Lithuanian ICT export strategy development - ES parama

1 ICT export strategy development for Lithuania – External analysis

Lithuanian ICT export strategy development

Germany, UK and the Netherlands

Authors:

Petri O. Roine

Frederik Willmes

Joel Thompson

Adomas Svirskas

Algimantas Nedzveckas


Table of contents

1. Management Summary ..................................................................................................................... 5

2. Introduction and Methodology ......................................................................................................... 8

3. Attributes and methodology used to choose key ICT sectors ............................................................ 9

4. External analysis ............................................................................................................................. 11

A. Germany –country summary .......................................................................................................... 11

i. End consumer’s interest ................................................................................................................. 12

1. Market opportunity ..................................................................................................................... 12

2. Trends ........................................................................................................................................ 12

ii. Infrastructural landscape and trends ............................................................................................... 13

1. Infrastructure .............................................................................................................................. 13

2. Devices ....................................................................................................................................... 13

3. Bandwidth and Services .............................................................................................................. 14

iii. ICT employment and available workforce ....................................................................................... 16

1. Employment and education level ................................................................................................ 16

2. Available workforce and trend .................................................................................................... 17

iv. ICT investment............................................................................................................................... 18

v. Major clusters ................................................................................................................................. 18

vi. Governmental Policy and Regulations ............................................................................................ 18

i. Major ICT sectors ........................................................................................................................... 20

vii. Key ICT sector analysis .............................................................................................................. 23

1. The Telecom Sector .................................................................................................................... 23

2. Payment Services ........................................................................................................................ 26

3. E-Commerce .............................................................................................................................. 27

4. Cloud Computing ....................................................................................................................... 28

viii. Commonly used outsourcing destinations and practices .............................................................. 28

ix. Home market and ICT exports ....................................................................................................... 30

x. Commonly used partnership practices ............................................................................................ 30

1. Business culture and languages requirements .............................................................................. 30

2. Procurement practices and regulations ........................................................................................ 30


xi. IT associations, and other organization bodies ................................................................................ 30

B. UK – Country summary ................................................................................................................. 32

ii. End consumer’s interest ................................................................................................................. 32


2. Trends ........................................................................................................................................ 33

iii. Infrastructural landscape and trends ............................................................................................... 34

1. Infrastructure .............................................................................................................................. 34

2. Devices ....................................................................................................................................... 35


iv. ICT employment and available workforce ....................................................................................... 36

1. Employment and education level ................................................................................................ 36

2. Available workforce and trend .................................................................................................... 37

v. ICT investment............................................................................................................................... 37

vi. Major clusters ................................................................................................................................. 38

vii. Governmental Policy and regulations.......................................................................................... 40

i. Major ICT sectors ........................................................................................................................... 42

ii. Key ICT sector analysis .................................................................................................................. 45

1. Cloud computing ........................................................................................................................ 45

2. Business Solutions ...................................................................................................................... 46

3. E-Commerce .............................................................................................................................. 47

4. E-Health ..................................................................................................................................... 49

iii. Commonly used outsourcing destinations and practises .................................................................. 50

1. Local, near-shore, off-shore ............................................................................................................ 50

2. IT Personnel Costs....................................................................................................................... 52

iv. Home market and ICT exports ....................................................................................................... 54

v. Commonly used partnership practices ............................................................................................ 55

1. Business culture and languages requirements .............................................................................. 55

2. Practices and partnership schemes .............................................................................................. 56

3. Procurement practices and regulations ........................................................................................ 56

vi. IT associations, and other organization bodies ................................................................................ 56

vii. Specific industry related IT regulations and regulating institutions .............................................. 57

C. The Netherlands –country summary ............................................................................................... 58

i. End consumer’s interest ................................................................................................................. 58



2. Trends ........................................................................................................................................ 58

ii. Infrastructural landscape and trends ............................................................................................... 59

1. Infrastructure .............................................................................................................................. 59

2. Devices ....................................................................................................................................... 59


iii. ICT employment and available workforce ....................................................................................... 60

iv. ICT investment............................................................................................................................... 61

v. Major clusters ................................................................................................................................. 62

vi. Governmental Policy and Regulation .............................................................................................. 62

i. Major ICT sector analysis ............................................................................................................... 63

ii. Key ICT sector analysis .................................................................................................................. 67

1. Telecom ..................................................................................................................................... 67

2. Financial and payment services ................................................................................................... 72

3. Media and Entertainment ........................................................................................................... 74

4. E-Commerce .............................................................................................................................. 77

iii. Commonly used outsourcing destinations and practices .................................................................. 81

iv. Home market and ICT exports ....................................................................................................... 82

v. Commonly used partnership practices ............................................................................................ 82

vi. IT associations, and other organization bodies ................................................................................ 83

5. Internal analysis ................................................................................................................. 85

6. Conclusions ...................................................................................................................... 113

a. Business solution sector ................................................................................................................ 114

b. eHealth ......................................................................................................................................... 115

c. Finance and Payment services ....................................................................................................... 115

d. eCommerce&eSignature ............................................................................................................... 116

e. Custom ERP solutions ................................................................................................................. 117

f. Telecom, Finance & Payments ...................................................................................................... 118


1. Management Summary Germany

Cloud computing is considered the top trend by IT decision makers (66% of respondents), followed by mobile applications (53% of respondents), IT security (48% of respondents) and social media (35% of respondents).

Germany has the highest number of mobile phones in the European Union and the second highest mobile penetration rate (130%) in Western Europe after Italy (147%). 94% of the overall population have at least one mobile phone. Smartphone penetration has also risen from 54% in 2012 to 61% in 2013.

ICT is the fastest growing sector: There are almost 1.4 million ICT professionals, which only represents 1.7% of the entire workforce. Rhine-Main-Neckar ICT cluster is currently one the world’s largest IT and high-tech clusters.

Interesting ICT sectors: Telecom, Finance and Payments, e-Commerce and Cloud computing

UK

The UK is Europe’s largest ICT market by revenue.

UK has fibre optic available in 50% of households and 74% of households already have a broadband connection. Mobile device penetration is 124% for all handsets and 51% for smart phones. UK is Europe’s leading couponing market, which is now transitioning to e- and m-commerce.

There is high demand for skilled IT professionals, due to a lack of higher education enrolment in computer science. The country’s major ICT cluster is located in London and is called Tech City - it is one of the fastest growing ICT developer hubs in Europe.

Interesting ICT sectors: Cloud computing, Business Solutions, e-Commerce and e-Health

The Netherlands

ICT is considered a focal point of innovation. It plays a critical role in 80% of large production innovations and 92% of process innovations. Strong, local online payment provider iDEAL has boosted online payments adoption and, as a result, consumers have gained trust in the technology. This has helped The Netherlands to achieve one of the highest numbers of e-shoppers in relative terms (9.8 million).

Dutch mobile penetration is 121% for all handsets and 60% for smart phones. In 2011, 83% of households had a broadband internet connection, while 94% had access to internet in 2012.


Dutch companies were also the original founders of the internet. 19% of all companies are selling goods and services via the web and 7% via EDI.

A recent study conducted by CBS (Dutch statistics office) discovered that almost half of companies in the ICT sector had job openings and more than half find it difficult to fulfil positions.

Interesting ICT sector: Telecom, Finance & payments, Media &Entertainment and e-Commerce

Country comparison

Key metrics of focus market countries Germany, UK and the Netherlands are compared below, providing a high level view of our external analysis findings.

There are two common ways to identify market attractiveness: size of addressable market and scalability. Online payments area good benchmark because they provide,first,insights about customers’ access to internet (addressable market) and, second, (influencing scalability)theoption to pay online. UK is the leader in Europe in terms of online purchases, whileboth Germany and Netherlands are in top 10. Nearly 60% of all EU internet users shop online.

Online Purchases by internet users in previous 12 months (2012)

1. UK 82% 9. Netherlands 69% 17. Poland 47%

2. Norway 80% 10. Malta 63% 18. Czech Rep. 43%


3. Denmark 79% 11. Austria 60% 19. Spain 43%

4. Sweden 79% 12. Ireland 57% 20. Latvia 37%

5. Germany 77% 13.Slovakia 56% 21. Greece 36%

6. Luxemburg 73% 14. Island 56% 22. Cyprus 35%

7. Finland 72% 15. Belgium 55% 23. Portugal 35%

8. France 69% 16 Slovenia 49% 24. Hungary 35%

Source: Eurostat 2013

Another benchmark providing insight on market size isthe percentage of value added to the country’s business sector by the ICT sector.

The ICT sector represent more than 9% of value added in UK, 9% in The Netherlands and 7% in Germany. All countries are part of the top 15 countries in OECD ranking (2009). UK is ranked number 6, just after other European countries Ireland, Finland, Sweden and Hungary. The Netherlands shares10th place with Japan. Due to the strong manufacturing percentage of value added, Germany is positioned in14th place in the OECD ranking (2009)

ICT usage in households


2. Introduction and Methodology Mobinance was requested to support development of ICT export strategic services for Lithuania. The objective of this research is to identify the fit between interesting and emerging ICT sectors in UK, Germany and the Netherlands (the “topdown approach”) and at a later phase evaluate thecompetence fit of 14 participating companies with emerging and interesting ICT sectors of the chosen countries (the “bottom-up approach”). These 15 participants will be used as a representative sample of Lithuanian ICT sector competencies in our study.


3. Attributes and methodology used to choose key ICT sectors We have used three key attributes to define key ICT sector in Germany, UK and the Netherlands. These are broad adoptability of solution or service, current market size and market growth.


Broad adoptability

Solution or service has broad audience o Addressable market is wide enough

Distribution channels are accessible

Technical solution available o Allows access to broad audience (addressable market) o Allows required independence from 3rd parties (Over-the-top possibility) o Tested, scalable and widely accepted

Infrastructure present

Access to suitable devices: Smartphones, Tablets and other devices o HTML5, Application o NFC &QR codes o SMS & USSD o Sonar and others

Current market size

Market already present

Market maturity level o Too early stage => Requires high investment and marketing o Early growth => Attractive stage, since market already present o Mature stage => Attractive for process and operational innovations

Total Revenue by sector o Current revenue o Ability leverage solution or service to other sectors or fields

Investments and R&D expenditures

Market growth

ICT sector is showing high growth potential

Ability to leverage horizontally and/or vertically between industries

Ability to serve new segments (e.g. Cloud computing – SME business solutions)


13 ICT sectors are evaluated in three countries and key sectors selected based on previously mentioned attributes Broad adoptability, Current market size and growth.

4. External analysis

A. Germany –country summary


i. End consumer’s interest

1. Market opportunity Germany is not an ICT leader in terms of value added in business sector in comparison to other EU countries but the country has been catching up from its laggard position since 2008 and has the strong ambition to further strengthen its ICT sectors in the future. This ambition is formulated at the federal government’s level with the Ministry of Transport and Digital Infrastructure’s ICT Strategy Digital Germany 2015. ICT growth in terms of products and services is therefore stimulated while the good ICT resources from helpdesk operators to programmers are scarce (www.make-it-in-germany.com). This shortage of resources leads to the conclusion that the planned growth will need to be facilitated through non-German labour sources.

Opportunities in terms of defined projects, support contracts, business process outsourcing and co-venturing can arise to companies that can export these to Germany or fulfil their services there. Some of the larger ICT driven companies have large operations in Germany such as SAP, Oracle and Microsoft. The shortage of qualified ICT professionals also applies to their operations and they have to increasingly rely on third party resources in the form of project based and general temporary labour.

Connecting the described labour shortage and growth in ICT driven industries to the business cultural demands of German companies, the market opportunities, for companies that want to export ICT skills to Germany, arise as a combination of:

offering mainly technologically grounded skills such as programming on an associate level, the manager level is well represented in Germany already,

in flexible labour structures (project, temporary on-site support, business process outsourcing) according to the specific need,

with a thorough cultural understanding of German business practices in terms of language and behaviour (respect for hierarchy, professional distance etc.).

2. Trends In highly developed countries the demand for flexibility is a common macro trend and while Germany is not seen as the most flexible country on the planet this trend has also gained ground here. More and more employment contracts offer flexibility in terms of hours and locations and other signs of flexibility (i.e. longer shopping hours, individualized education opportunities) are also very visible in Germany. Reflections of this trend in the ICT world are for example the growing cloud computing and mobile device markets.

Another macro trend is returning to stronger localization, people increasingly like to have things closer by than a decade ago. It is shown by an increased demand for “made in Germany” and the fact that people buy their food from increasingly local and organic sources. This trend is not reflected in ICT yet and offers first mover advantages to successful and demanded ICT interpretations both for reaching companies and individuals. Examples could include having on site representatives for outsourced processes or having project programmers work more at the client site. Translations or facilitations of this trend into ICT products or services could also be well received.

Currently Germans mainly use the internet for communication, information and e-commerce purposes. The scope of companies in terms of ICT utilizations is obviously broader, software


solutions track everything from incoming goods through production to sales and service. There is still development in these areas for companies to play an important role. For both groups a common trend is that utilizations of ICT infrastructures have become increasingly mobile through the rise of smart phones and tablet computers. Privacy is also strongly on the agendas of both though it is issue rather than a trend. Whereas 10 years ago ICT was a topic caught in desktop and notebook computers the hardware spectrum and flexibility demand has become much broader.

In a recent survey by European IT Observatory EITO, IT decision makers were asked to identify the major trends driving development of ICT industry in Germany in 2012. Cloud computing is still the top trend for the German ICT industry mentioned by 66% of respondents, followed by mobile applications (53% of respondents), IT security (48% of respondents) and social media (35% of respondents).

ii. Infrastructural landscape and trends

1. Infrastructure Germany’s infrastructure is of high quality with slight variations in rural areas. Generally a very internet-accommodating environment with high fibre and cable based bandwidths and even LTE connections; however a few rural areas are still behind in their development. 78.4% of the German population can be called internet-users and nearly 27,5% of the population has a broadband internet subscription. While fixed phone lines are decreasing the number of mobile phone subscriptions is stable at a very high level of 130% penetration (World Bank Communication Indicators)

Digital infrastructure has recently been recognized as a hot topic by the government; the former ministry of transport has been renamed and refocused into the ministry of transport and digital infrastructure after the 2013 election. One of this ministry’s core strategies is to strengthen Germany’s ICT sector in the coming years. This includes raising the number of ICT start-ups significantly as well as better enabling non-ICT businesses in the utilization of ICT technologies. (Ministry of Transport and Digital Infrastructure: ICT Strategy Digital Germany 2015)

2. Devices Germany has the largest amount of mobile phones in the European Union and the second highest mobile penetration rate (130%) in Western Europe after Italy (147%). 94% of the overall population have at least one mobile phone Smartphone penetration has also risen from 54% in 2012 to 61% in 2013 which means that 61% of German mobile phone owners can access the internet “on the go” and “from their pocket” (Nielsen, 2013).

The internet in general has a large penetration rate of 83% in Germany compared to 73% in the European Union; these connections are increasingly made through mobile devices. Tablet penetration has crossed the 25% mark in 2013 and is forecasted to reach more than 45% in 2017. Smartphones are more popular access devices growing above EU average while the growth of the tablet penetration rate is in line with the current EU average of 25%. Just like in many other countries, the mobile internet access rate is highest among teenagers (>75%) and lowest (<15%) in the 50+ age group. (TNS Infratest, 2013: “Ein Welt ohne Internet?”)

Desktop computers are the only shrinking product category when it comes to internet accessing devices which is in line with other Western European countries.


3. Bandwidth and Services Broadband access is available throughout Germany but in certain areas the band is broader than others. Downstream connections of at least 1Mbit/second are available throughout the country, the government’s goal is to make >50Mbit/second connections available to 75% of the German population by the end of 2014 (Ministry of Transport and Digital Infrastructure: ICT Strategy Digital Germany 2015).

On the demand side the trend for SME companies and households is to go for a significantly broader bandwidth by 2025, larger companies can be assumed to go for the best available bandwidth. By 2025 100% of SME companies and 90% of households will demand to be connected.

German Bandwidth Demand 2025:

Source: Wik Consult.

