headcount in Finland by up to 1,350 employees. But in typical Nordic style, the country has found new ways to move forward.

“When you look back [over the past few years] there has been a round of layoffs almost every summer,” said Tuula Antola, business and economic development director at the city of Espoo, home to both Nokia and Microsoft’s Finnish headquarters.

“The Microsoft news was expected, it was only a matter of time, but it was really unfortunate this coincided with Nokia’s significant job cuts,” Antola added. “But on the other hand, this can be seen as an opportunity. By combining the expertise now available we can attract new global players [to Finland].”

Oula Välipakka, senior manager at Tampere Region Economic Development Agency Tredea, shares this sentiment. In its heyday of the early 2000’s, Nokia employed more than 24,000 people in Finland and around 4,500 people in Tampere alone (population 223,000), but the latter number will soon be close to 700 as Nokia cuts staff and Microsoft terminates mobile phone development in the city.

Despite the cuts, Välipakka said there will be opportunities for Tampere’s growing ICT sector as the city will be less dependent on the success of one big company. The city has also been fast to react. In early June it launched an international Tampere4ICT campaign to promote the fact it will have 1,000 experienced ICT professionals available. Välipakka said the phones have already been ringing.

“I just spoke with a company that is thinking about opening a new 150-worker unit in Tampere. This is because of the amount of the expertise coming to the labour market,” he added.

Välipakka expects the first new investments in the city to be announced soon.

Alongside Tampere, Espoo and Oulu are two major cities hit hard by the latest layoff news. Nokia is axing 500 of its 3,500 employees in Espoo and around 250 jobs in each of the two other cities by the end of 2018. This is part of Nokia’s efforts to eliminate overlapping functions in its new organisation of 104,000 employees which, according to Bloomberg, may put up to 15,000 jobs at risk globally.

For its part, Microsoft will shut down Microsoft Mobile Oy in Finland by June 2017 and leave only “a few development teams in Espoo” and around 270 people in a separate sales and marketing subsidiary. This follows several turbulent years since Microsoft acquired Nokia’s mobile phone business, with the company cutting 1,050 Finnish jobs in 2014 and 2,300 in 2015.

Programmers in demand

Although the figures make for grim reading, there is a silver lining: software developers are in a constant demand in Finland. Rasmus Roiha, CEO of the Finnish Software Industry and Entrepreneurs’ Association, said while many large technology corporations have cut staff in Finland, the total number of people working in the software sector in Finland has stayed at around 60,000.

“This means [the people made redundant] have been employed somewhere else,” said Roiha. “The net reducers have been corporations that employ more than 1,000 people, and on the receiving side is the SME sector, which has been growing.”

The association estimates 7,000 programmers are needed just to meet the needs of the technology sector. While this is good news for some of those made redundant, Roiha pointed out there are challenges in matching their skillsets and the demands particularly from smaller companies where the needs can differ from those of large corporations.

Another company that sees the layoffs as a major opportunity is the Tampere-based information management company M-Files. It recently secured €33m (£28m) in funding and plans to hire 80 to 100 new employees in the next year.

CEO Miika Mäkitalo said many ex-Microsoft and Nokia employees have the kind of experience an internationally focused company needs.

“Microsoft’s major layoff wave is unfortunate and ends one phase in the Finnish economic history, but at the same time there are a lot of great professionals coming to the technology sector. They have gone through the Nokia ‘university’ and can bring new strengths and thinking to SMEs,” said Mäkitalo.

“In Tampere alone, ICT companies will hire almost 1,000 employees this year. This is why I see that in a medium-long timespan the effect of these redundancies to the IT sector may even be positive,” he addded.

Startup boost

While the fall of Nokia’s mobile phone business was initially seen as national tragedy in Finland, it has had an invigorating effect on its startup scene. And the latest layoffs are expected to continue the trend as many choose to test their skills in entrepreneurship.

Significant credit for this goes to Nokia. The company’s Bridge programme, run from 2011 to 2014, is estimated to have contributed to the creation of 400 startups in Finland with coaching and seed funding. The network company has promised similar support this time around, but has yet to announce detailed plans.

And Microsoft Mobile also started a similar programme in Finland in summer 2015. Polku, as it is known (a path), offers retraining, recruitment services, startup coaching and even potential funding. According to Microsoft, 94% of its employees who lost their jobs have participated in the programme and it estimates more than 50% have found new employment, while almost 100 startups have received funding through the programme.

Wireless testing company Verkotan is one of these startups. Its six founders all worked at Microsoft when the company decided to shut its R&D unit in Oulu in 2014. The group acted quickly and acquired Microsoft’s mobile equipment testing laboratories to start Verkotan, and has now doubled its headcount to 12 employees.

Pertti Mäkikyrö, technical sales manager at Verkotan, found his way to the company through the Polku scheme after more than 20 years at Nokia and Microsoft. The programme supported him joining the startup with a €60,000 grant and practical advice and coaching on running the new company.

“In the long run it is the practical support which is the most significant. If you can [be helped to] avoid mistakes at the start that is really important – those mistakes could even take down a new company,” said Mäkikyrö.

“Of course it is not a good thing for Finland that [Microsoft’s] mobile phone product development is being shut down, but, based on our experience, it is not the end of the world either,” he added.

The digitisation effect

The Finnish cities most affected are also calling on the government for support. Antola at Espoo sees new measures are needed to reduce the impact of the latest layoffs. Espoo is collaborating among others with the Finnish Funding Agency for Innovation, Tekes, which in 2015 launched a Digiboost scheme to support the hiring of digitisation experts.

“The aim is to enhance the ability of existing SMEs to benefit from digitisation,” said Antola. “Digiboost helps [companies] to hire one person or a whole team to drive this work. It pays half of their salary for a year.”

the Tampere Region Economic Development Agency’s Välipakka agreed that many of the people facing unemployment could now be helped by the fast pace of digitisation. In particular, Tampere has seen a growing demand for software and mobile expertise from the more traditional manufacturing industries where software and sensors are starting to play a major role.

No one in Finland is pretending the layoffs by Microsoft and Nokia aren’t damaging with significant long-term effects, but Finns are also doing their best to ensure they won’t all be negative.

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