Norwegian School of Management NrNorweg inian IT: Industry and/or enzymeme?? EKN Steering Committee Meeting NHO June 16, 2011 Dr. Espen Andersen Associate Professor BI Norwegian Business School www. espen. com [email protected] EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.0 IT-industrien er sentralisert… EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.1 The IT industry’s value creation happens largely in other industries EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.2 Revenues of the main categories 60 000 000 International - eqqpuipment and software 50 000 000 International - consulting and services Norway - equipment and software 40 000 000 Norway - consulting and services 30 000 000 20 000 000 10 000 000 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.3 Value creation per employee, Balassa indices Annual value creation, CPI-adjusted 1 200,00 Norway - consulting and services 1 100,00 Norway - equipment and software International - consulting and services 1 000,00 International - equipment and software 900,00 800,00 700,00 600,00 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.4 Centralization in numbers IT employees, by county 14000 Oslo Akershus Hordaland 12000 Rogaland Vestfold 10000 Sør-Trøndelag Buskerud Østfold 8000 OldOppland Hedmark Møre and Romsdal 6000 Telemark Nordland 4000 Aust Agder Vest Agder Troms 2000 Sogn and Fjordane Nord-Trøndelag 0 Finnmark 2000 2001 2002 2003 2004 2005 2006 2007 2008 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.5 Centralization in numbers (relative) 2,50 Balassa indices, IT employees, by county Oslo Akershus Vestfold 2,00 Sør-Trøndelag Buskerud Østfold Hordaland 1,50 Rogaland Oppland Aust Agder Hedmark 1,00 Telemark Møre and Romsdal Troms 0,50 Vest Agder Nordland Sogn and Fjordane Nord-Trøndelag - Finnmar k 2000 2001 2002 2003 2004 2005 2006 2007 2008 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.6 The Norwegian IT workforce is dominated by engineers and increasingly international 6,00 Education type, IT industry 5,00 4,00 ex dd Science 3,00 Administrative/business Engineering Balassa in Foreign employees 2,00 1,00 0,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.7 The Norwegian IT workforce is well educated, but not research-based 3,00 Education levels, IT industry 2,50 2,00 Changes Master ex mostly dd from Bachelor 1,50 recoding PhD Balassa in High school SdSecondary schlhool 1,00 0500,50 0,00 2000 2001 2002 2003 2004 2005 2006 2007 2008 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.8 IT is no longer something you learn on the job Education level, IT sector 100 % 0,44 % 0,47 % 0,47 % 0,47 % 0,43 % 0,44 % 0,44 % 0,42 % 11,74 % 12,29 % 12,69 % 12,79 % 13,86 % 14,24 % 14,62 % 14,94 % 90 % 80 % 70 % 36,26 % 35,79 % 36,52 % 36,27 % 36,64 % 36, 54 % 36, 55 % 35, 94 % Ph.D . 60 % Master Bachelor 50 % High school 40 % Secondary school 39,35 % 39,12 % 30 % 38,68 % 38,65 % 37,07 % 35,80 % 33,59 % 32,04 % 20 % 10 % 10,74 % 10,77 % 10,21 % 10,10 % 9,92 % 10,34 % 11,24 % 11,33 % 0 % 2001 2002 2003 2004 2005 2006 2007 2008 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.9 IT people work in IT – or telecom, consulting and media. Source new employees, 2008 Balassa index IT 7,096 Telecommunications 3,179 KIFT 2, 488 Media 1,584 Retail 0,804 RblRenewable 0,7 94 Finance 0,701 Reiseliv 0,551 Oil 0,346 Maritime 0,300 Bygg 0, 291 Metal 0,239 Health 0,224 Fish 0,150 EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.10 A customer overview Small Large Individual Consumer Prosumer Business SMB Corporate Public Municipality National International International International consumer business EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.11 5 mechanisms of knowledge in the Norwegian (and international) IT industry • Research-based technology institutions (UiO/Simula, NTNU/Sintef, UiTø, other universities) – M.Sc./Ph.D. education, research collaboration – Technology dominates • Vocationally oriented programs (HiO, NITH, BI, others) – Educating IT personnel and managers – orggganization/management dominates, technology application- oriented • Industry organizations (Dataforeningen, IKT-Norge, Abelia) – UdtUpdates and discuss ion forums, advocacy • Vendors (Microsoft, Oracle, SAP, consulting companies) – Certification programs for individuals – Partnership programs for developers and implementors • Industry-oriented research and advisory groups (Gartner, IDG, McKinsey Institute) – Arbiters of taste, evolution and decision