This demand profile is driven by several different services categories which consume the demanded bandwidth to different degrees.

DemandLevel Min.Down(Mbit/sec.) Min.Up(Mbit/sec.) NumberofHouseholds(k) NumberofCompanies(k)TopLevelPlus 350 320 6800 300

TopLevel 200 170 12300 0

MediumLevel 70 60 13300 2700

LowLevel 1 1 4300 590

NoBroadband 4300 0


Bandwidth Demand by Service Category:

Source: Wik Consult

Companies’ utilization of digital services shows an increase that is forecasted to continue further. Electronic Data Interchange (EDI) as well as ICT based e-procurement and e-sales systems have grown in utilization and their utilizations and penetration in business world are forecasted to grow further. In 2011 Germany ranks 2nd in e-procurement value and 6th in e-procurement take-up level in the EU27. From 2010 to 2011 the e-procured value grew by 28% and the growth curve is still in its initial stages. In 2011 € 38819m was e-procured which corresponds to just over 10% (take-up level). This figure in combination with the growth of 28% shows that e-procurement has been accepted widely enough to succeed and that the growth curve is still in its initial stage. On the e-sales side Germany is close to the European average, which shows that there is still ground to gain. When consumer e-commerce first became broadly known and available through the likes of E-Bay and Amazon, the main issue holding people back was trust in the systems. Being used to handing over money for a direct receipt of goods and the fact that Germans are quite resistant to change held e-commerce back for a long time but the recent and current developments show that this lack of trust has significantly decreased and that e-commerce has been on the rise for a while. While the penetration rate is already very high, further innovation challenges remain especially in the areas of payment systems and supply chain speed.

ServiceCategories ServiceExamples BandwidthDemand

CloudComputing SaaS,IaaS,PaaS,... Veryhigh

MediaandEntertainment Video/Film,Web-TV,HD-TV,3D-TV,UltraHD-TV High

Communication Telephony,Chats,IM,Videotelephony Medium

HomeOffice VPN,Videoconferencing,E-Learning… Veryhigh

Gaming Online-Gaming,MMOG,virtualworlds,.. Medium

E-Health Monitoring,Remotediagnostics,AAL,... Low

E-Home/E-Facility SmartMeter,HomeNetworks,SmartGrid,Security,... Low

MobileServices Location-basedServices,MobileBusiness,Apps,WiFi-Offloading,... Low-Medium

BasicInternet Websurfing,News/Mail,Photo,Downloads,Videoclips,SocialNetworks,OnlineStorage,... Low


Proportion of E-Revenue in Total Revenue: EU Comparison

Source: Eurostat

iii. ICT employment and available workforce

1. Employment and education level Good ICT employees are wanted in Germany, especially when it comes to the high end functions. There is a variety of available functions in Germany from simple scripted helpdesks to CIO functions. The trend for larger companies is to outsource the lower end of ICT functions and strengthen the high end of the scale in-house. Highly educated and experienced ICT workers are especially sought after; this is also shown by the presence of many specialized ICT recruitment / headhunting companies in Germany. The only sector in which ICT employment has decreased is the ICT hardware-manufacturing sector

0 5 10 15 20 25 30

Bulgaria

Romania

Cyprus

Italy

Latvia

Poland

Lithuania

Portugal

Slovakia

Estonia

Malta

Netherlands

Austria

Slovenia

Belgium

Spain

France

Iceland

EU(28countries)

Germany

Croa a

Finland

Norway

Hungary

UnitedKingdom

Sweden

Ireland

Luxembourg

CzechRepublic

%ofturnover


Salaries for ICT workers vary largely by function and education level, the monthly average salary is € 3766 and the distribution by function is shown below:

Average Monthly Gross Salary (€) by ICT Function in Germany

Source: Salary Explorer. Note:Additional labor cost at 21% are paid on top of Labor costs (Gross Salary) Redline represent average salary (Gross salary), Blue line represents Average Salary (Net salary).

2. Available workforce and trend Germany has the second largest ICT workforce in Europe but it also has the largest population. In comparison with the other two countries in scope, Germany has the smallest percentage of ICT workers in its population. The percentage is actually in line with the EU average which shows the heritage of Germany’s former position as a European ICT laggard. Especially developers and expert level resources are in high demand. However the country is catching up and especially highly skilled university level ICT related educations are stimulated which is also driven by the Ministry of Transport and Digital Infrastructure’s ICT Strategy Digital Germany 2015.

Populations and ICT Workers:

Sources: Eurostat 2011, CIA World Factbook 2013.

The German government’s ICT expansion strategy clearly aims at increasing this workforce by creating more education opportunities and broader as well as more employment opportunities for ICT workers. One of the strategy’s central goals is to create 30000 new jobs for ICT workers in Germany by 2015. (Ministry of Transport and Digital Infrastructure: ICT Strategy Digital Germany 2015) In ICT, jobs usually create other jobs. One could think of taking over outsourced processes or providing project based programming services to the broadening industry.

2701,93

2954,82

3322,66

3667,51

3976,06

4226,53

4432,23

4952,53

5106,2

5236,88

5599,88

0 1000 2000 3000 4000 5000 6000

Web

Helpdesk and Support

Security

Other IT Jobs

Developers and Programmers

Database and Data

Administrators

Consultants

Networking

Analyst and Architects

Managers and Supervisors

Labor Cost

Average Salary

Country ICTWorkers Population InPercentofPopulationGermany 1373000 81147265 1,7%UK 1481000 63395574 2,3%Netherlands 339000 16805037 2,0%


iv. ICT investment ICT investments in Germany show moderate growth in spite of the European recession. Total spending amounted to €47 billion in 2012 and Germany’s GDP in the same year was €3401 billion meaning that ICT spending accounts for 1,4% of Germany’s GDP.

ICT Investments (billion €) per Category in 2011 & 2012

Source: Business Wire

Other sources quote similar numbers on hardware and software sales but differ when it comes to service sales, these differences are largely based on the definition of ICT service sales.

v. Major clusters Germany consists of sixteen federal states and companies that want to support the production industry with ICT solutions should focus on the federal states on NordrheinWestfalen, Bayern and Baden-Wurtenberg. These three combined are home to 60% of the German production industry (ING, 2011).Germany is also home to several ICT clusters with the most notable one in the Rhine-Main-Neckar area. Software development centres within this region are in the cities of Darmstadt, Karlsruhe, Kaiserslautern, Saarbrücken and Walldorf.

The IT-Cluster Rhine-Main-Neckar is a cluster of high-tech companies located in the Rhine-Main and the Rhine-Neckar metropolitan areas in Germany. It's currently one the world's largest IT and high-tech clusters. The region is home to companies such as SAP AG, Software AG, T-Systems or Crytek. The region has been referred to as the “Silicon Valley of Europe” and is seen as one of the major ICT clusters in the world.

Smaller, more service driven ICT clusters can be seen in any large German town with sufficient industry demand. The ICT clusters of Düsseldorf and Berlin should be mentioned as particularly well known. Especially Berlin is home to several, very innovative ICT companies.

In Germany, clusters are wanted and supported by the federal and local governments as Germany’s industry has always been grouped in certain cluster structures.

vi. Governmental Policy and Regulations It is Germany’s clear policy to strengthen the ICT industry and its sectors. After the 2013 election the former Ministry for Transport has been renamed into the Ministry for Transport and DigitalInfrastructure. The country has recognized its pre-2010 ICT laggard position in Europe and is willing to invest to become one of the ICT leaders. This is based on realizing that Germany has always been a country of ideas and innovations, a country where people like to create things. It is also based on the fact of having a good ICT infrastructure and successful ICT companies such as SAP present already.

Furthermore Germany has clearly realized the growing impact and influence of ICT in professional and individual lives and wants to move to the forefront of this trend. In 2010 government has developed its ICT Strategy Digital Germany 2015 aimed at growing and broadening the current ICT industry and its sectors, the defined goals are:

Category 2012 2011 Growth 2011 - 2012

Hardware Sales 12,6 12,4 1,2%

Software Sales 15,1 14,9 1,6%

Service Sales 19,3 19,1 1,2%


Strengthen competitiveness through the use of ICT in all segments of the economic process

Expand digital infrastructure and networks to meet future challenges

Safeguard the protected and personal rights of users in the future Internet and in the use of new media

Step up research and development in the ICT sector and speed up the translation of R&D findings into marketable products and services

Strengthen basic, further and continuing education and training and competencies in handling new media

Make consistent use of ICT to cope with social problems, including sustainability and climate protection, health, mobility, administration and the improvement of the quality of life of citizens

These goals show the broad and deep impact of this strategy as ICT is reaching into all areas of life. Especially the commitment to health and climate protection shows that the strategically driven ICT investments of today will have far reaching impacts even beyond 2015.


i. Major ICT sectors

Sector Broad adaptability Current market

size

Market growth Score (/5

stars)

Telecoms Audience: direct end-

consumers, B2B and B2C

business

Technical solutions: available

but continued room for

innovations

Infrastructure level: good with

room to improve in

broadband width and other

areas

Device access: High mobile

phone penetration of 130%,

35 million internet subscribers

(estimated); 46 million 3G/4G

subscribers (2013)

€69272 million

(2010) for classic

(network mvn

operators)

telecom market

10,2 million

VOIP subscribers

in 2012

(PointTopic)

Fixed lines decline, mobile penetration is stagnant,

3G and broadband subscriptions are still strongly increasing. 3G has grown from 12,9 million subscriptions in 2009 with a compounded annual growth rate of 37%. Broadband subscriptions grow at more than 2% per year. Broadband bandwidth itself is also growing further stimulated by the government

VOIP subscribers yearly growth rate of 14% in 2012

****

Payment

Services

Audience: direct end-

consumers, B2B and B2C

business

Technical solutions: other than

credit cards, online banking

and direct debit mainly PayPal,

others have not broken

through

Infrastructure level: available

infrastructure for online

payments, not fully ready for

other mobile payment forms

Device access: high due to

broadband and mobile phone

penetration

10 million PayPal

accounts

Full population

has access to

bank based

methods (credit

and directdebit)

Number of non-cash transactions growing at 2,5% / year (CapGemini)

****

E-

commerce

Audience: Broad B2C and

B2B audiences

Technical solutions: mainly

website or web portal driven.

Most B2C solutions are

available on mobile devices

Infrastructure level: broadband

speed level is sufficient to

support website and portal

B2C: € 33,5

billion yearly

revenue, 41

billion yearly

buyers in B2C e-

commerce.

Amazon

dominant in the

B2C market

B2B:4,7% B2B e-

Current growth rate of 21,3% Market has more than doubled since 2009

****


traffic.

Device access: full access for

B2B world, almost full access

for B2C world

commerce

growth (2011) at

a market size of

€15,6 billion


Cloud

Computing

Audience: SME adoption

24%, trade industry adoption

29%, service industry 25%

Technical solutions: Available

/ Mature

Infrastructure level: Mature

Device access: High

Total B2B market

size:

€4.6 billion

Cloud services

(SaaS, PaaS,

IaaS): €2.3 billion

Cloud integration

and consulting:

€0.8 billion Cloud

technology:

€1.5 billion

Growth forecast for 2014 is at 50% Total B2B market is expected to reach €18.5 billion by 2017 Cloud services growing to reach €10.9 billion by 2017 Cloud integration & consulting reaching 2.6 by 2017

****

Big Data Audience: Largely driven by

internet, e-commerce and

advertising sectors, however

growth is expected in

optimized production,

logistics, and sales processes

services

Technical solutions: Data base

and analytics technology

expected to grow

Infrastructure level: Lack of

regulatory framework will

make the country’s companies

in disadvantage competitively

Device access: Medium/high

(ongoing transition to omni-

channel data dashboards

Total market size:

€651 million

Hardware

revenue:

€215 million

Software revenue:

€228 million

Service revenue:

€208 million

Total market is expected to grow to 1,687 million by 2016 Hardware revenue reaching €506 million by 2016 Software revenue reaching €523 million by 2016 Service revenue reaching €658 million by 2016 Based on data volume growth, following sectors to be addressed:

IT, Telco, Media

Mobility, logistics and health

Finance & Insurance

Professional services

***

Business

Solutions

Audience: Industry specific

solution audience and SMEs

Technical solutions: Mature

(ERP, CRM, ECM, BI,

product lifecycle management

and analytics) Infrastructure

level: Mature Device access:

High

Total market size

of ERP

technologies €2.5

billion

More than 70%

of all companies

expect social

applications

increase during

the next two

years

Fastest segment to recover are enterprise content management (ECM), Business intelligent (BI),

ERP expenditures is expected to remain relatively constant. The Best market opportunity exist for those providing more industry specific solutions paired with improved usability, business analytics capabilities for processing big data and integration with business processes and systems Smart social business platforms market growth potential is one of highest in the ICT sector in Germany

***


product life cycle management (PLM)

IT Security Audience: Technology based industries,IT companies (20%), data processing companies, electronic components, telecom, entertainment (12%) Technical solutions: Mature

Infrastructure level: Mature

Device access: High

IT security goods

and services

consumed in

2012: €6.6 billion

IT Security was

major trend

according to 48%

of IT decision

makers

Established solutions such as firewalls, encryption, virus scanners, and signature verification will not lose their relevance. Growth potential in the area of ICT and software almost inevitably means growth potential in the area of IT security.

***

vii. Key ICT sector analysis

1. The Telecom Sector The German telecom sector had a total value of €60600 million in 2009 the German telecom sector was already the biggest one in Europe and has grown further. (Eurostat).With the second highest mobile penetration rate of 130% in Western Europe and 94% of the population owning at least one mobile phone Germany is the largest national mobile phone market in Europe. There are four network operators and a clear market leader cannot be pointed out.

Mobile Phone Subscriptions to Network Operating Companies (2/3 of market)

Source: GSMA

The percentages above relate to 2/3 of the mobile phone market, 1/3 of the market are served by mobile virtual network operators (MVNO). There are 120 companies offering 186 mobile phone service brands in Germany, which means that 116 companies offer MVNO based brands. (prepaidmvno.com). These MVNOs use one of the four networks each in the following distribution. Many companies have gotten into providing MVNO services even supermarket giants Aldi and Lidl offer mobile phone services, other newcomers are purely dedicated Network Utilization by MVNOs in Germany.This makes MVNOs attractive partner or distribution channel to address specific target segments with new services. Looking at players

Deutsche Telekom

33%

Vodafone 29%

E-Plus (KPN) 21%

O2 (Telefónica)

17%


involved, MVNO sector can also provide cross-sectorial opportunities sectors for example in retail and media.

Mobile phone subscription to virtual network operators (1/3 of market)

Source: prepaidmvno.com

O2 and E-Plus have announced plans to merge in 2014, currently both EU and German market regulators are evaluating these plans critically. This merger further shows that the mobile phone subscription service market has reached such a penetration and saturation level that it is virtually only possible to gain market share by stealing it from a competitor. It can also be observed that an increasing amount of brands compete based on low prices which is another indicator for a mature market. Providing services or solutions that can facilitate in the consolidation phase is an opportunity for strong ICT companies. Specifically post-merger integration processes can offer opportunities. However, small and medium IT service market players are not well positioned to win such contracts.

Digital television is by now the standard in Germany, analogue satellite television has been discontinued at the end of 2012 and analogue terrestrial television reception has also been discontinued in most areas. The current standard followed is DVB-T. However there is still the basic decoding price / cost associated with television reception which does not include further costs for pay television or comparable services. Internet protocol (IP) based television is also on

E-Plus 38%

Vodafone 26%

T-Mobile 24%

O2 12%


the rise. IPTV market is largely dominated by few major players (Alice TV owned by Telefonica, Entertain owned by Deutche Telecom, and Vodafone), but new independent over-the-top players (including international) are expected to enter into market. While IPTV can currently only be received through internet connections it is highly likely that IP-television will also be accessible through cable or other means. Pay-tv services are also rising in popularity, it is estimated that the number of subscriptions will rise to 23 million by 2018 (digitalfernsehen.de). Providing services that help understanding and improving the current architecture in the phase of rising subscriptions and demands offers opportunities for ICT companies.

