KTH ROYAL INSTITUTE OF TECHNOLOGY

From research to business in the Swedish ICT Sector Eric Giertz Professor, Industrial Economics and Management, KTH Founder & Chairman, KTH Executive School LUCAS-dagen, Lund 2016-10-20 Reports

• Vinnova analys 2013:07 • Företag inom informations- och kommunikationsteknik i Sverige 2007-2011

• Vinnova analys 2015:06: • Small and beautiful – The ICT success of &

• Vinnova analys 20016:07 • Svensk konsultsektor i ny belysning 160 000 Employees in ICT companies in Sweden 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) related Business models A Swedish gaming industry ICT Consultancy companies Understanding the Swedish saga through an historical exposé

• The foundation was build by very few strong actors!

• The turbulance around 2000 created new conditions

• Today we have an entrepreneurial and dynamic industry with many different actors! ”Developing couples” Four parties plan from acorns to oak trees

Government

ASEA Vattenfall E X KTH Televerket P O Saab R Defence T ASEA SJ (rail) Private Companies Public Partners 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 Gov’t was 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 A New era starts in the 1990th

• 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 ready to conquer the world! – Ericsson outsourcing late 1990s – Ericsson on top March 2000 % of GDP in 2000 3,1

Indirect impact (sub-contracting & partnering) 1,6 4,0 Direct impact WORLD 1,8 RECORD!?

Ericsson of Swedish GDP Nokia of Finnish GDP Share of ICT Sector Value Added in 2000, %

Other ICT firms’ share 42,8 61,8

57.2% 15,1

38.2% 9,6 42,1 28,7 Direct share of Ericsson/Nokia

Swedish ICT Sector Finnish ICT Sector An explosion in 2001

• Ericsson survived when bubble burst – Ericsson hit by 3G licensees – Leaves handsets to Sony Ericsson – More than 8,000 consultants are kicked out in 2001 – 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 10

9 The ICT sector as a percentage of GDP Finland 8

7 Sweden 6

5 NMT GSM Cf. Ch 2 1st disrupt The 2nd disruption 4 In Cloud computing network eq.: 3 Mobile Internet Big data, analytics 1. Huawei Tech convergence 2. Ericsson 2 Worldwide: 3. Nokia From monopolies Services, software, (Siemens; Alcatel- 1 to competition deeper diffusion of ICT in using sectors Lucent)

0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 50 000 100%50 000 100%

Companies 45 000 Companies 90% 45 000 IC manufacturing 90% IC manufacturing 40 000 80%40 000 80% IT manufacturing IT manufacturing 35 000 70%35 000 70%

30 000 IT wholesale 60%30 000 IT wholesale 60%

25 000 50%25 000 50% Telecom oper. Telecom oper. 20 000 In 2012 Sweden had40%6 20 000times as many 40% Software Software 15 000 30%15 000 30%

10 000 20% 10 000 ICT-companiesICT consultingbut20%only twice the ICT consulting

5 000 10% 5 000 10% ICT maintenance ICT maintenance number of employees0 0% 0 0% Finland Sweden FinlandFinland SwedenSweden Finland Sweden 50200 000 000 100%100%200 000 100%

180 000 CompaniesEmployment 90%180 000 Employment 90% 45 000 IC IC manufacturingmanufacturing 90% IC manufacturing 40160 000 000 80%80%160 000 80% IT IT manufacturingmanufacturing IT manufacturing 35140 000 000 70%70%140 000 70%

30120 000 000 IT IT wholesalewholesale 60%60%120 000 IT wholesale 60%

25100 000 000 50%50%100 000 50% Telecom Telecom operoper. . Telecom oper. 2080 000 000 40%40% 80 000 40% SoftwareSoftware Software 1560 000 000 30%30% 60 000 30%

40 000 20% 1040 000 000 ICT consultingICT consulting 20%20% ICT consulting

520 000 000 10%10% 20 000 10% ICT maintenanceICT maintenance ICT maintenance 0 0 0%0% 0 0% FinlandFinland SwedenSweden FinlandFinlandFinland SwedenSwedenSweden Finland Sweden

200100% 000 100% 100% 100% 100% 100% 100% Employment 18090% 000 90% IC manufacturing 90% 90% 90% 90% 90%

16080% 000 80% 80% 80% 80% 80% 80% IT manufacturing Age Size Region 140 000 Age Size70% Region 70% 70% 70% 70% 70% 70% 21- y. 21- y. 120 000 IT wholesale 60% 60% 60% 250-60% 60% 60% 250- 60% 11-20 y. 11-20 y. Other Other 50-249 regions 100 000 50% 50-24950% regions50% 50% 50% 5-10 y. 50% Telecom oper. 50% 5-10 y. 80 000 40% 10-49 Capital 10-49 Capital 40% 40% 40% 40% 0-4 y. 40% 40% 0-4 y. region region Software 0-9 60 000 30% 0-9 30% N/A 30% 30% 30% N/A 30% 30% 40 000 ICT consulting 20% 20% 20% 20% 20% 20% 20% 20 000 10% 10% 10% ICT maintenance 10% 10% 10% 10% 0 0% 0% 0% 0% 0% Finland Sweden 0% Finland0% Sweden Finland Sweden Finland Sweden FinlandFinlandSwedenSweden Finland Sweden Finland Sweden 100% 100% 100%

90% 90% 90%

80% 80% 80% Age Size Region 70% 70% 70% 21- y. 60% 60% 250- 60% 11-20 y. Other 50-249 regions 50% 5-10 y. 50% 50% 10-49 Capital 40% 0-4 y. 40% 40% region 0-9 30% N/A 30% 30%

20% 20% 20%

10% 10% 10%

0% 0% 0% Finland Sweden Finland Sweden Finland Sweden Concentration to and universities 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 Finland vs Sweden: Part II

Finland Sweden 1800 1600 1400 1200 SuperCell 1000 Rovio 800 Fingersoft 600 Other Companies 400 200 0 2008 2010 2012 2014 Finland Sweden Mobile focus vs Broad footprint Super concentrated vs Concentrated ICT permeates many sectors

Three aspects in focus here:

– ICT consultants as drivers of change

– Embedded systems in engineering

– Internet of things - cloud computing 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 Firm XX ABB Ericsson Saab Firm XX Volvo DeLaval Atlas Copco Atlas Copco

Autoliv Firm XX Saab Saab Automobile Ericsson

Kapsch Volvo Saab Viking Husqvarna Firm XX Firm XX Saab Ericsson Kockum

Firm XX

Ericsson Mobile Hemocue Is there a Swedish paradox?

• Sweden tops European Innovation Scoreboard 2016 • Stockholm top ranked among European regions in the World Competitive Index of regions in 2014. (# 6 in the world) • World Economic Forum ranks Sweden number 6 in Global Competitive Index 2016-2017 edition