criteria EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.12 Research-based institutions deliver engineers, but have little influence (with exceptions) • IFI growing, NTNU stbltable, recruiting the best students main worry • Connections to industry mainly through students and research programs • Moving towards less technical focus • IFI’s new building new IT center in Norway? EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.13 Mid-level educational institutions provide the bread and butter IT personnel in Norway • Focus on Bachelor programs and basic courses • Many teachers come ffmrom business • Application oriented, frequently aimed towards certification • Focused development based on student interest • Large drop in students after dtdot-com btbust, no reboun d yet EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.14 Industry organizations form meeting spaces and build a nascent political lobby • The Norwegian Computing association – Meetinggp place for various interest g rop s – Organizes certification and education – 14500 members, 9 district associations, 50 interest groups – struggles with staid image • ICT Norway – industry association, primarily for vendors – documents and promotes industry – visible in ppygpress and lobbying towards politicians – Struggles with rebel image and technology focus • Abelia – part of NHO, Confederation of Norwegian Enterprise – organizes knowledge-based companies, including ICT – Documents and comments on role of knowledge in society – Struggles with industry dominance and unclear mandate EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.15 EA EKN-IT Customers developers and Vendors addressmarket: two-sided* a © 2011 rights Andersen. All Espen reserved. PDF versionmay be reproduced, with attribution reproduced, with Based on Parker, G. and M. Van Alstyne (2005). "Two-Sided Network Effects: A 1.16 Theory of Information Product Design." Management Science 10: 1494-1504. Commercial research organizations – and independent experts – do what academia won’ t and vendors can’t EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.17 IT technology providers and service providers face different challenges, business models and futures Technology providers Service providers • Evolution of technology is • Evolution of customer need main driver is main driver • Competition mostly global • Competition mostly local • Funding by angels or VCs • Funding from sales or from • Pricing an issue: Norwegian mother corporation market underprices IP? • Overpriced and • Exit by sale to large, underintegrated? fiforeign corporation • EiExit by consolidat ion wihith larger IT service provider EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.18 •Proprietary •Modularized •Commoditized •Ubiquitous •UtidUnnoticed Technology providers have to adapt to evolinlving thnltechnology phases EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.19 Norwegian software IP is sold out of Norway • Norwegian investors (stock market) do not value IP? • Lack of investor muscle for transition to platform? • Knowledge community will change – Going abroad as a result of acquirer’s decision – Reduced as a result of technology maturity • Where is the new undergrowth, the pipeline? EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.20 Three possible platform plays • Kongsberg Maritime – 60% market share as control systems integrate across the ship and to the shipowner/manager • DNV – global knowledge network as certification and maintenance switches from periodic inspection to constant monitoring – Synchroport initiative as example of the new maritime industry, software-enabled • Opera – enabling mobile browsing by centralizing screen rendering and lowering the cost of mobile surfing in developing markets EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.21 The march of IS: From internal provider to external partner (I) CEO Staff SBU CEO SSO CEO SBU CEO IT SBU CEO IT dtdpt IT dpt Strategic Strategicdpt IT Business dpt UitUnitBusinessStrategic Step 1: UnitBusiness Centralization of distributed IS UUtnit departments EA EKN-IT © 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution 1.22 The march of IS: From internal provider to external partner (II) CEO Staff SBU CEO SSO CEO SBU CEO IT dpt SBU CEO Central IT IT S Strategic dpt L IT dpt BusinessStrategic dpt A UitUnitBusinessStrategic UnitBusiness Step 2: Formalization of customer UUtnit relationship, process organization EA EKN-IT © 2011 Espen Andersen.