Source: TIME 2013 TV platforms in Germany

Cable is still the biggest digital TV channel (46.3%), but is losing market share for Satellite platforms (46.2%). Digital terrestrial television (DDT) is decreasing, but still holds 11%, while IPTV is growing, but holds only 5% market share In Telecoms market, Deutche Telekom holds dominant position with 67% of 39.9 million landline connections (2009) Leading German broadcasters and platform operators are looking for further monetization opportunities from Pay-TV to HD fees for end users and to multi-criticiced carriage feed for TV channels.

There are 10,2 million voice over IP subscribers in Germany in 2012 and the growth in 2012 was 14%. (point-topic.com). Looking at VOIP subscriptions in terms of a percentage of broadband connections it becomes apparent that Germany is not ahead as only 34,3% of all broadband subscribers also subscribe to VOIP services which makes it 10th country in the corresponding ranking. The Netherlands is the 4th country with 72% of all broadband subscribers, the UK is not in the top ten. Topping the ranking is France where more than 93% of broadband subscribers have a VOIP subscription. (point-topic.com). There are around 18 major VoIP service providers in Germany. These VoIP service providers offer primarily full service products aimed at the small to medium sized business telephone market. This can provide opportunity to address SME segment in market via VoIP players.

34% of Germans have a fixed broadband internet subscription and 41% have a mobile broadband subscription. (GSMA). The yearly growth in broadband subscription is just above 2%. (point-topic.com).

In general the German telecom sector has entered a phase of consolidation; there are a number of rumours about possible mergers or acquisitions between major players. For example Vodafone is expected to acquire Kabel Deutschland (digital television) and Verizon has looked at the possibility of acquiring Vodafone in the past. (frasee-investors.com).


Given the governmental digital growth strategy our expectation is a current and future high level of IT and R&D expenditures in the telecom sector. Public investments and incentive usually drive investments in the private sector by subsidising them in various ways. Within these R&D expenditures we expect the big four network operators to invest mainly into their network, also in order to fulfil the bandwidth demands of the future. Other companies will invest in a broader way and can be closer to the end-user.

2. Payment Services Finance and payment service is a sector where Germany still has room for innovation. This is mainly a cultural issue as Germans need full trust into a payment method before adopting it. Germans are generally very concerned about their privacy and guard their valuables well which is the cultural aspect driving this adoption issue. Therefore Germans are also very careful when it comes to surrendering their bank or credit card details.

PayPal has managed to bridge this trust gap to a large extent and is the second most preferred e-commerce payment method in Germany. It is even more preferred than bank authorisations (automatic deductions) and credit card utilization. When it comes to e-commerce, the graph below shows which payment methods Germans prefer in e-commerce payments.

Payment Methods in E-Commerce

Source: BITKOM 2013

Because Germans are conservative in adopting payment methods it is important to create trust through reliability and privacy. If this can be done successfully then a lot of consumer whitespace is available to successful incumbents.

Near field communication (NFC) through RFID or other means is an interesting field that many parties are looking into for developing new payment systems. These solutions are an interesting alternative to carrying cash and if developed well they can speak to the safety and privacy concerns. Both, banks, mobile phone network operators and other parties are spending resources on creating potential NFC solutions for consumers. Currently the mobile network operators are ahead in introducing workable solutions, all four of them have pilot projects running and Vodafone has recently introduced a market ready solution called NFC mobile wallet which is currently in its starting phase. Banks are active because they have seen through the rise

0% 10% 20% 30% 40% 50%

ClickandBuy

Cash on delivery

Direct transfer

Advance payment / bank transfer

Credit card

Direct debit

Paypal

Purchase on account


of PayPal that they need to be closer to the forefront of developments in order not to lose control of financial transactions.

3. E-Commerce E-commerce had a difficult start in Germany but has grown throughout the last years and is expected to grow further. It is one of the biggest B2C e-commerce sectors in the world and had total revenue of € 33.5 billion and 41 million buyers in 2013. (Germany Trade & Invest: The E-Commerce Market in Germany). Its growth rate of 21,3% is also impressive, the sector has more than doubled in revenue since 2009. (Germany Trade & Invest: The E-Commerce Market in Germany). The B2B market amounts to € 870 billion and has seen impressive yearly growth throughout the last years. The B2C market is clearly dominated by Amazon and the Otto GmbH as the table of the top ten B2C sellers’ shows.

Top 10 B2C E-Commerce Retail Companies in Germany 2011

With mobile phones sales revenue of € 8,8 billion (on & offline), mobile devices such as tablets and phones account for a large part of the B2C revenue but only 2%-10% of the retail goods are bought with a mobile device. (BITKOM). This shows large room for growth as people increasingly use their mobile devices to access the internet. This is further amplified by the fact that 25% of smartphone users use their phones for e-commerce purposes. The current challenge for companies active in e-commerce is to redefine the “e” from electronic to everywhere for all users.

Next to secure payment systems, one of the German growth drivers has been the excellent service provided by B2C e-commerce retailers. Examples of this include fast delivery, free returns and efficient handling of order and return processes. Concepts like same day delivery have created flexibility and speed on the customer side and challenges on the retailer side. Especially the return stream has become larger than in the pre-e-commerce mail-order world, 40% of all German e-shoppers already take potential returns into account. Better solutions are needed in the future to handle the increasing supply chain challenges.

Method of payment is one of the most important success factors in e-commerce. A study conducted by the E-Commerce-Center confirms that over 80% of people making online purchases consider the availability of their preferred payment procedure to be very or absolutely important. Purchase on account, followed by PayPal and direct debit remains the preferred payment options in Germany. Payment methods are a direct factor when it comes to acquiring new customers as they evaluate potential retailers also by the availability of their preferred payment method.

A rather new development is the combination of online and offline services, customers demand a multi-channel experience as they want to access the retailers through their momentarily preferred method which can differ by location and personal situation throughout a single shopping process.

No. Name Type CountryofOrigin Revenue(EURMillion)

1 AmazonEUS.a.r.l. Allround USA 34332 OttoGmbH Allround Germany 15523 Neckermann(OttoGmbH) Allround Germany 6914 Notebooksbilliger.deAG Computer,phonesconsumerelectronics Germany 4555 ConradElectronicSE Allroud Germany 4086 VerlagsgruppeWeltbildGmbH Allround Germany 3717 BonprixHandelsgesellschaftmbH Allround Germany 3568 EspritRetailB.V.&Co.KG Apparel,textiles,shoes USA 2979 CyberportGmbH Computer,phonesconsumerelectronics Germany 28410 AppleInc. Computer,phonesconsumerelectronics USA 273


E-commerce has become an essential channel for every retailer and will gain further in importance. Looking at extensive growth figures, it is safe to say that R&D investments will remain high and challenges are plentiful. Companies that can provide solutions in the areas of payments, supply chain and customer service can succeed in partnering with German based e-commerce retailers.

4. Cloud Computing Following a joint study by BITKOM and KPMG, the attitude of German companies towards cloud computing has improved significantly between 2012 and 2013. More than one third of all German enterprises already use cloud computing solutions; with a growth rate of 32% in one year flagging up the significant growth potential for the coming years. In 2014 growth in cloud services could even reach 50%, which makes it the hardest growing ICT sector in Germany (Germany Trade & Invest).

Currently, cloud computing accounts for 5% of corporate German ICT expenditures with a total size of € 4,6 billion. Due to the current rapid growth the sector is expected to account for € 18 billion by 2017. (Germany Trade & Invest). In terms of the sector’s revenue breakdown 50% of the current cloud sector revenue is incurred through cloud services, 30%-35% comes from cloud technology and 15%-20% comes from cloud integration and consulting. (Experton Group 2013).

Germany has comprehensive cybercrime legislation and good intellectual property protection in place, the combination of both provides a sufficiently good legal basis for enabling the cloud sector. (cloudscorecard.bsa.org) Also the ICT Strategy Digital Germany 2015 is geared at adding bandwidth to Germany’s broadband network drives the positive development of cloud computing.

As the fastest growing German ICT sector, cloud computing offers opportunities both for new cloud companies and service providers to the sector.

viii. Commonly used outsourcing destinations and practices Growth in ICT opportunities and investments have driven outsourcing of inputs since the 1990s, Germany is no exception to this practice. About half of all German companies outsource part of their corporate IT function, half of the outsourcing companies’ contract with multiple sources and destinations. (European IT Outsourcing Intelligence Report: Germany, 2012).

Outsourced projects mainly fall into four different areas. Outsourcing companies were surveyed to understand the preferred outsourcing project areas; multiple answers per respondent were possible.

Outsourcing Project Areas in Germany


Source: European IT Outsourcing Intelligence Report: Germany, 2012.

The main reasons for companies to outsource ICT areas are in line with other countries where outsourcing is high on the agenda:

1. reducing operating costs, 2. freeing up key resources, 3. focuson core competence.

When it comes to choosing outsourcing destinations geographical proximity is a surprisingly important factor for German companies, the two and equally most important factors are the availability of talent and cultural proximity. Language skills (German) and positive references from other German companies are also of high importance. (European IT Outsourcing Intelligence Report: Germany, 2012).

When it comes to choosing an outsourcing partner experience and references dominate the list of factors. Low cost and successful completions of pilot projects are also important when it comes to choosing the right partner (European IT Outsourcing Intelligence Report: Germany, 2012).

Combining all of these results and factors it becomes clear that Germans prefer near-shoring and need trust, cultural proximity, cost advantages and good references to make an outsourcing decision.

00% 10% 20% 30% 40% 50% 60% 70%

Web

Mobile

Enterprise

Cloud


ix. Home market and ICT exports

There are more than 72000 ICT companies in Germany, employing 876000 people. More than 90% of IT companies are active in IT and software development. However, today’s market for ICT services in Germany suffers from a shortage of IT professionals. The skills shortage predicted for 2012 indicates that more than 32000 additional IT professionals are needed in Germany (ciklum.com).

There are still ICT exports but Germany continues to be a net importer of ICT services and goods. This is particularly in the understanding that Germany is a net exporter in most categories of goods. On the other side there is a strong yearly growth in ICT service exports in Germany of almost 10% on a yearly basis since 2009(data.worldbank.org/indicator/BX.GSR.CCIS.ZS).

x. Commonly used partnership practices

1. Business culture and languages requirements Germany’s business culture is characterized by exactness and predictability. It is important to deliver exactly what has been promised and for when it has been promised, Germans do not like surprises when it comes to business. It is also important to be able to communicate in German to achieve a successful business relationship. Not all German companies are international and in international companies not every employee has international contact points. Generally speaking Germans are not as good at English as for example Scandinavians or people from the BeNeLux. Therefore it is important to speak the language and offer predictability to succeed in partnering with a German company.

2. Procurement practices and regulations Companies and institutions follow professional procurement processes when it comes to ICT, which is due to the generally high total cost and mid-long term orientation in the ICT category. Bidding ICT providers must expect to go through a request for information (RFI) and request for proposal (RFP) process where they will be asked to submit extensive company information and cost breakdowns. This is usually followed by several rounds competitive negotiations. Governments and institutional customers usually have to follow a public RFP process, which is less flexible than corporate RFP processes and usually takes more time to complete. It is worth informing about the specific bid process and its requirements before bidding for a larger project.

Bid ranges tend to vary significantly according to project size, ranging between €70,000 and several hundred million Euros. Larger contracts, as in the Netherlands and UK, tend to be broken down into smaller sub-contracts by the successful bidder. Where sub-contracting involves body shopping, local consultants are remunerated at a rate of around €60-120 per hour.

xi. IT associations, and other organization bodies The most significant organizational body is the government’s ministry of transport and digital infrastructure. This is the top down strategist of all activities. Another important political body Is the Federal Network Agency which regulates the detailed policies The Fraunhofer Institute is an important and the biggest ICT research institution in the sector. BITKOM is the most important ICT industry association in Germany. Contacts to all three can facilitate a desired market entrance further as well as linking up with Germany Trade & Invest, a foreign trade and investment association in Germany.

http://data.worldbank.org/indicator/BX.GSR.CCIS.ZS


eHealth:ghec.de, BVMed Association

Business solutions:cebit.de, crm-expo.com, entscheiderforum.net, germantop500.de, systems.de

Bundesnetzagentur: Information about regulations and consumer rights in the German telecommunications market. http://www.bundesnetzagentur.de/cln_1911/EN/Home/home_node.html;jsessionid=97B27AC21800F20CF5A0621678313AE6

BundesverbandInformationswirtschaft, Telekommunikation und neueMediene.V.: Association of more than 1,700 businesses in the IT, Telecom and New Media industries in Germany.

http://www.bitkom.org/en/Default.aspx

Association of Telecommunications and Value-Added Service Providers: Represents 90 active telecom companies in the German market and works with government agencies to promote business interests in the telecom sector.

http://www.vatm.de/128.html

http://www.bundesnetzagentur.de/cln_1911/EN/Home/home_node.html;jsessionid=97B27AC21800F20CF5A0621678313AE6

http://www.bundesnetzagentur.de/cln_1911/EN/Home/home_node.html;jsessionid=97B27AC21800F20CF5A0621678313AE6

http://www.bitkom.org/en/Default.aspx

http://www.vatm.de/128.html


B. UK – Country summary

ii. End consumer’s interest

1. Market opportunity Despite on-going economic struggles in 2013, the UK economy has benefited from a small boom in manufacturing and strong inward investment in the ICT sector in recent years. According to the European Information Technology Observatory (EITO), the UK ICT market is the largest in Europe by revenue (see bar chart, “Europe’s top ICT Markets by Revenue”, below) and growth areas include cloud computing, e-commerce, e-health and business solutions.

The ICT sector contributes 8% of GVA to the UK economy (Gross Value Added: contribution a sector makes to GDP before taxes and subsidies are applied) and more than two million are employed in the sector. London has Europe’s largest end-user market: 392,000 registered businesses and a population of nearly 8m. Within the ICT market, telecoms and info tech services dominate, as illustrated below:

Source: London & Partners, Ltd.

Within info tech, the software industry is estimated to be worth £9.2bn – the second most valuable market in the EU and accounting for 5% of the worldwide market. The IT service industry is estimated to be worth £25.2bn – accounting for 21% of the EU market and 7.2% of the worldwide market.

The key ICT sectors identified and analysed for the UK are cloud computing, e-commerce, e-health and business solutions. While each of these sectors has its own unique context and opportunities, the cross-sector opportunities in the UK are particularly strong among these sectors because of the combination of the following:

Advanced, integrated infrastructure.

Vibrant investment environment.

A dynamic market attracting international talent and businesses.

Clusters across the country supported by the government, incubating start-ups – many on which have grown to be highly successful.

London: A hub of innovation and global finance, London has been described as the “gateway to Europe” because it is home to the European headquarters of global


companies and offers access to these companies, which are keen on optimising their ICT spends.

The UK’s unique position in regard to the above presents broad opportunities to a wide range of ICT sectors and, as such, is certainly not limited to the four key sectors mentioned (cloud computing, e-commerce, e-health and business solutions). For example:

The UK is home to global defence companies and a thriving space industry offering potential for companies specialising in satellite technology.

Concerns over data security is driving growth among consultancies and professional services companies in the cyber security and data protection industries, fuelled by growing demand from large retailers, banks and mobile network operators.

The 3D CAD sector is well-established in the UK with small and larger companies tapping the VARS (Value added resellers) and bundled add-ons market for industry-leading products such as AutoCAD.

VARS opportunities are also present in the business platform sector, with a market for Microsoft Dynamic bundles and opportunities being tapped by both small and larger players.

The UK is home to a large financial services sector offering various opportunities to payment companies, including international transfer services, app-based m-commerce, Omni channel technology and cross-sector opportunities in banking, retail and telecoms.

2. Trends The UK is a competitive mobile market for 4G providers. For example:

O2, Vodafone and Three joined the 4G market in 2013, upsetting EE’s (Everything Everywhere) monopoly.

4Gis drivingsmart phone adoption (the UK already has the highest smartphone penetration in the EU5).

Financial services are increasingly being accessed via mobile banking apps, with most commercial banks offering a mobile app to customers (the UK mobile banking market grew by an estimated 47% in 2013).

