Nordic Leadership in ICT

Small & beautiful:The ICT success of Finland & Sweden
The seminar on Nordic Leadership in ICT
VINNOVA, Mäster Samuelsgatan 56, Stockholm
22 Sep. 2015, 09:30–12:00
Eric Giertz, Annika Rickne & Petri Rouvinen
Jyrki Ali-Yrkkö, Niklas Arvidsson, Anders Broström, Magnus Gens,
Fredrik Johansson, Annu Kotiranta, Sven Lindmark, Monia
Lougui, Juri Mattila, Mika Pajarinen, Bryan Pon, Timo
Seppälä, Kent Thorén & Pekka Ylä-Anttila

Finland & Sweden in ICT
Petri Rouvinen

Towards the end of 1999...
Finland & Sweden on top of ICT – In hype & in reality
Presented by Petri Rouvinen at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

fdsaf
SEK 44238 m.
Nokia’s GDP
(value added)
in Finland,
Year 2000
SEK 42382 m.
Ericsson’s GDP
(value added)
in Sweden,
Year 2000
≈
2000 2000

1.8
4.0
1.6
3.1
Ericsson of Swedish GDP Nokia of Finnish GDP
Direct impact
Indirect impact
(sub-contracting
& partnering)
% of GDP
in 2000
WORLD
RECORD!?

38.2%
28.7
42.1
9.6
15.1
Swedish ICT Sector Finnish ICT Sector
Direct share
of Ericsson/Nokia
Share of ICT Sector Value Added in 2000, %
Other ICT
firms’
share
57.2%
61,8
42,8

0
1
2
3
4
5
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7
8
9
10
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Finland
Sweden
The ICT sector
as a percentage of GDP
NMT
Cf. Ch 2
GSM
1st disrupt
In wireless
network eq.:
1. Huawei
2. Ericsson
3. Nokia
(Siemens;
Alcatel-
Lucent)
Worldwide:
From monopolies
to competition
The 2nd disruption
Cloud computing
Mobile Internet
Big data, analytics
Tech convergence
Services, software,
deeper diffusion of
ICT in using sectors
As presented by Petri Rouvinen at the
Nordic Leadership in ICT Seminar,
22 Sep. 2015

ICT sector: 5–6% of GDP,
3–4% or working hours
Nokia/Ericsson: 0.5% of
GDP, 10% of ICT sectors
The highest economy-
wide share of ICT experts
Similarities
Swe FinLow ICT investment intensity
Smaller in absolute terms
Small ICT consulting: Below 10%
High ICT investment intensity
Bigger: 2× employees, 6× firms
Large ICT consulting: Over 25%

History of the Finnish ICT Sector
• 1880s: The Finnish Senate – a dispersed telecom infra
– Operation: PTO-regulator & hundreds of private telecom operators
– Equipment: International competition, little domestic
• Since 1970s: Digitalization in other sectors
– Banking & engineering (pulp & paper eq.)
– Demanding Soviet exports
– Electronics: TVs etc.
• NMT: Int’l provision of telecom equip.
• 1990s: Facilitating factors
– Global
• Analog  Digital
• GSM (standardization process; Nokia; Tekes)
• Worldwide liberalization of telecom markets
– Domestic
• From a semi-closed to an open economy (reality & mindset)
• Relaxed constraints: Abundant supply of capital & labor

History of the Swedish ICT Sector
Eric Giertz

Sweden: A belated but fast industrialization
1844–1866: A new foundation is put in place
– Liberal reforms
– free trade
– Infra service providers
– Banks
– A new parliament
1860–1920: Industrialization
– Entrepreneurship
– Domestic industries
– Export industries
– 400 private tele associations (Ericsson 1876)
Presented by Eric Giertz at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

From consolidation to welfare state 1920–1970
• Engineering industry goes bankrupt
– Concentration of ownership (financial spheres)
– Engineers hired as CEOs
– Restructuring & rationalization
• Social democratic government 1932
– Takes over infra service providers
– Close cooperation with private industry
– Focus on productivity growth, not on new ventures
• Supportive labor unions
– Higher productivity is promoted
– The Saltsjöbaden agreement
– Compulsory work & motion studies

Source: Giertz, Marionettens död, Ekerlids förlag

”Developing Couples”
Four parties plan from acorns to oak trees
KTH
ASEA
Vattenfall
Ericsson
Televerket
Saab
Defence
ASEA
SJ (rail)
Private Companies
Public Partners
Government
E
X
P
O
R
T