E-commerce is also expected to benefit from this trend. For example:

Advances in mobile data access have helped drive a 47% increase in total e-commerce sales in the UK from 2008-2012.

o This is because mobile device adoption has driven adoption of e-commerce o Tablet e-commerce in particular is expected to outpace smartphone e-commerce

in the UK and contribute 25% of e-commerce sales by 2017

A major driver of e-commerce and m-commerce in particular has been the digitization of coupons and discount vouchers. The UK hasthe highest paper coupon usage in Europe with an estimated combined redemption value in 2013 of £2bnandhas been described as having an “extreme” coupon culture.

This coupon culture is now transitioning to e- and m-commerce, with cashbackwebsiteQuidco dominating the market. Quidco has:

3.5m users,

4,000 member/participating retailers and retail chains, and

90,000 new members joining each month.


There is also a strong, exponential trend among UK companies to better target their services for e-commerce and m-commerce users by harvesting big data to determine consumer trends and sentiment.

Finally, MVNOs (Mobile Virtual Network Operators) are allowing more players to come into the UK market and provide services independent of bandwidth operators. For example, supermarket retailer Tesco has used its capacity as an MVNO tolaunch 4G plans to all customers in October 2013and to grow its customer base to more than 3m in FY 2011/2012

Tesco is an example of leveraging MVNO capability to attract a wider customer base through the marketing, special offers or e-commerce that MVNO data allows. It therefore can offer an advantage over traditional non-MVNO services such as SMS or selling minutes, and allows the new data services to be bundled into packages. Partly as a result, bundles have proliferated in the UK, including bundles offered by:

Tesco,

Virgin Mobile – the world’s first MVNO,

Sky: considering becoming an MVNO to offer data to customers and support its popular Sky Go “TV Anywhere” package (as of 2013),

BT: announced in October 2013 that it will return to the mobile market after a 10-year absence, partnering with EE to provide MVNO services.

Cloud computinghas a role in facilitating both e-commerce and MVNO services (for example through cloud company SpatialBuzz) by offering simplified customer experiences – cloud computing is therefore also a key sector in the UK market.

iii. Infrastructural landscape and trends

1. Infrastructure UK ICT trends are being facilitated by infrastructure investment. For example, investment in superfast broadband (SFBB) is expected to provide a downlink of 24 Mb/sec to 90% of local authority areas by 2015. The government and private sector have also worked together to increase public wifi access; for example, through Virgin Media’s partnership with Transport for London, or through BT’s “open zones”. The government has also sought to increase bandwidth efficiency by auctioning off spectrum in 2013 as part of its LTE and digital strategy. The principal targets of the government’s strategy for ICT infrastructure are featured in the timeline below:

The principal targets of the government’s strategy for ICT infrastructure

Broadband Rural Broadband “Creating the best broadband in Europe by 2015” 2015

Adequate BB to all Adequate broadband access and capacity for all 2020

Fiber to UK

Cabinet

BT fiber reaches two-thirds of UK population 2019

IPv6 Migration from IP4 to IPv6 Core + ISP’s service offering 2017

Government Capacity “Internet of Things” 2030

PSN Installation and migration of services to PSN 2016

Mobile 4G/LTE 0.8/2.6GHz public spectrum auction 2013; LTE services 2013; 2024


evolve

Femto/mesh

technology

Femto/Mesh networks established 2019

Source: adapted from Engineering for the Future

Key infrastructure facts and figures:

Telecoms o Fiber optic penetration: 50% of households. o Average range of fiber broadband speeds: 22-35Mbps (download), 6.7-8.8

(upload). o Mobile penetration: 124%. o Fixed broadband take-up: increased from 3% in 2002 to 74% in 2010. o Average broadband speed: 6.8 Mb/sec (2011). o £830m allocated by UK government to assist in improving the UK broadband

network, including achieving 90% superfast broadband coverage in each local authority area by 2015.

Government investment in IT and data processing o In 2003, the government had 100 major IT projects valued at £10bn. o In 2009, annual government expenditure on IT projects was £16bn. o One of the largest projects in recent times was the National Health Service

(NHS) IT Project, worth £12bn. o Cloud computing provides greater business efficiency and lower start-up costs - in

line with government objectives. o The government’s private cloud computing program, G-Cloud, is expected to

enable £3.2bn in government savings.

2. Devices Mobile device penetration in the UK is 124% for all handsets (2011) and 51% for smart phones in Q4 2012 – up from 30% in Q1 2011. The UK has the highest smart phone penetration of the EU5 (UK, Spain, Germany, Italy and France) with 41.9m smart phone users forecast by 2016 (65% of population). Tablet penetration is currently 29% (Nov 2013). This compares favorably to both Germany and the Netherlands, as indicated in the table below:

Tablet penetration

Country 2013 penetration 2017 forecast

UK 27% 50% (regular user of tablet)

Germany 25% 45% (penetration)

Netherlands 23% -

The high rate of tablet adoption in the UK is driven by the availability of low-cost Android tablets. For example, Tesco launched Hudl in September 2013, a low-cost alternative to Apple’s iPad, which currently still has the largest market share. Tablet adoption by businesses is


also expected to fuel growth as the global forecast for the market share of enterprise devices is expected to rise to 20% of all tablet devices by 2017.

3. Bandwidth and Services UK fixed-line residential broadband speeds have been steadily increasing from an average speed of 3.6Mb/sec in November 2008 to 14.7Mb/sec in May 2013. Moreover, by May 2013, 19% of residential connections were “superfast” (30Mb/second or more), more than doubling on the previous year. Higher speeds have been made possible, in part, by Virgin Media’s network upgrade to double its customers’ broadband speeds, resulting in average speeds on the network of nearly 35Mb/sec.

Bandwidth is expected to increase further due to the spread of fibre optic cable, which currently covers only 50% of UK households. The median household is expected to require 19Mb/sec of bandwidth by 2023 and the top 1% of households by usage are expected to require 35-39 Mb/sec. The government is also moving to reduce the bandwidth required for signals in a bid to tackle a pending “spectrum crisis”. The UK regulator, Ofcom, has sought to enhance LTE by exploiting the spectrum made available by the digital switch over and auctioned spectrum in 2013.

There are strong service trends in e-commerce (including digital coupons) and also in mobile media penetration:

56% of mobile users use mobile media

34% use location based services

63% use social media

66% use web browsing

56% use applications

26% use Mobile shopping/m-commerce

E-commerce: a. 19% of all UK sales revenue came from e-commerce in 2011 b. 95% of e-commerce sales were B2B in 2011, 5% were B2C c. In 2012, online food sales grew 27%, online department store items grew 25%

and clothes sales rose 15%.

iv. ICT employment and available workforce

1. Employment and education level According to GCSE (General Certificate of Secondary Education) figures, the number of people studying ICT fell to 61,022 from 73,519, while the GCSE ICT short course had the largest decrease of all subjects, falling 27% compared to last year. This trend is also reflected in higher education (university/college) enrolment in computer science subjects: computer science is the only discipline which has seen a decline in higher education enrolment (by about 30,000) between 2002 and 2011. As a result, it has been claimed that the UK is set to suffer from a shortage of native IT talent in the next five to ten years. Nevertheless, employment in the IT industry is expected to grow 2.19% per annum between 2010 and 2019. Conversely, employment in the telecom industry is expected to decline. However, despite the economic opportunities to native IT personnel, the offshoring of IT activities might create challenges by dissuading young people to develop career paths or skills in certain areas, such as mobile computing projects (which represents the majority of outsourced ITO projects in the UK) or cloudsourcing (the UK offshoring market for cloudsourcing increased 8% between 2011-2012).


2. Available workforce and trend More than two million people are employed in the IT workforce in the UK (2013): including 597,000 in the IT industry and 650,000 IT professionals working in other industries (2011). In recent decades the demand for technical skills in operating systems, programming languages and system fundamentals has fallen; instead it has been replaced by a focus on applications and integration. As ICT continues to become embedded in operating and regulating ICT activities in other sectors, a skills gap has emerged due to a lack of higher education enrolment in computer science subjects. The ICT skills gap in the UK is said to cover all sectors (e.g., education, enterprise and government) and all professional development levels (e.g., those in entry positions as well as senior positions requiring many years of experience. The high demand for skilled IT professionals translates to a relatively low unemployment rate of 3.3% (2011) and a lack of adequate training in the workforce – particularly among IT professionals in SMEs.

Computer higher education degrees are currently the 10th most popular enrolment choice out of 18 disciplines. Among foreign students studying in the UK, computer science is the eight most popular enrolment choice out of 18 disciplines. However, computer science is also the only discipline which has seen a decline in enrolment (by about 30,000) between 2002 and 2011, indicating the sustainable provision of qualified ICT personnel is lacking in the UK.

Study choices among foreigners and nationals in Germany, the Netherlands and the UK

Country All students Among foreign students

UK 4,7% study computer science 37% study sciences

Netherlands 4% study computer science 20% study sciences

Germany 4,2% study computer science 40% study sciences

v. ICT investment Investment in the UK ICT investment is heavily oriented towards services, attracting £930m investment per year in software R&D from international businesses. IT services and software have a combined market value of £58bn per year.

Such strong investment in services and software has helped drive impressive growth in ICT service exports, while ICT goods exports have seen a steady decline in their proportion of total exports.

UK ICT sector exports

Category 2012 2011 2010 2009

ICT service

exports*

$177.6bn $115.8bn $106.9bn $90.5bn

ICT goods

exports*

5.0% 6.0% 6.7%

Source: World Bank


*ICT service exports include: computer and communications services and information services. ICT goods exports are as a % of total goods exports.

Additionally, £440m has been invested through the Technology Strategy Board (TSB) – a government agency – in order to stimulate innovation and business growth through raising the profile of cloud computing on the business agenda. While investment in broadband infrastructure, particularly superfast broadband (discussed below) is a government priority, the academic community has identified a funding gap of at least £1.1bn to support deployment and the complexity of upgrading legacy ICT systems in the business community to cloud systems.

vi. Major clusters London is perceived as one of the most vibrant ICT hubs in Europe. The city is a gateway to EU markets and hosts the continent’s largest end-user market (392,000 registered businesses and a population of 7.8m). The government has for several years now backed the creation of a tech cluster which stretches across central and east London called Tech City (hwww.techcityuk.com). Tech City isone of the fastest growing ICT developer hubs in Europe.

London has incubated successful start-ups, including Last.fm (sold for $280m to CBS), Dopplr (sold for $22m to Nokia), TweetDeck (sold for $40m to Twitter) and Saffron Digital (sold for $48m to HTC).

Tech city community which shares resources and guidance for start-ups in the following areas:

Relocation to London, including staff recruitment or staff relocation

Finding a property and negotiating leases

Taking advantage of the favourable tax system for Tech City start-ups

Raising investment

Marketing and access to market

(source: London & Partners, Ltd.)

Other ICT clusters in the UK include:

Manchester/North West England

Manchester and the North West region offer opportunities to ICT professionals working with local government, the NHS, academic institutions and consultancy opportunities at IT companies such as IBM, as well as accounting, finance and retail companies in the area. KPMG, Grant Thornton, PwC and Logica all have ICT consultancy opportunities and the region is also known


for a large number of SMEs and software development companies. Key facts regarding the region:

The digital sector in the North West of England is the second-largest digital cluster in Europe and one of the fastest growing in the country

Liverpool and the surrounding region is renowned for being a centre of games design and gaming studios, including:

o Sony Computer Entertainment employs more than 600 personnel in Liverpool o Travellers Tales (responsible for the Lego series), based in Knutsford o Bizarre Creations, based in Liverpool o Warner Brothers, based in Cheshire o THQ Digital Warrington, based in Cheshire (www.juicegames.com)

43% of digital companies in Manchester are SMEs with 1-3 employees

Digital animation TV production companies in the area include Chapman Entertainment and Red Vision Vfx

Manchester is notable for the variety of ICT sectors it hosts and for its strong digital business networks. Some of the key institutions in Manchester include:

Manchester Academic Health Science Centre (MAHSC) (http://www.mahsc.ac.uk), a national health informatics research institute which received £20m funding in 2013. The Centre is a partnership between Manchester University and six regional NHS trusts (NHS trusts are regional authorities of the National Health Service, which is the universal public health care service paid for by the taxpayer).

Centre for Virtual Environments(CVE) is hosted in Manchester by the University of Salford (www.cve.salford.ac.uk)

Business networks and hubs: Manchester Digital (www.manchesterdigital.com), MadLab (www.madlab.org.uk), Manchester Digital Development Agency (www.manchesterdda.com)

Another part of the North West of England, the counties of Lancashire and Cumbria in North-West England are being encouraged to institute an ICT cluster to bring closer ties and collaboration between ICT ventures in the two neighbouring counties. In particular, Lancaster University in Lancashire hosts InfoLab21 (www.infolab21.lancs.ac.uk), an ICT research centre which also acts as a hub supporting ICT businesses in the area through events, workshops and programmes.

Bristol/South West England

Bristol’s ICT hub, also known as “Silicon George”, specialises in creative, media and designer businesses. For example, Imagination Technologies (www.imgtec.com) has opened a new R&D centre in Bristol, which will be home to its PowerVR graphics and multimedia R&D facility. The north of Bristol is known for its cluster of high technology companies working in software, semiconductor design and wireless sectors. Large ICT companies with a presence in Bristol and the South West include:

BT

HP – global R&D site in Stoke Gifford

Nokia Siemens

Orange – headquarters in Bradley Stoke

Toshiba

http://www.juicegames.com/

http://www.mahsc.ac.uk/

http://www.cve.salford.ac.uk/

http://www.manchesterdigital.com/

http://www.madlab.org.uk/

http://www.manchesterdda.com/


Northern Ireland

Northern Ireland is home to more than 700 ICT companies including 100 international companies such as HP and Microsoft. Momentum NI (www.momentumni.org) is the Northern Ireland ICT Federation and one of the leading ICT networks in the region. Members of the Momentum NI network have expertise in

Telecoms/mobile telecoms – e.g., Aepona and InTune Networks

Financial services – e.g., Allstate Northern Ireland and Liberty IT

Public procurement solutions – e.g., Kainos Belfast and Equinity ICS

Medical devices/health technology – e.g., Andor Technology

Education/e-learning – e.g. TextHelp (literacy software)

Cloud computing – e.g., SQS and CMI (www.newcmi.com)

As for digital content, Northern Ireland’s Digital Circle network represents the digital content industry in the region (www.digitalcircle.org).

vii. Governmental Policy and regulations Following the publication of the Government’s ICT Strategy in 2011, the UK government published its Strategic Implementation Plan which outlines it plans to achieve the following Delivery Area objectives:

Objective 1: Reducing Waste and Project Failure, and Stimulating Economic Growth o Asset and services knowledgebase o Open source o E-procurement o Agile o Capable

Objective 2: Creating a common ICT structure o Open standards for data o Reference architecture o Open technical standards o Cloud computing and applications store o Public services network (PSN) o Data centre consolidation o End user device strategy o Green ICT o Information strategy o Risk management regime

Objective 3: Using ICT to enable and deliver change o Channel shift o Application Programme Interfaces (APIs) o Online government consultation o Social media

As government budgets tighten and department funding is cut, the public sector is increasingly looking to use ICT as a tool to create cost-effective and “lean” government departments. The goal is therefore to “enable more cost-effective delivery of better public services”, as the following diagram illustrates (source: Government ICT Strategy – Strategic Implementation Plan):

http://www.momentumni.org/

http://www.newcmi.com/


In particular, cloud computing is considered an essential component in the “going green” aspect of the government’s digital strategy. For example, the “greening government” ICT strategy rationalises cloud computing, in part, as a way to help government “operate equipment efficiently, [reduce] waste...and [enhance] utilisation through re-use and sharing”. Consolidation of data centres and the migration of services to cloud is an essential part of the “greening government strategy”. Furthermore, government procurement programmes are reflective of these priorities; for example, the “G-Cloud” programme “provides a framework through which public sector bodies can buy Cloud services from an increased range of pre-approved vendors” and will help the government boost the public and private sectors by phasing out legacy ICT estates deemed “risky”.