Close Government–Industry Cooperation
A Swedish computer industry is born
– 1948 The public agency MMN is established at KTH
– BESK is completed in 1953 (the US, France, Britain and Sweden)
– SARA in 1957 (Saab) – D21 in 1962
– Facit leaves computers in 1963
– A new development couple 12,000 main frame computers (failed)
Ericsson + Televerket = A very tight couple
– 1970 Ellemtel – a joint venture is established
– Joint development of electronic and automated switching
– 1976 Televerket puts AXE in operation in Södertälje
– 1978 Ellemtel transfers AXE competence to Ericsson

From stagnation to bankruptcies &
emergency measures in 1970–1990
Nils G. Åslings
Industriakut

The end of close gov’t–industry cooperation
A new generation of social democrats in in the cabinet
– SSU holds a congress in 1967
– A new position as Minister of Industry 1969
– Sveriges Investeringsbank 1967, Statsföretag AB 1969
– STU 1969, SUAB 1969, SIND 1973
– LO convention proposed Wage earner funds in 1971
Sweden: In good health … and then to an emergency room
– 1976 A new liberal-conservative government
– government becomes sole owner in many industries

Gov’t is involved in ICT restructuring
Datasaab is established
– Stansaab established 1971 (SRT, Saab Scania, SUAB)
– Alfaskop is a huge success
– SRT leaves in 1973
– 1978 Stansaab & Saab Scania computer division = Datasaab
A state-owned PC industry is born
– January 1978 – a meeting in Linköping
– August 1978 ABC 80 is introduced
– 1979 Government takes over
Ericsson and Nokia takes over
NMT & GSM opens world market for Ericsson

Hunting for global growth in 1990–2005
• Televerket & Ericsson are divorced
– Liberalization in 1993
– Ericsson takes over Teli (1994) and Ellemtel (1995)
– Telia AB makes IPO 2000
– Telia acquires Sonera in 2002
• Ericsson survived when bubble burst
– Ericsson outsourcing late 1990s
– Ericsson on top March 2000
– Ericsson hit by 3G licensees
– Leaves handsets to Sony Ericsson
– Saved by new issued shares in July 2002
– Employment in Sweden from 43,000 to 21,000 in four years
• A diversified ICT Sector is born

Software and services Hardware
Products and
systems
IT Operations,
Application
Mngnt and
Maintenance
Software and
net services
IT Consultants Components
The Swedish ICT Sector of Today
Commercial
Software
Net services
Repair &
Maintenance
Operations R&D

Number of employees in ICT industry in Sweden
117,011
129,458
130,221
127,560
132,142
105,000
110,000
115,000
120,000
125,000
130,000
135,000
2007 2008 2009 2010 2011

Number of employees in different business logics
Software
Net Services
Service and Maintenance of ICT systems
ICT operations
ICT consultancy firms (Commercial systems)
ICT consultancy firms (R&D related)
Hardware (Components)
Hardware (Complete products and systems)

Number of employees in Hardware companies
Hardware
(Complete products
and systems)
Hardware
(Components)

No of employees in Software & Net services
Net services
Software

Internet-related business models

Internet-related business models
• Proof of Concepts
• Industrial exits
• Loved by Business angels & VCs
• Employ rather few people
• Great importance for the use of
ICT in other sectors of industry
• Technology based B2B-companies serve
many customers in consolidated industries

No of empl. in Maintenance & IT operations
ICT operations
Service &
Maintenance
of ICT systems

No of empl. in ICT-consultancy firms in Sweden
R&D-related:
12 397 employees
492 work places
363 companies
Administration:
25 633 employees
1 118 work places
766 companies

Enablers for Industry Dynamics
Annika Rickne

Mergers & acq. as enablers of industry dynamics
0
20
40
60
80
100
120
0
500
1000
1500
2000
2500
3000
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Valueoftransactionsinbil.USD
Numberoftransactions
Announced Mergers & Acquisitions in the IT Consulting & Services
Number of transactions Value of transactions
• In general, mergers and acquisitions (M&A) may create
consolidation, productivity, mobility, etc.
• Cyclic patterns of M&A – as linked to industry cycles
• Focus: ICT software and services sector
Presented by Annika Rickne at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Enablers for ind. dyn.: M&A in the Swedish economy
Swedish ICT software & service sector, 2000–2008: 9 341 firms
– 28% have been acquired (2 657 firms) (4 001 M&A)
– 1 % acquired by foreign owned companies
& still operate in Sweden (131 firms)
– So 5% of the acquired firms got a foreign owner
– Acquired firm in average 25 employees
Intensive M&A activity in Sweden
Above all small firms that are acquired
Motifs: Investment in tech capacity & int’l customer base
 acquisitions to pursue growth strategies

Enablers for ind. dyn.: M&A for industrial transformation
• Larger actors – to compete on global markets
– But did not lead to new Swedish based multinationals
• Efficiency through synergy & scale
• New firm formation
– Larger firms abandon niche markets => open up for new entry
– New impulses and opportunities for entrepreneurship
– M&As increase the frequency of spin-out by 33% two years after the event
• Technology and competence diffusion
– Learning between acquired and owner firm
– Stimulated between-firm job mobility of key persons in the sector
– Increased managerial turnover
• Possibility for exit through M&As
– Motivation for entrepreneurs
• Private wealth – to potentially reinvest

Enablers for industry dynamics:
Entrepreneurial Hotspots: Sweden & Stockholm
• International reputation as highly ICT productive
environment, especially Stockholm
• Goodwill builds on long history
• Software & hardware development, highly educated
& experienced, work efficiently at high standards
• Flat organization, consensus models  Speed
• Attract foreign capital
• Pride & rationale in staying Swedish

Very large
concentration
to Stockholm

Entrepreneurial Hotspots: Silicon Valley
• Scale: firms, investors & customers
• Role models & peers
• Competent, connected & operational
investors with large pockets
• Speed
• Experienced in growth management
• A portal to the customers – consumers + B2B
• A portal to the US market

Entrepreneurial Hotspots: Potential for Sweden
• Remain as a leading hotspot
• Renew flow of engineers & designers from educ.
• Shortage of engineers + low mobility:
Has to be solved!
• Increase mobility between business & academia
• Retain experienced managers & engineers
• Facilitate angel & VC investment + management
involvement through legal arrangements
• Demanding, competent & early customers
• Tap into hotspots, e.g., Silicon Valley - Pave the way!

Presented by Kent Thorén at the Nordic Leadership in ICT Seminar, 22 Sep. 2015

Nordic gaming: Historic development
• Commercial video games initiated
in the US & Japan in early 1970s
• Nordic (early attempts in 1980s, but) more
sustainable companies started around 1990
 Industry formation
• Conditions
– Rewritable storage media
– Home computers (PC games)
– Multimedia skills from “demo” groups

Overview: Early Hits
Sweden Norway Denmark Finland
DICE (Pinball,
Rally games)
atod (Edge, The
Lawnmower man)
Funcom
(Pocahontas, The
Longest Jorney)
IO Interactive
(Hitman)
Housemarque
(Supreme
Snowboarding)
Development patterns

Finland vs Sweden: Part I
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2009 2010 2011 2012 2013 2014
Finland
Sweden
TurnoverMEuro
• Dramatic shift!
• Finland mobile success
– Nokia’s pioneering efforts –
supplying game industry with
talent by down sourcing
– Support from Tekes

Finland vs Sweden: Part II
2008 2010 2012 2014
SuperCell
Rovio
Fingersoft
Other Companies
Finland Sweden
Mobile focus vs Broad footprint
Super concentrated vs Concentrated
Finland Sweden

The Swedish Game Development Sector
Kent Thorén

Sweden: Overview of Development
• PC Games
• AAA games on PC and Console (PS, xBox)
• Facebook games (King)
• Mobile games (King, Toca Boca, Mediocre etc)
• PC Games? (Indie developers via Steam etc)
• VR?

Backpacker Pan Vision/Aniware Minecraft Mojang
Battlefield DICE Mirrors edge DICE
Bioniuc Commando Grin Motorhead DICE
Candy crush saga King Need for Speed Ghost
Chronicles of Riddick Starbreeze/Tigon Payday Overkill/Starbreeze
Entropia Universe MindArk Pinball DICE
Europa Universalis Paradox RalliSport Challenge DICE
Far Cry 3 Massive Renegade Ops Avalanche
Goat Simulator Coffee Stain Smash hit Mediocre
Hotline Miami Dennaton Snactum Coffee Stain
Ignition Unique Development Sprinkle Mediocre
Just Cause Avalanche Stardoll Stardoll
Labyrinth 2 Illusion Labs Starstable Pizel Tales
Mad Skills Motocross Turborilla Syndicate Starbreeze
Magicka Arrowhead/Paradox Unravel Coldwood
ManagerZone Power Challenge Word Brain MAG Interactive
Midtown Madness DICE World in Conflict Massive
Major Releases 2015/6: Star Wars Battlefront (DICE), Magicka 2 (Paradox Interactive),
Mirrors Edge Catalyst (DICE), Need for Speed – Rivals (Ghost), Just Cause 3 (Avalanche),
Tom Clancy’s The Division (Massive), Mad Max (Avalanche), Wolfenstein: The New Order
(Machine Games), Minecraft on Hololens, Warhammer Vermintid (FatShark)
Examples