Any company can register to become an “Assured” government supplier through the G-Cloud programme:

The G-Cloud programme operates through Framework Agreements, abbreviated to “Framework”. A Framework is “a general term for agreements with suppliers that set out terms and conditions under which purchases (‘call-offs’) can be made.”

Companies do not need to be based in the UK to apply to the Framework and be on G-Cloud

G-Cloud issues framework agreements on rolling basis, every 3-6 months

G-Cloud 5 (G-Cloud Framework Agreement 5) is to begin in early 2014

A comprehensive guide on how to supply services through G-Cloud can be found here: https://www.gov.uk/government/publications/apply-to-supply-services-through-g-cloud/apply-to-supply-services-through-g-cloud

The following are policy goals of the government in the area of internet infrastructure:

To have the “best superfast broadband network” in Europe by 2015

To have a minimum downlink speed of 2 MB/Sec in all premises in the UK by 2015

Achieve 90% superfast broadband coverage by 2015

The issue of superfast broadband (SBFF) connection is discussed in the following section.

The UK government is committed to enabling superfast broadband access across the country, while the ICT and broadcast regulatory body, Ofcom, has a mandate to provide an “objective evidence base” for the government’s plans.


Ofcom does this for key ICT areas within government strategy, including achieving nationwide superfast broadband (SFBB) penetration and growing public wifi access. In regard to SFBB in particular, regulatory changes have been made requiring the introduction of certain wholesale fixed network services in order to support SFBB deployment among local authorities and devolved administrations. Ofcom has, in the past, shown interest in the benefits of establishing “net neutrality” to ensure, for example, differential charging among ISPs does not inhibit the ability of users to access legal content

Ofcom has a voluntary code of practice for broadband speeds and defines SFBB as a downlink speed of more than 24 Mb/second. It furthermore imposes regulatory obligations on internet service providers to meet certain open access standards; for example, BT must provide wholesale products that can be used in the implementation of broadband, such as SLU, LLU and Physical Infrastructure Access (PIA) for non-BT communication providers. Such “infrastructure sharing” is of interest to the government and Ofcom in increasing the efficiency in the country’s ICT infrastructure. Of particular importance to Ofcom is ensuring that “where infrastructure is constructed with the aid of public funds, the infrastructure operators are expected to offer open access on fair, reasonable and non-discriminatory terms” to other communications operators.

Ofcom is also keen to enhance LTE by exploiting the spectrum made available by the digital switch over and initiated two consultations on the issue in 2011 and 2012. A key part of the consultants included a spectrum auction proposal of 250 MHz in 800 MHz and 2.6 GHz bands.

i. Major ICT sectors

The key sectors chosen for the UK were based on three criteria: Broad adaptability, current market size and market growth. Of these, the top four sectors were analysed in more detail (business solutions, e-commerce, e-health/telehealth and cloud computing).

The following table contains a short-list of the UK’s sectors based on the findings of the forgoing analysis.


Sector Broad adaptability Current market size

Market growth Score (/5 stars)

Cloud computing

Audience: Public (local authorities via G-Cloud) and private entities (SMEs) Technical solutions: Available/mature Infrastructure level: High maturity Device access: High

£3bn (2010)

8% growth of outsourcing market

Market expected to double in value between 2010-14

Most growth from SMEs

98% adoption by 2016

*****

Business solutions

Audience: SMEs; public sector through big data efficiency savings (e.g. NHS) Technical solutions: Available/mature (ERP, CRM, big data/analytics systems) Infrastructure level: High maturity Device access: Limited, but will be enhanced by cloud solutions

Est. >£1bn High growth, particularly in area of data analytics and big data processing Highest ERP systems growth among SMEs (5.6%)

Opportunity to tap coupon culture through smart devices

Cloud solutions available

*****


Sector Broad adaptability Current

market size Market growth Score (/5

stars)

E-commerce Audience: end consumers, retailers (B2B) Technical solutions: Available/mature (cashback sites, digital coupons, LBS for customer targeting, B2B) Infrastructure level: High maturity Device access: High

£492bn (total)

£87bn (B2C market)

Strong growth for B2B e-commerce transactions, particularly tablet-based Tablets expected to generate 25% of total e-commerce sales by 2017 Highest B2B growth from wholesale and manufacturing sectors

****

E-health and Telehealth

Audience: end consumers (e-health), NHS (telehealth, e-health), private health practices (telehealth, e-health) Technical solutions: trial phase (telehealth pilots), maturing e-health app market Infrastructure level: Medium maturity (effective telehealth systems are dependent on high bandwith and SFBB) Device access: Medium (telehealth systems)/High (smartphone access to apps)

$26bn anticipated by 2017 (globally for e-health apps)

$1bn anticipated by 2016 (globally for telehealth)

Increased NHS ICT expenditure expected to drive telehealth

NHS England has approved 150 health apps which will eventually become part of new “NHS Choices” platform Growth expected from telehealth initiatives moving from trial phase into commercialisation phase. E-health integration into daily routine of health-care practitioners expected from 2016

****

Telecoms

(excluded from key sectors)

Audience: end consumers, B2B, B2C Technical solutions: Highly developed/limited market opportunity Infrastructure level: High (e.g., MVNO)/Medium (e.g. SFBB and LTE under development) Device access: High

£30.8bn (operator retail revenue, 2010) £3.3bn (fixed internet revenues, 2010 130.1 active mobile connections per 100 population (2010)

Mobile telecoms market saturated by dominant players: Virgin, EE, O2 and Vodafone

BT, Sky and Virgin dominate fixed internet connections and bundles market Decline in retail revenue from 2007-2010 Decline in average monthly household telecoms spend from 2007-2010 Decline in employment numbers Industry revenue from mobile retail is stagnant at around £15bn/year

***

Big data analytics

Audience: B2B, mostly large businesses with a UK presence Technical solutions: sentiment analysis, media monitoring, reputation analysis, general analytics Infrastructure level: Medium

$3.2bn (global value, 2012)

Only 8% of ICT professionals considered big data to have had the biggest impact on the UK ICT market in 2013 (compared with 80% for cloud computing) An innovation growth area

***


(media monitoring)/high (data analytics) Device access: Medium/high (ongoing transition to omni-channel data dashboards)

(reaching a value of $16.9bn by 2015), driven by need to sort and interpret unstructured data and the need for predictive analytics to guide business strategy Big data compatibility with e-commerce and cloud computing (e.g. NHS uses Qlikview to analyse patient and staff information to improve waiting times)

ICT in agriculture

Audience: Smallholders, small business owners, dairy farmers Technical solutions: e.g., robotic milking solutions (AMS), app-based market info (e.g. commodity prices) Infrastructure level: Medium (rural BB/LTE access limitations)/high (apps and technology available) Device access: Medium (primarily app-based)

NA Cost of device and infrastructure limitations makes service access prohibitive to some farmers

Growing value to farmers currently in apps (e.g. Livestock App, weather apps, seed rate calculators, BASF Weed ID, Crop Monitor, Hutchinsons Field Wise, Kuhn Nozzle Configurator, Firestone TPC, and LBS), social networks, mobile internet access, e-statements, business tools

**

ICT creative media

Audience: wide variety, from ICT clusters in South West England to broadcast media solutions and end consumers Technical solutions: Strong creative media industries (e.g. gaming in NW England, digital media in Bristol) Infrastructure level: High maturity Device access: High

1.3m employed in creative industries - 213,000 jobs from software-related industries

A growth key sector with regional expertise and leadership from clusters in North West England and South West England in particular. Sector dominated by large established players and smaller, newer indigenous companies

ICT considered essential to future growth of creative industries and ICT use growing in nearly all areas of creative work

***

While the telecoms market is one of the largest and broadest ICT markets in the UK, the field is highly competitive and dominated by both large international players (O2, Vodafone, EE, Orange) and many UK companies well-established in the market (e.g., BT). Given intense competition and established preferential government service providers (e.g., BT will be responsible for rolling out the government’s superfast BB program), the sector offers limited opportunity to smaller firms.

ii. Key ICT sector analysis

1. Cloud computing Size and growth

The attitude of UK SMEs towards cloud computing is positive, as demonstrated by impressive growth figures. While the cloud computing market is expected to more than double from 2010-2014 to reach a value of £6.1bn, this growth will be driven by explosive growth in the SME market of 79% between 2014 and 2016, reaching a value of £2.5bn and an estimated adoption


rate of 98% by 2016. Additionally, 80% of existing cloud users was expected to have increased their cloud computing expenditure by the end of 2013.

The UK government is also driving growth owing to investment in its G-Cloud public procurement programme which is aimed at reducing government costs by £200m per year, contributing to an estimated market value of £5.8bn in terms of revenue for cloud computing service providers between 2012 and 2013 – a year-on-year increase of 6.5%. It is also estimated that 60% of server workloads will be virtualised by 2014, up from 12% in 2008.

Trends and development

Cloud computing is an essential and targeted area of growth for small businesses as they look to increase productivity and efficiency in a number of ways- 80% of IT professionals considered cloud computing to have the most impact on business technology in 2013. For example, cloud computing can enhance remote/flexible working, which is particularly useful for company employees and consultants travelling to clients in the UK, for example through virtual desktops with multi-device accessibility such as Hosted Exchange. Growth in cloud computing is also being driven by the challenge of growing businesses operating across multiple sites. Accessing and streamlining operations for efficient management can be a challenge - cloud computing offers centralised and secure servers for storage, accessible via a Hosted Virtual Desktop. Cloud computing also offers advantages in disaster recovery through integrated backup and disaster recovery modules, while SaaS can provide a cheaper alternative to licensing software across devices and individual users by offering “on-demand” pricing.

SMEs are looking to take advantage of these benefits through investment in cloud computing, with SMEs depending more heavily on cloud computing to sustain growth than other organisations.

2. Business Solutions Size and growth

The business solutions sector in the UK is among the most vibrant in Europe. Business studies is the most popular study choice among students in the country (including foreign students) and the services sector dominates the UK economy (78% services, 21% industry, 1% agriculture). The size of the services sector is about 10% more than that of Germany, which has a stronger manufacturing base. While services contributes a similar percentage to the GDP of the Netherlands, the sheer size of the UK economy and its global services industries (particularly retail and financial) dwarf the opportunity for business solutions in the Netherlands.

The mobile CRM market is expected to grow 500% in 2014 and the Software as a Service (SaaS) approach to CRM is expected to grow by 46% over the next five years. Technical budgets still dominate investment in the area of CRM, although a dramatic shift is expected, as 80% of total IT expenditure for marketing is forecast to be in CRM by 2016.

Although the market for ERP systems is forecast to experience growth at a compound annual growth rate (CAGR) of just 2.4% from 2010 to 2015, the CAGR for large SMEs with 100-1,000 employees is expected to grow at 5.6% with even higher growth for smaller SMEs. The market is dominated by Sage, with ERP revenues of around £250m; ACS and Iris are also among the top market players.

The market for real-time data analytics is growing as fast as it is evolving. Global market growth for big data includes forecasts of market value of $46bn by 2018 and $6.5bn for predictive


analytics by 2019. With high demand coming from some of the world’s largest companies based in the UK, some UK providers of data analytics have seen more than 100% growth in annual revenue. It is therefore expected that the UK will play a key role in the growth of this sector in the future.


Retailers are increasingly looking for CRM solutions in order to understand which media sources are driving sales, whether purchases are being made by new or existing customers, and how they can improve customer retention. These types of CRM intelligence are valuable to UK retailers, driving high membership growth among retailers in websites such as QuidCo, which offer customers discounts, cashback and a monetary reward for stepping inside a member’s shop. The trend in CRM solutions is being facilitated by growing smart phone and m-commerce usage among the public – 22% of mobile media users have redeemed mobile coupons and the coupon usage grew by 17% from 2010-2011. Mobile coupons offer retailers to gather the CRM intelligence they are looking for through unique m-coupon identifiers which track the consumption patterns of individuals over time.

ERP is also experiencing high demand due to an economic climate which is driving demand for improved performance and efficiency. Growth is strongest among smaller SMEs with less than 100 employees and it is seen as a good Return on Investment to adopt cloud systems for ERP management – rather than adapting or replacing large on-site systems. ERP software is also adapting to changing business needs, driven by a demand for platforms which allow mixing and matching of applications and services and the ability for on-site and off-site provision.

Real-time data analytics has become increasingly important for companies and organisations looking to monitor the response to the company’s brand, products and reputation. From a reputational angle in particular, real-time “big data” frameworks can offer a competitive advantage if the reputation risks revealed through media monitoring, for example, are anticipated ahead of time. In short, big data has moved away from simple storage towards business insight and business intelligence through making sense of unstructured data in the public domain.

Finally, businesses are expected to benefit from a government commitment to Supply Chain Finance. The government announced in 2012 that it would be committing billions of pounds of investment in a Supply Chain Finance scheme to fuel business growth by encouraging banks to lend to businesses, introducing a start-up loan programme, and providing generous tax schemes for investors in UK start-ups.

3. E-Commerce

Size and growth

UK has become leading ecommerce country in Europe. 70% of population is shopping online now. Average amount spend annually is three times higher than Europe’s next largest market - Germany, reaching £1,083 per head. Total B2C market is expected to reach over £87 billion in 2013. Overall e-retail grew 14% and over 10% of all retail sales (excluding fuel) are now online. In 2012, all major purchase categories grew as well. Online food sales grew 27%, online department store items grew 25% and apparel sales went up 15%.


From B2B side E-commerce sales represent 18% of business turnover in 2012. Sales by electronic data interchange (EDI) made up 67% of total ecommerce sales and website sales with remaining 33% in 2012. Total e-commerce sales reached £492 billion in 2012, which is £157 billion higher than in 2008. Average growth in e-commerce sales since 2008 was 10% over period of 2008 to 2012.

Source: (Office of National Statistics

The wholesale (£172 billion) and manufacturing (£157 billion) sectors reported the highest level of e-commerce sales in 2012. On the other hand, accommodation and food services sector reported comparatively low e-commerce sales £9.1 billion. However, growth of this sector was a staggering 57%, which was the highest proportional increase in total e-commerce sales in 2012.


It is clear that UK retail is still growing on the internet and can be expected to continue growing for couple of more years. It is easy way for consumers to make purchase and typically selections of goods are also broader online. In addition, it is also cheaper for retailers supply their products and services online. However, device used for online shopping is expected to change.

According to new figures from eMarketer, UK retail sales of goods and services via mobile devices are expected to more than double, reaching £8.17 billion in 2013. This would account 18% of total UK retail ecommerce sales. Even greater growth is expected in tablet commerce, which is expected to triple, reaching £4.74 billion in year 2013 and take 10.4% of total UK retail ecommerce sales. Based on eMarketerfigures, tablet will continue growing strongly and reach 25% of UK total ecommerce sales by 2017. It is expected that, for the first time, more m-commerce sales will occur on tablets (58%) than smartphones (40.5%) in 2013.


Source:http://www.emarketer.com/Article/Tablets-Account-Over-10-of-UK-Retail-Ecommerce-Sales/1010421

James Hardy, head of Europe at Alibaba.com, outlines the top e-commerce UK trends he predicts retailers will be embracing in 2014:

1. Shift to B2B: Based on Forester research and Hybris businesses are now following trend initiated by B2C sector and sourcing product via web

2. Making use of big data: e-tailers customizing and making personalized offerings to customers and predict market trends

3. Multichannel shopping: Show in figures above 4. Offering assistance: Like in brick and mortar stores, shopper are also expecting sales

assistance for help (24-hour chat assistance, personalisation and recommendations) 5. Pre-tail opportunities: Option to buy product before bringing them to market, which

is more commonly known in crowd-funding sites. 6. Quality content:Content marketing is king 7. Next day delivery: The micros online retail delivery report discovered that a growing

amount of retailers currently offer next day delivery.