Launch of First
Game
Developing
Second Game
Developing First
Game
Drop off forming a
Company
Launch of First
Game
Forming a
Company
Informal Group
Enters Game
Competitions
Major StudioGame Education
Project
Developing
Second Game
Consulting
or
employment
Consulting
Typical Patterns

Key Success Factors
Making really
good games
Penetrating
Challenge
Bypassing
Reaching through
market noise
Virality
Emotion
Gameplay
Novelty

Key Success Factors
Beneficial Circumstances
Competence
Making really
good games
Reaching through
market noise
IT Competence
Quality culture
Creativity
Design
Business Culture
Game Competence
Team orientation
Previous Success
*
Sharing Culture
Reputation
Contacts
Courage
Cross-firm support
Flat org.

Key Findings
• Success on all platforms
• Games of high quality – international reputation
• The industry is the source of its own competitive
advantage, thanks to culture of sharing & helping?
• Education-incubator combinations  Regional clusters
• Capital difficult to get
• No targeted public support

ICT in Other Sectors
Annika Rickne & Eric Giertz

ICT in Other Sectors
• ICT technology, products & knowledge permeates many sectors
– ICT in tech & competence platforms, development processes, process
equipment, internal administration, decentralization processes,
communications, global networks, service offerings, customer
communication, access to global markets, etc.
– Increases work productivity: Sweden above OECD average
– Spurs innovation
– Retail, health care, media, etc.
– A sharing economy
• Recent trends: Big data, cloud computing, Internet of Things
• Evidence from how various sectors in Finland uses ICT
– 1/3 has software development (mostly by contracting)
– 1/3 sees digitalization as enhancing their products
– 1/3 expects Big Data to have large impact in the next 3 years
– 43% expects Internet of Things to have large impact in the next 3 years

ICT permeates many sectors
Three aspects in focus here:
– ICT consultants as drivers of change
– Embedded systems in engineering
– Towards cash-less banking

The importance of R&D-related Consultancy

R&D related ICT Consultancy firms
Typical customers:
Engineering Corporations making
complex & assembled products
• Developing software components
(embedded systems) in costumer
products & systems
• Developing software & systems
for production processes

R&D related ICT Consultancy firms
• A handful dominating larger companies
(~1000 employees)
• Domestic owners
• Mainly domestic market but some
customers in other Nordic countries
• Differs a lot from ICT-consultancy firms
working with commercial systems

Ericsson
Firm XX
Atlas CopcoDeLaval
Saab
Firm XX
Kockum
HusqvarnaViking
Saab Automobile
Ericsson
Ericsson
Saab
Saab
Hemocue
Autoliv
Ericsson Mobile
Firm XX
Saab
Volvo
Atlas Copco
Volvo
Kapsch
Firm XX
Firm XX
Firm XX ABB
Presented by Eric Giertz at the Nordic
Leadership in ICT Seminar, 22.9.2015

To be discussed
• Does Sweden differ from other
industrial nations?
• Can externalization of ICT-related
R&D partly explain why large
Swedish engineering firms have
survived radical tech shifts when
foreign competitors have failed?

Emergence of an ICT-based disruptive
mobile payment service
• Long cooperation b/w Swedish banks in infrastructure & services
• Involvement of regulatory actors
 Harmony between reg. frameworks & business operations
• The corporate society 2.0
• Emergence of mobile payment services: Swish
– Societal interest in reducing cash payments
– Pressures from ICT-skilled competitors (telecom)
– Potential new entrants in the payment service industry
– Tech advances (processing of transactions,
real time handling, access Internet via smart phones)
– Disrupting the cash infrastructure & also the card infrastructure

Swish

Nordic Leadership in ICT

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