4. E-Health Size and growth

A tightening National Health Service (NHS) budget has led the organisation to trial e-health and telehealth interventions in a bid to save money and examine how cost-effective these interventions are (the trials are known as the Whole Systems Demonstrator programme – the largest such programme in the world: (www.gov.uk/government/news/whole-system-demonstrator-programme-headline-findings-december-2011). While the global market for telehealth systems grows and is expected to pass the $1bn in 2016, NHS spending on telehealth is still tentative, with around 5,000 patients benefiting from telehealth services in 2013 – a figure which could rise as NHS ICT expenditure grows (expected growth of 3.7% CAGR from 2012-2015) provided the interventions prove cost-effective. Nevertheless, on-going trials could lead to a breakthrough for e-health if certain interventions meet or beat cost-effectiveness health standards (set by the National Institute for Health and Clinical Excellence).



The uptake of e-health interventions has been hindered by several studies which have found telehealth in the NHS is not cost-effective and cannot therefore help the government achieve its financial and quality of care targets. Combined with widespread negative response from medical practitioners, the government’s vision to target three million individuals with telehealth interventions by 2017 has been set back. For example, the British Medical Journal published a study in early 2013 which revealed that telehealth did not meet NHS cost-effectiveness standards by a factor of more than three. However, the study did find that if the price of the technology decreases over time, the chance of achieving cost-effectiveness could be 61%. The slow uptake of the telehealth market prompted O2 to leave the market in 2013.

Despite such setbacks, the UK’s ageing population, combined with the budget cuts, suggest a market opportunity exists but may take some time before it can be exploited. Increasing smartphone penetration and 4G service expansion suggests the mobile market for e-health could also offer a variety of opportunities over telehealth. Additionally, the roll out of superfast broadband over the next few years could make telehealth interventions more cost-effective by providing real-time HD interaction between doctors and patients. In regards to e-health, the NHS has already vetted and approved of “library” of 150 e-health apps which will eventually become part of the NHS Choices platform and contribute to an NHS England app strategy (www.england.nhs.uk/2013/03/13/health-apps-blog) involving

patient facing apps,

clinician (medical professional) facing apps,

open source and API development, and

“market making” - developing market mechanisms to improve the efficiency and quality of health services.

The NHS is currently moving from the trial phases to a commercialisation phase, soon to be followed by an integration phase in which e-health apps will become an integrated part of patient care. Given the NHS servers a population of around 62m and had a net expenditure in 2012/13 of £105bn, the market opportunity is promising. Additional opportunities will come from private sector as e-health and telehealth product sales are expected to grow to an estimated global value of $27bn by 2017.

iii. Commonly used outsourcing destinations and practises

1. Local, near-shore, off-shore

The UK public sector is the world’s second largest outsourcing market with programmes such as the Department for Work and Pensions welfare benefits programme outsourced, among many others. The public sector contributed 28% to the UK’s outsourcing spending in 2009 and the market is valued at £17bn (2010). This is forecast to grow as more and more government department seek to slim their budgets by outsourcing their ICT needs. High demand for outsourcing is also being created from banking, retail sectors and professional services, with the latter increasingly expanding its service offerings to cyber security, analytics and tech entrepreneurship. It is also expected that the public sector benefit from increased budgets for data security and information assurance, e-procurement, mobility and outsourced shared services.

http://www.england.nhs.uk/2013/03/13/health-apps-blog


Offshoring competition is shifting as companies look to make efficiency gains by bringing ICT functions in-house. For example, pharmaceutical company AstraZeneca announced in February 2014 that is to bring a number of ICT functions in-house, where previously they were outsourced to India. Other large companies, such as financial services company RSA, are responding to customer pressures to end outsourcing call centre jobs and return them to the UK – UK customers are keen to speak with native English customer service representatives because of communication difficulties with Indian call centre staff. This sentiment and move by RSA reflects a trend in “onshoring”, e.g., by telecoms companies such as BT and TalkTalk – potentially creating new opportunities ICT companies in the business solutions sector. A UK government study in 2013 found that one in six UK manufacturers were moving production onshore from offshore in a “u-turn”.

Key trends and figures for the UK outsourcing market (2012):

Deepening penetration of IT Outsourcing (ITO) into the financial services market and a B2C focused IT industry

The majority of outsourced ITO projects are mobile computing projects, e.g. apps

Cloudsourcing increased 8% between 2011-2012

Embedded development is the least outsourced area

In general, near shore remains the most popular ITO destination, followed by offshore

Top drivers of outsourcing: free up time of in-house staff, reduced operating costs, and to focus on core competencies

Top three factors in choice of ITO outsourcing destination: vast IT talent pool, proficient English, economic stability

o Around 10% of companies found an outsourcing partner via a publicly released RFP/RFI/RFQ

Public procurement processes:

o Procurement channel for cloud-based services: www.gcloud.civilservice.org.uk

o The government’s Contracts Finder website allows searching on government

agency contracts worth over £10,000: https://www.gov.uk/contracts-finder

Official information on tendering for public contracts can be found here: https://www.gov.uk/tendering-for-public-sector-contracts/overview

Top three factors in choice of ITO outsourcing partner: positive references from peers, realistic HR scalability, and innovative and flexible business model

Number one challenge facing outsourcing companies: poor communication between ITO buyers and providers

45% of companies pay 25% more than the contracted amount and save no more than 25% in operating costs

50% of companies have a positive opinion about their ITO outsourcing engagement

Top predicted drivers of outsourcing in future: high cost of domestic talent, shortage of domestic IT resources, improving the Time to Market (TTM)

Of those companies currently developing their IT solutions in-house (i.e., not yet outsourcing), nearly 60% would prefer to nearshore and 15% offshore

http://www.gcloud.civilservice.org.uk/

https://www.gov.uk/tendering-for-public-sector-contracts/overview


2. IT Personnel Costs

Please note that the following tables are based on a sample of jobs advertised on one of the UK’s

most prominent ICT recruitment websites. The sample sizes vary depending on the number of

vacancies advertised for the named position over the period. Because of this, in cases where the

sample size is small, the average salary % change may see dramatic increases (e.g. in the first

table). Conversely, the rank of the most advertised positions is more realistic and reflective of

industry trends because the sample size is much bigger (e.g., in the second table). The figures are

therefore best used as a representation of general trends rather than, for example, exact salary

increases/decreases across the entire industry in the UK. However, cases where small sample

sizes are accompanied by huge fluctuations in salaries may also suggest newly emerging positions

or positions with highly volatile salary rates.

Please note, that the salary figures are gross, and can be converted to net using the online Income

Tax Calculator tool (www.incometaxcalculator.org.uk). Income tax is dependent upon which tax

band the individual falls under, depending on his/her income, as displayed in the table bellow.

Income tax variationby salary bracket (2013/2014 rate)

Taxable income Rate of tax

£0-32,010 20%

£32,011-150,000 40%

Over £150,000 45%

Tax-free allowance £9,440 (only applicable if earning <£100,000

a. Contract jobs1

Top 10 contract jobs by day rate(included only if sample size was larger than 10 job postings)

Description % of permanent IT job ads sampled in there months to 03/01/14

Average daily rate (3 months to 03/01/14)

Average salary % change on same period last year

Data Governance Consultant

- £2,000 290.24%

Master Data Consultant - £1,300 160.00%

IT Director - £850 47.82%

IT Strategy Consultant - £825 57.14%

Technical Director - £813 -

Programme Director - £800 -3.03%

Chief Technology Officer - £800 23.07% Senior Implementation Manager

- £775 55.00%

1 Source (adapted from): www.itjobswatch.co.uk.

http://www.incometaxcalculator.org.uk/

http://www.itjobswatch.co.uk/


Murex MxML Developer - £775 3.33%

Murex Developer - £750 15.38%

Top 10 contract jobs by job vacancies:


Average daily rate (three months to 03/01/14)

Average salary % change on same period last year

Developer 11409 (23.57%) £375 -

Analyst 9092 (18.78%) £375 3.44%

Project Manager 4194 (8.66%) £438 2.94%

Consultant 3775 (7.80%) £430 1.17%

Business Analyst 3749 (7.74%) £425 1.19%

Architect 3019 (6.24%) £500 5.26%

.NET Developer 1449 (2.99%) £338 0.74%

Java Developer 1371 (2.83%) £425 -

Administrator 1162 (2.40%) £338 2.27%

C# Developer 1134 (2.34%) £400 -2.14%

b. Permanent jobs2

Top 10 permanent jobs by salary(included only if sample size was larger than 10 job postings):


Average gross salary (three months to 03-Jan-14)

Average gross salary % change on same period last year

Senior Sales Executive - £130,000 100.00%

Senior Quantitative - £128,750 28.75%

2 Source (adapted from): www.itjobswatch.co.uk.

http://www.itjobswatch.co.uk/


Developer

Chief Operating Officer - £120,000 21.51%

Senior Vendor Manager - £117,500 59.32%

Programme Director - £113,750 10.97%

SAS Architect - £110,000 76.00%

Chief Security Officer - £110,000 91.30%

Chief Information Security Officer

- £110,000 91.30%

Senior Enterprise Architect

- £105,000 27.27%

Operational Risk Manager

- £105,000 110.00%

Top 10 permanent jobs by job vacancies:

Description % of IT job ads sampled in three months to 03/01/14

Average gross salary (three months to 03-Jan-14)

Average gross salary % change on same period last year

Developer 31933 (30.88%) £40,000 -

Analyst 14594 (14.11%) £40,000 3.89%

Consultant 7682 (7.43%) £54,000 2.85%

.NET Developer 6402 (6.19%) £40,000 5.26%

Architect 5916 (5.72%) £70,000 7.69%

Project Manager 5172 (5.00%) £52,500 -

Senior Developer 5136 (4.97%) £50,000 5.26%

Business Analyst 4864 (4.70%) £47,500 -

Java Developer 4807 (4.65%) £49,000 8.88%

C# Developer 4639 (4.49%) £40,000 -

iv. Home market and ICT exports Computer and information services exports contributed $11.6bn to the UK economy in 2010, a 1.8% share of all UK exports. Total UK exports contribute 5.4% of total world exports. The financial services industry is a major driver of service sector activity - the services sector contributes 78% to the UK’s GDP. Within the services sector, UK Trade & Investment (UKTI) describes ICT as one of the largest wealth creators in the UK, with future wealth creation anticipated to come from the key sectors and integrated cross-sector solutions supported by ongoing telecoms infrastructure developments (broadband and LTE in particular). Info Tech sectors (hardware, software, services) provide the largest share of the home market, with the software and computer services market among the largest in Europe. These services are worth


an estimated £27bn to the UK economy and include the UK’s strongest ICT export application areas:

Automotive (e.g. telematics, such as Aviva’s Drive app)

Financial services (including supply chain finance as a business solution, discussed in UK key sectors, above)

Retail and logistics (e.g., owing to UK’s leadership in couponing and e-commerce innovation, such as QuidCo, discussed above)

Security (e.g. cyber security initiatives of leading professional services firms such as KPMG and Deloitte)

Healthcare (a key sector with strong domestic market opportunities as well, particularly through the NHS)

Education (e.g. Northern Ireland’s TextHelp – see UK ICT clusters, above)

Process control (e.g. for automation of big data handling and processing)

v. Commonly used partnership practices

1. Business culture and languages requirements Fluency in English is expected as a language requirement. However, because of regional accents, dialects and meanings, conducting business in Britain has different language requirements to other countries which use the English language for business. For example, the way Dutch use English words may mean something slightly different in Britain – this makes it important to have marketing materials checked by a native speaker to make sure they communicate what is intended to be communicated. This is especially important because the British tend to use figures of speech and avoid giving straight answers. Other points to bear in mind when doing business in Britain:

Communication tends to be indirect and subtle, avoiding straight “yes” or “no”

Business negotiation usually involves compromise and finding a fair outcome for both parties

Meetings tend to be small and structured – punctuality is very important. Because public transport is sometimes congested and subject to delays, careful planning when travelling across the country is essential.

Handshakes can be accompanied by a formal greeting “how do you do?”, which does not require a reply

The British use small talk – particularly the weather – to break the ice and start a conversation. Such talk may be considered superficial but demonstrates good etiquette.

The UK is ranked among the easiest countries in the world to do business yet it has some unique qualities which make it different from doing business in, for example, the Netherlands. Meetings in the UK tend to take longer than in the Netherlands and contracts tend to be much longer than Dutch contracts. The reason contracts are longer is because there is no standard commercial code upon which contracts are based and refer to – contracts therefore require extra attention to detail so there is no ambiguity in the agreement. For this reason it is also important to maintain all correspondence as it may be useful in legal proceedings to establish contractual obligations. The Netherlands, on the other hand, has a more rigid way of determining when an agreement has been reached and therefore legally broken. Finally, sole traders or “self-employed” do not require business registration in the UK (unlike in the Netherlands) and therefore it is harder to assess their reputation compared with a limited company. In all cases, it is important to check the legal


status of the company, e.g., whether it is limited liability, a partnership, a sole trader or a limited company.

2. Practices and partnership schemes A common business practice in the UK is known as “body-shopping”, in which mid to large size consultancies contract ICT staff to carry out short-term work and “rebadged” them as their own consultants. Similarly, many independent ICT consultants join co-operatives in order to bid for some of the smaller work available. The government’s Cabinet Office has changed their engagement policies to deliberately move away from issuing contracts only to a few giants in order to favour smaller, “quicker” companies (e.g. as part of its Government Digital Service) For ICT partnerships, London is rated alongside San Francisco as one of the best cities for ‘convergence’ – where technology, telecommunications, creative and media companies collaborate to create mould-breaking businesses. This is reflected in entrepreneurial hotspots dotted around London, such as branches of The Hub, besides London’s Tech City, which has formed valuable partnerships (such as TweetDeck, which sold in 2011). Innovative partnerships are also being encouraged by the government through, for example, its £440m investment in the Technology Strategy Board (part of the government’s Department for Business, Innovation and Skills) in order to encourage technological innovation and business growth.

3. Procurement practices and regulations Procurement practices are increasingly leaning towards flexible, short-term contracts, including

body-shopping, which help organizations bring on-board consultants under the company name

on a short-term basis. Such practices have been driven by rapidly changing ICT needs among

private institutions, such as universities and SMEs, leading to a rise in online procurement tools.

For example, UK universities have access to a contracts database powered by GeM, a higher

education “eMarketplace and contracts repository” managed by the Southern Universities

Purchasing Consortium (SUPC).

In regard to contract bids, ranges vary greatly: A large contract may be worth £200m in total; a

small one, £50,000. Many large contracts are broken down into smaller sub-contracts; for

example, the average value of UK government ICT projects for FY 2014 is £34m, the project is

then usually outsourced (nearshore or offshore). The value of such government projects range in

value between £2,600 and £620m.

vi. IT associations, and other organization bodies Key IT associations and bodies in the UK include:

The Chartered Institute for IT/BCS (www.BCS.org) o The BCS works to foster links between industry and academia

UK IT Association (www.UKITA.co.uk) o UKITA is a co-operative/trade body made-up of SMEs and is part of the wider

PIN-SME network

The Association of Computer Professionals (www.acpexamboard.com) o ACP offers professional IT courses and also serves as an examining body

ISACA (www.Isaca.org.uk)

http://www.bcs.org/

http://www.ukita.co.uk/

http://www.acpexamboard.com/

http://www.isaca.org.uk/


o ISACA offers certification to IT professionals through its UK chapters

Regional networks and hubs include:

North-West England o Manchester Digital (www.manchesterdigital.com) o MadLab (www.madlab.org.uk) o Manchester Digital Development Agency (www.manchesterdda.com) o InfoLab21 (www.infolab21.lancs.ac.uk)

Northern Ireland o Momentum NI (www.momentumni.org) o Digital Circle (www.digitalcircle.org)

South-West England o Bristol Media (www.bristolmedia.co.uk)

London o Tech city (www.techcityuk.com)

vii. Specific industry related IT regulations and regulating institutions Ofcom is the industry regulator, while the ICT sector is also subject to:

EU directives, such as the e-Privacy Directive

Additional regulations applicable to specific industries, for example: o Financial services institutions are subject to the Sarbanes-Oxley Act (SOX) which

places responsibility for financial scandals at the top of the organization. Compliance with SOX requires documenting the operational effectiveness of a wide range of processes that impact the accuracy of financial reporting. The average cost of SOX compliance in the UK for a major business is £10-20m.

UK ICT businesses are also subject to laws regarding discrimination, such as the Disability Discrimination Act.

http://www.manchesterdigital.com/

http://www.madlab.org.uk/

http://www.manchesterdda.com/

http://www.infolab21.lancs.ac.uk/

http://www.momentumni.org/

http://www.techcityuk.com/


C. The Netherlands –country summary

i. End consumer’s interest

1. Market opportunity The Netherlands is the fourth-largest exporter of IT services after the US, UK and Germany. This is majorly contributed by the software sector, which is a valuable and important economic sector in the Netherlands with a turnover of €25 billion and a gross added value of €17.3 billion.

In 2009 the total ICT expenditures amounted to €29.1 billion andthere were 25,500 ICT companies and 268,000 ICT professionals. Even in the time of deep recession in 2011, half of companies did find it difficult to fulfil open ICT job positions.

ICT is considered as a central element for innovation. This applies to products and process innovations, as well as organizational and marketing innovations. It plays a critical role in 80% of large product innovation and 92% of process innovations.

The key ICT sectors identified and analysed for the Netherlands are Telecom, Finance and Payments, Media and Entertainment and E-Commerce. These sectors are emerging further together, opening new cross-sector opportunities.

Other interesting sectors are also Cloud computing (including B2B) and gaming. Cloud computing is expected to grow from €439 million in 2012 to €1,173 in 2016. Gaming sector is in early stage. Social gaming shows potential, growing 13% between 2009 and 2012.

2. Trends

Communicating has been the most important internet activity of individuals for many years. Virtually every user communicated one way or the other. The second most common activity on internet (90% of users) was to search for information on goods and services. Social networks are also used extensively. 64% of internet users and 95% of young internet users were active in social networks. Internet was also frequently used to listen to the radio and/or watch television (60% of internet users).

Key drivers for growth in ICT sector

Advance infrastructure. The Netherlands is well prepared for knowledge economy and high emphasis has been put on providing broadband for all homes. This has boosted new services and digitalization in country.

High smart phone penetration. For years operators have provided service bundles with devices, which has kept portion of latest devices high in the market.

Cross platform and mobility.Consumers are expected to use services with any device, anywhere and at any time, which has challenged traditional players in the market and provided opportunity for new market entrances.

Trusted local online payment gateway iDEAL. Success of local payment scheme iDEAL have played fundamental role to gain consumer’s trust in online shopping.

The Netherlands had one of the highest numbers of e-shoppers in relative terms. 9.8 million individuals (Dutch population 16.72 million: CIA Factbook) were shopping online in 2012. The most common types of purchases were trips, holidays and accommodation. Also clothing items, tickets for events and literature were frequently bought over the internet. Four in ten e-shoppers spend in total 100 to 500€ on new goods purchased over the internet in the three months prior to


a survey conducted by the Central Bureau of Statistics (CBS) in the Netherlands in 2013. (CBS, ICT knowledge and the economy 2013).

After a minor decline, the R&D expenditures in the Netherlands amounted to almost €12 billion in 2011. The most R&D is carried out by large companies and the manufacturing industry. The service sector showed the highest increase, but the number of companies engaged in R&D also increased significantly in the manufacturing sector. The business sector spends relatively little in R&D in comparison to other countries, whereas the higher education sector spends a relatively large amount. In total, 116,000 working years were spent on R&D in the Netherlands.

ii. Infrastructural landscape and trends

1. Infrastructure The Netherlands has the highest internet connectivity rates in Europe and one of the top cable penetration rates globally. It is one of the most internet-ready environments in Europe, which is supported by advance fibre network (20% of households) and offers the largest bandwidth on the European continent, which is complemented by relatively low-cost long-distance telecom and bandwidth charges.

2. Devices There is a 121% mobile penetration in the Netherlands.

Dutch citizens are increasingly more often making use of the laptop or mobile devices to access the internet. One in three internet users used a laptop with mobile internet and one in five used a tablet to get access to internet. Almost 75% of households used a laptop to access internet. 60% of internet users had access to the web through mobile devices. Additionally, devices for mobile internet users were most commonly used by young internet users (aged 12 to 25). 86% of internet users used the internet every day or almost every day in 2012 (CBS, ICT knowledge and the economy 2013).

3. Bandwidth and Services The Netherlands ranked top 5countries in Europe in 2011 in terms of share of households with a broadband internet connection. In 2011, 83% of households had a broadband internet connection and 94% had access to internet in 2012(CBS, ICT knowledge and the economy 2012).


ICT usage in households

Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in households and by individuals, November 2011.

91% of companies had a fixed broadband connection and 53% had mobile broadband connection, which has been growing rapidly especially among large corporates. An increasing amount of companies is offering possibility to teleworking, reaching 62% of companies. Dutch corporates are also using extensively solutions supporting business processes. Half of the companies are recording sales orders and over 45% of all companies used purchase order software in 2010. Open source software has also increased in popularity and was used by 54% of companies (internet browser 43% and office and business applications 26%). 65% of small companies and 85% of large companies used some form of automated data exchange. 92% of all companies had contact with the government over the internet in 2010.

Dutch companies have also found internet an attractive channel for selling goods. There are 19% of all companies selling goods and services via websites and 7% via EDI (Electronic data interchange). 15% of all companies in the Netherlands applied some form of supply chain management software.

iii. ICT employment and available workforce There were 283,000 ICT workers working in the Netherlands at the end of 2011 (Statistics Netherlands (CBS), 2012). The most of ICT workers have completed higher education and were commonly working with permanent contract. Past few years, there has been a significant increase in number of independent ICT professionals. In 2011, that number was around 40,000 independent professionals, which grew from 5% in 1998 to 14% in 2011.

As recorded by CBSin 2011, 3.9 % of total ICT professional population was unemployed. Even though some unemployment exists at the moment, the current economic outlook predicts a growth of unfulfilled demand in coming years. The Netherlands is expected to have shortage on the ICT labour market in 2017. This shortage is expected to reach between 6800 and 12000 ICT professionals (2 to 4% of total ICT workforce). CBS discovered in their research that 8% of


companies had ICT job openings and almost half of companies had difficulties filling these positions in 2011.

iv. ICT investment Overall ICT spends have remained fairly stable compare to the Dutch economy as a whole in spite of economic downturn. Total ICT spending dropped by 0.6% to €29.7 billion in 2012. This represents around 5% of the gross domestic product (€609 billion, 2012). Hardware purchases are expected to be postponed for longer and the demand for professional services will continue its downturn trend. Also supportive services demand is expected to decrease. Although no growth is expected, spending will not drop. Software spending saw biggest growth in 2012, even though IT hardware & office technology segment dropped the most.


Source: Nederland ICT Keala Research, 2013

v. Major clusters There are three major ICT clusters in the Netherlands; Noord-Holland (Amsterdam), Utrecht and North Brabant & Limburg. Utrecht has the highest percentage of people working in ICT. The sector employs approximately 43,000 people in around 3000 companies. Software and services are the main focus of ICT activities, including development, distribution and implementation of software applications. Furthermore, Utrecht region is one of the largest game hubs in the Netherlands. 50% of all employees working in the Dutch games industry is trained by Utrecht’s knowledge institutions and one-third of all jobs are located in Utrecht and Hilversum.

The ICT Cluster in Noord-Holland, which is located around Amsterdam, is closely related to the media sector. Together with the media sector also finance sector has been an important driving force for the Amsterdam cluster and her growth. Many publishers, advertisement agencies and other segments of the media industry have provided a rich and demanding client base for the ICT sector in Amsterdam.

Due to the presence and home location of Philips, North Brabant ICT cluster and especially the Eindhoven region is involved in the design of software-intensive systems, the design of software components, modules and architectures for such systems and special techniques for development in the area of architecture, quality maintenance, testing and integration, system evaluation, configuration and so forth (Eurostat, 2010).

vi. Governmental Policy and Regulation

Dutch ICT policy is more decentralized and thus able to foster the emergence of bottom up initiatives. In contract to the UK’s top down design for ICT, which allows central government to initiate ICT action by pulling levers, in the Dutch approach central government is functioning as facilitator, which role is to create a space for autonomous initiatives and ‘let a thousand flowers bloom’.

In 2011 the Dutch government implemented a policy of investing in top sectors in order to foster the required innovation. This allows companies, institutions and entrepreneurs to claim a subsidy for the salary costs of R&D employees under this scheme (total budget €735 million in

19%

17%

10%

54%

ICT spending (Mln) split 2012

IT hardware IT software

IT services Telecom and internet

5547

5076

2893

16148


2013). Even though ICT is not considered as a top sector itself, it acts as an axis of innovation throughout the other (nine) top sectors in the country.

Another scheme implemented by the Dutch research & development allowance (RDA) provides allowance towards income tax and company tax, based on R&D costs. The government set aside €375 million for this scheme in 2013, and the budget is expected to rise to €500 million annually from 2014 onwards.

ICT market is not over-regulated and as such there is room for new initiatives. The government is the second biggest financier of ICT after the business sector, contributing €4.3 billion euros and 36% of total R&D financing in 2011. In addition, the government is attempting to reduce the burden imposed by laws and regulations. Often business community, knowledge institutes and government organizations are working on innovation via joint innovation contracts.

i. Major ICT sector analysis

The key sectors chosen for the Netherlands were based on three criteria: Broad adaptability, current market size and market growth. Of these, the top four sectors were analyzed in more detail (Telecom, Finance and Payments, Media and Entertainment and eCommerce).

Sector Broad adaptability Current market size Market growth Score (/5 stars)

Telecom Audience:

- 19.9 million mobile

subscribers and 119% SIM

penetration

- Attractive opportunity via

MVNOs to get access to

specific customer

segments

Technical solutions:

Wide range of solutions

available

Infrastructure level: Very

well developed broadband

infrastructure

Device access: Smart

devices grew to reach 60+%

(see below in detail)

Mobile market revenue € 5.6

billion


Expected to show

negative CAGR of 2.5%

VoIP connection

growing

Cable subscriber rate

growing

Fibre providing showing

impressive growth


****

Finance and Audience:Both operators Online payment were €18.5 ****


payments and banks are positioning

themselves to get into

mobile financial services.

B2B services are recently

launched by ING and

Rabobank.

Technical solutions: 14%

of financial institutions use

ERP. 46% using CRM

software to store customer

data and 36% were also

analysing customer data

Infrastructure level: Well

developed ICT

infrastructure

Device access: Smart

devices grew to reach 60+%


billion market in 2011

(8thlargest online payment

market worldwide)

Contactless payments

represent a €14 billion

opportunity in the

Netherlands

Great shift towards mobile

(cross channel) and more

customer centric financial

services are providing

opportunities for new

innovations in financial

services

B2B services are expected to

gain ground

All banks and operators

are looking into

possibilities to enter into

this space

Media and

Entertainment

Audience: content cross

platform consumption

boosting broad adoption

Technical solutions: Cross

platform service usage


developed infrastructure

Device access: New smart

devices are providing high

growth opportunities

€14.4 billion

Turnover is expected to

grow to €16.4 billion by

2017

****

E-Commerce Audience:9.8 million online

line shoppers


Mobile platforms are

becoming critical (especially

tablets)


developed broadband

infrastructure

Device access: 60+%

Smart phone penetration

€9.8 billion


Market grew by 9.8%

despite of recession


****


and 25% Tablet penetration


E-Health Audience: Lack of

standards and

interoperability is

diminishing adoption


Source systems progress

-Acute integrated Systems

-Primary care integrated

Usage and Access

-Systems used for clinical

decision making (some

progress)

- Patient access to records

National integration and

sharing progress

- National electronic health

record & unique identifier

- E-Health infrastructure &

communication services

- Agreed clinical coding

&data transfer standards

(Some progress)

- Tailored legislative &

privacy frameworks

- Clear political & clinical

leadership

Infrastructure level:Very

well developed broadband

infrastructure

Device access: New smart

devices are providing over-

the-top opportunity.

Wearable devices and plug-

in devices are facilitating

new services

$26bn anticipated by 2017

(globally for e-health apps)

$1bn anticipated by 2016

(globally for telehealth)

***


ICT

Agriculture

Source: wur.nl

Audience:

- World leading horticulture

- Large Agriculture sector

- Processing industry

- Input manufacturing

- Distribution


-Cloud computing is

Infrastructure level: …

Device access:60+% Smart

phone penetration and 25%

Tablet penetration

Gross value added €52.5

billion representing 10% of

national total

Netherland has 15% market

share in ICT agriculture in

Europe (MTT specialist)

Large global wholesale

organizations are located

into Netherlands, due to

important Rotterdam

harbour

Market is growing

modestly, but large

export efforts are

expected to grow Dutch

ICT agriculture sector

New enabling platforms

are able to connect

farmers and consumers

directly and managing

supply chain from farm

to fork

***

Cloud

Computing Audience:Small and

medium size enterprices

Technical solutions:Public

cloud, but also other type of

cloud services


developed infrastructure

Device access:60+% Smart

phone penetration and 25%

Tablet penetration

€574 million

Cloud computing is

expected to grow from

€439 million in 2012 to

€1,173 in 2016

Software as-a-service

(SaaS) represents the

largest portion of public

cloud, growing 29%

from €298 to €383

million.

Infrastructure as-a-

service (IaaS) is the

second largest segment,

growing 32% from €107

to €141 million.

Platform as-a-service

(PaaS) is the smallest

section, growing 45%

from €34 to €49 million

***


ii. Key ICT sector analysis

1. Telecom

Size and growth

Mobile

There are 19.9 million mobile subscribers in the Netherlands (SIM penetration 119%) (gsmaintelligence.com, Q4 2012). In 2012, Netherlands experienced minor decrease in terms of subscribers. On the other hand, mobile virtual network operators (MVNOs) subscriber base has grown.

There are three major operators in the market KPN (44% market share), Vodafone (30% market share) and T-Mobile (26% market share). In addition, newcomer Tele2 has entered into mobile market and signed a 10 year MVNO agreement with T-Mobile. Telecompaper reported Tele2 to have gained 5% market share in Netherlands in 3rd quarter 2013.

Digital Television

Gaming

(Source:

Deloitte Market

study Dutch

gaming

industry April

2011)

Audience:

- Mobile gamers grew from

1.3 to 5.9 million between

2009 and 2012

- Smart phone users 60+%


- New smart devices

expected to create

disruption in gaming

industry

Infrastructure level:

- Very well developed

broadband infrastructure

Device access:

- New advance gaming

devices are expected to

boost market

- Mobile and social gaming is

growing the most

- €805million (est. 2013)

Social, mobile and portal

gaming making up €189

million

- There are around 160

mostly small Dutch

companies active in the

games industry (developers,

publishers and distributors)

employing around 2500 full

time employees

- Dutch companies

generate€125-150 million in

revenues

Game industry growth

- 2009: €626 million

- 2010: €621 million

- 2011: €668 million

- 2012: €805 million

- Social gaming grew

13% between 2009-

2012

- Paying casual (10-13%)

and mobile gamers (12-

24%) were growing

between 2010-2012

- Gamification in

multiple industries (e.g.

education, finance,

marketing) is global

trend and expected to

take up in Netherlands

as well

***


Around 6.22 million households (84% of total 7.4 million) have digital television. The majority of digital subscriptions are over cable (ACM.nl: The Netherlands authority for consumer and markets Q2, 2013). Digital Television market has been typically driven by cable operators (Ziggo (Liberty), KPN, UPC, CanalDigitaal),which together hold roughly 50%% of the market, while the remaining part is occupied by telecom players, international platforms (e.g. Netflix) and smaller players. Recent aggressive roll-out of fibre optics has decreased their market share. In the second quarter of 2013 alone, KPN market share increased from 25% to 30%, while subscribers over cable decreased.

VoIP and fixed telephony

VoIP market reached 3rd quarter of 2013 a total 5.05 million subscribers. VoIP has been extensively boosted by bundled services offered to customers. Although major players, such as cable operators are active in this sector, there are also 45 technology, service and solutions providers active in VoIP market.

Broadband Internet

At the end of 2013, the total number of broadband subscribers over landline was over 6.7 million. While the number of DSL connections continues to drop, the number of cable connection has slightly increased.

There are 457,000 households and businesses, which have access to broadband via fibre optic. This number is increasing rapidly. Only in 2nd quarter of 2013 275,000 more households were able to access to fibre broadband. Major Cable players are UPC, Ziggo (Liberty), CAIWAY and ZeelandNet,which together hold roughly 45% of the market, while the remaining part is occupied by telecom operators .Telecom operator KPN is gaining market share currently by rolling fibre to home services already for 400,000 households.

Bundled telecom services

More and more households buy their services from a single provider (total almost 5.5 million subscribers). Two third of bundles are triple play bundles combining broadband internet, television and fixed telephony (CBS, ICT knowledge and the economy 2013). Major playerswho occupy nearly 100% of the market are UPC, Ziggo (Liberty), CAIWAY and ZeelandNet and KPN.

ICT Trends and development

Mobile

In 2012, Netherlands experienced a minor decrease in terms of subscribers. On the other hand, the mobile virtual network operators (MVNOs) subscriber base has grown. This is a typical phenomenon in a maturing market. MVNOs in comparison to mobile operators are better positioned to serve needs of specific customer segments (youth, B2B, etc.). Benelux countries have historically been top countries, what comes to number of MVNOs in market. There are 67 MVNOs active in the Netherlands currently.

The function of mobile phone has changed dramatically. Until few years ago, mobile was primarily used as device to make calls and sending/receiving SMS. Currently data traffic is displacing text message. Since the appearance of smart phones many people use mobile phone


primarily for accessing the internet. Total mobile traffic in the first half of 2012 was 68% higher than the year before, while text messages declined from 5.7 billion in 2011 to 4.3 billion 2012(CBS, ICT knowledge and the economy 2013).

Due to an increasingly high demand of data all three Dutch operators (KPN, Vodafone and T-Mobile) have all launched their 4G network in 2013. High emphasis has been put on data bundles as their primary service product. KPN and Vodafone offer their new subscribers as 4G data bundle, including unlimited voice and SMS usage. 4G will further boost over the top (OTT) services, allowing services to be delivered over the top of existing infrastructure and provided directly to the consumers through apps and browsers.

Digital Television

The number of digital television subscribers in the Netherlands continued to rise in 2012. More and more people are watching TV via internet connection (IPTV). A Viewers uses normal TV unit, however signal is routed via an internet connection. Growth has been extensive; in 2010 there were over 590,000 IPTV subscriptions; by 2012 this number had doubled to 1.2 million. IPTV is now the most often used TV subscription method after cable. This growing market share is at the expense of satellite and terrestrial TV (CBS ICT knowledge and the economy 2013).


VoIP

Dramatic change in the way mobile is used has also influenced on VoIP. Fewer households have a fixed telephony connection and calls are more often routed via internet applications, such as Skype, and number of mobile subscriptions is growing. In addition, many people (especially youth and young professionals) are now communicating via internet applications, such as ‘Whatsapp’ and social media, which have had drastic consequences for the telecom market. Already for some years, packages that allow consumers to acquire multiple telecom services, such as TV, internet and VoIP, in single subscription have been gaining in popularity (CBS, ICT knowledge and the economy 2013).

Bundled telecom services


By far the most popular bundle contains radio, TV, fixed telephony and internet. Over 3 million subscribers had such a package in 2012. Another package with almost 1 million subscribers contains internet and fixed telephony. The radio, TV and internet combination was also popular with 739,000 subscribers in 2012.

Telecom operators are creating bundled telecom services, in order to decrease churn and lower customer acquisition costs. We can see the following three trends happening here. First, telecom services were bundled together. Second, multiscreen and channel services were appearing. Subscribers are currently expecting to be able to use any services with any device, anytime and anywhere. We can already see an indication about the third evolutionary step (Tablets, Google glass, wearable, etc.), which will create new devices to fit with new services and new way of consuming services.

R&D and ICT expenditures

Major part of Global R&D expenditures in Telecom are done by Equipment and IT services representing over 80% of total. Operators are functioning more as facilitator of ICT innovations enabling new type of applications and services with investments to next generation network allowing increasing bandwidth. Telecom service providers and network operators’ investment to R&D is globally around 7% of total R&D. Exact figures about R&D expenditures specifically in Netherlands are not available. Since there are no major network vendors present in Netherlands, it is safe to say that major part of R&D is done by small and medium size companies developing new application and services in Telecom space.


Telecom represents a major part of ICT spending, contributing 54% of entire ICT spending in Netherlands. Total telecom and internet expenditures were around €16.2 billion in 2012.

2. Financial and payment services Size and growth

In 2012, 80% of users engaged on online banking. This proportion has been at high, stable level for years. Past years mobile devices have become more and more an important channel for financial services.

14% of financial institutions use ERP (Enterprise resource planning) software, which is fairly low in comparison to other sectors in 2012. On the other hand, 46%were using CRM software for storing customer data and 36%were using CRM to analyse customer data. Marketing is seen as very important in this sector and a significant share of these companies believes that CRM can help them improve sales strategies. In addition, 62% of financial institutions use social media for marketing, but the most important purpose of using social media for financial institutions was recruiting new personnel (69% of companies) and exchanging knowledge within the organization (CBS, ICT Knowledge and the economy 2013).

Major banks active in sector are RaboBank, AbnAmro and ING. Also mobile operators are expected to enter into this market with mobile financial service(MFS) offerings. Major operators are KPN, T-Mobile and Vodafone are all participated MFS trials. Payment service providers are the largest segment in this sector with 30payment service providers active in the market. Examples of payment service providers are gone Multi Safepay, Buckaroo, Pay.nl, Adyen, Dutch Payment Group and HowPeoplePay.


New independent platforms are changing the way customers do and see financial and payment services. The fast pace of new innovative financial and payment services developed by new players, boosted by disruptive innovations, are growing independence from banks and payment service providers. Mobile devices have become a central element for subscribers to do their financial services. Three major industries; telecom, financial sector and ICT are merging together, making mobile financial service ecosystem a busy place. Traditional banks, mobile network operators, handset manufacturers, service providers and some of the biggest names on the web (Google, Apple, PayPal, etc.) rub shoulders together in this competitive space.


While mobile has truly become a central piece for consumers in developed countries, banks have been very hesitant to pursuit their mobile strategy further than creating mobile friendly online banking site or application. Even worse, they have refused to open 3rd parties access to banking platform and paralyzed innovation for a decade.

There has been an ambitious plan to launch mobile payment services in the Netherlands already for more than three years. In 2010, three mobile network operators KPN, Vodafone and T-Mobile signed a letter of intent with bankers ABN Amro, ING and Rabobank, in order to launch near field communication (NFC) payments in Netherlands. In 2011, T-Mobile pulled out of the ‘Sixpack’ consortium, citing difficulty finding a business case and return on investment. The deal that was prepared by parties nearly three years failed to establish planned joint venture to roll out NFC services together. Parties came to the conclusion that the original plan was too complex, requires too much time and had difficulty to create appropriate governance structure. On August 2013, three banks soft launched NFC trial in Leiden in partnership with Mastercard, KPN and City of Leiden. The trial was expected to last three months and approximately 1000 consumers and 150 businesses took part in the introduction of this payment innovation. After the introduction period, each bank will determine individually whether and how it will offer this form of payment to customers. A press release from November 11, 2013, announced Rabobank to be the first to implement commercial mobile payment in the Netherlands in cooperation with G&D.

Prior to soft launch start-up accelerator Startupbootcamp launched the accelerator program for NFC start-ups, in order to boost local ecosystem. This program provided €15,000 of seed funding, free office space, a sponsor package and guidance from mentors for ten starts-ups.

NFC technology is known to have very heavy and complex value chain structure and there are a very limited amount of successful large scale launches in the world. One could wonder, whether the launch could have been done years ago, if the other solution, instead of NFC, would have been chosen or considered to be used in parallel. NFC ecosystem requires extensive investment on infrastructure, while there are many technologies, which could function with existing infrastructure or with minimum investments at point of sales.

Major Dutch banks are also involved in creating supply chain finance services. This fits very well into international heritage of trading and aims amongst other things to smoothen the international trade, payments and cash flow of parties. This over €1 trillion market in EU alone has been growing more than 10% since 2009.


Major part of R&D expenditures is done by software, service and application development companies. There is no specific data available for R&D in Finance and Payment sector.

Companies in financial sector invest relatively high amount in ICT. In 2010, ICT represented 39% of total investments in this sector. This is significantly lower than prior to recession in 2008, when almost half of total investments were dedicated to ICT.

Available work force

In spite of deteriorating economic conditions (in 2011) there still was a shortage of ICT specialist in financial service sector. 26% of financial institutions had ICT job openings and 45% of them find it difficult to fulfil these positions. In 2011, in the Netherlands there was a greater shortage of ICT workers than the EU Average.

3. Media and Entertainment Size and growth

Media and entertainment includes 11 industry segments: distribution, television, radio, music, filmed entertainment, video games, newspapers, consumer magazines, consumer & education books, advertising and Business-to-business publishing. Globally this sector has been growing 5.6% per year on average. Dutch entertainment and media market turnover amounted to €14.4 billion in 2012. Turnover is expected to grow to €16.4 billion by 2017 (PwC Netherlands; Entertainment & Media Outlook for the Netherlands 2013-2017). The recession has had serious impact on this sector and global brands shift advertising spend to emerging market, but Dutch advertising market is expected to grow 1.1% CAGR for the next 5 years.

There has been a major shift to digital content, but this only partly compensates the decrease in spending on traditional media. Consumer spending on digital media in the Netherlands is expected to reach €1 billion by 2017. Digital spending will exceed physical spending in filmed entertainment by 2017. In the music industry this phenomenon will happen even earlier. By 2015 Dutch will spend more on digital music than the one physically distributed (PwC Netherlands; Entertainment & Media Outlook for the Netherlands 2013-2017).

Gaming industry is booming and new generation game consoles drive double digit growth in the next 5 years. Dutch gaming market was estimated to reach €805 million by 2013, with mobile and portal gaming contributing up to €189 million. There are around 160 mostly Dutch companies in the gaming industry (developers, publishers and distributors) and the most of these companies have benefitted from digital distribution, smart phones and education programs in game development (Market study ‘Dutch gaming industry, The right direction’ Deloitte, April 2011).

Even higher growth is expected in consumer eBooks revenue increasing from €12 million in 2012 to €81 million in 2017. Same trend can also be found in professional books. 12% of professional books are digital today, but the percentage is expected to grow up to 32% by 2017.

While consumers content consumption is inevitably moving towards digitalization also 43% of advertising spend in NL by 2017 will be online advertising, up from 19% in 2008.

Meanwhile, print newspaper advertising spend will be 40% less in 2017 of what it was in 2008. Digital magazines spending are expected to reach €86 million by 2017, up from €21 million in 2012.



Digitization is not new in media sector, but building on the opportunities it creates remains a major challenge for the entertainment and media industry. Throughout western world the shift in media consumption, from physical to digital, is hardly news. Connected consumers are moving towards digital and personal content. Mobility will be driving this trend and consumers will continue to migrate towards digital and mobile consumption across an expanding range of devices.

The digital share of overall consumer spends on entertainment and media in the Netherlands will increase from 36% in 2012 to 48% by 2017. One of the major trends that can be seen is growth in spending on the access content (via internet subscriptions). Digital media is increasing annually by 11.5% compare to 3.3% for non-digital media. In 2015, the share of digital media is estimated at 33% of the total industry.

(Entertainment and media outlook for the Netherlands2013-2017 PwC)

Three major trends can be foreseen in Dutch Digital media sector

1. More power will be given to the hands of consumers a. Customers are expecting more freedom in the choice of media content b. Consumption will be moved from download to streaming based content c. Personalisation will create a challenge for many content creators d. Digital distribution must deliver the right content at the right time via the right

device e. The Dutch are known from the new creative formats (such as Big Brother and

Closed Doors), but a relatively small home market is hampering local production f. Furthermore interactive content will become more popular in suitable programs

2. Distribution and cross platform consumption a. Distribution strategies need to adapt to change customer expectations b. Customer is expecting to consume content at any time via the right platform with

the right price c. Traditional media’s licensing models tied to physical formats must adapt to the

shifting demand of connected cross-channel consumers d. Disruptive international players with attractive content, such as Netflix (which

was expected to launch in late 2013 in Netherlands), will require local players to be agile in the way they response to these challenges – the Threat of Over-the-top (OTT) services should not be underestimated

e. The Netherlands is going to continue to be a popular test market for newly developed foreign formats, since Dutch are well-known for their ability to embrace other cultures and new ideas


3. Advertising possibilities a. Interactive content via social media is generating secondary profits for advertising b. The Netherlands are front runner in branded content. US programs have a lot of

branded content, but not as large scale as in the Netherlands c. Online platforms and cross platforms are attracting more advertising revenue d. End consumers are expecting to get more targeted advertising and new digital

channels will enable it e. Digital newspaper and magazine advertising will grow and print advertising will

fall. However, this will not be quite enough to offset the expected losses from print advertising. This will require serious innovation or new business models in newspaper and magazine companies. Quantifying the value of digital engagement is a priority for publishers


Dutch advertising market revenue by industry

(‘Entertainment and media outlook for the Netherlands’ 2013-2017, PwC)

Opportunities for ICT sector companies

Media and entertainment ICT industry is very broad and therefore many specific opportunities can be found. It consist 11 industries that can characterised high level as distributors, platforms, content players, operators and other supportive sectors (distribution, television, radio, music, filmed entertainment, video games, newspapers, consumer magazines, consumer & education books, advertising and Business-to-business publishing) Opportunities tight with trends can be anything from improving cross platform services to improving content targeting and customization. Target companies can vary from operators (MNO, Cable, MVNO and MVNEs) to content providers. Over-the-top players are interesting new addition to target companies, which are focussed on providing services via independent platforms from traditional players (such as Netflix and local players). Advertisers are interested about new concepts (especially interactive) and cross platforms, in order to boost advertising revenue.

Lets state these opportunities – they are not as obvious to everybody as they are obvious to us.

4. E-Commerce Size and growth


Nearly 10 million people in the Netherlands regularly shop online. The Dutch population included 12.3 million internet users in 2012. 80% of them – 9.8 million people – had purchased a product online at some point of time.

Regardless of recession, Dutch online market grew by 9% reaching €9.8 billion in 2012. (Thuiswinkelmarket monitor 2012-2). In terms of online orders; market grew 13%, reaching 88 million orders in 2012. This is more than 240,000 orders a day. This growth was significantly contributed by 400,000 new consumers that purchased for the first time via internet in 2012.

In the first half of the year 2013, ecommerce sales in the Netherlands grew to €5 billion (ThuiswinkelMarkt Monitor 2013-1). The amount of orders grew 10%, reaching 46 million orders placed in the first six months of 2013.

In 2011, 18% of companies were involved in electronic sales. Consumer sales contributed 47% of web revenue and 53 per cent from sales to other companies and government.

Leading E-Commerce companies by industry:

Top retailers 2010:

1. RFS Holland Holding (Wehnkamp.nl) €423 million 2. Bol.com €318 million (Acquired by Ahold) 3. Ahold €149 million 4. KPN €109 million 5. H&M €95 million 6. Hema €90million 7. Thuisbezorgd.nl €72 million 8. Neckermann.com €68.4 million 9. Coolblue €68.2 million 10. Ticket service €67 million

Top Travel:

1. KLM €372 million 2. Sundio Group €372 million 3. TUI €234 million 4. Thomas Cook €229 million 5. Transavia.com €192 million

Books & Multimedia

- Albelli& Bonus print (acquired by Vistaprint)€29.5 million

- Cosmox (acquired by Clearwood in 2008) est. €5-10 million

Comparison websites

- Bestlist.nl €4.5 million

- Independer.nl (achmea owns 70%) €21.7 million

- Kieskeurig.nl (Part of Sanoma Media Netherlands Group)

Computer hardware and software

- 4Launch (GFR business solutions B.V) €56 million (€31.8 million online)


- Alternate €51.6 million

- Azerty €18.6 million (€20 million, 2011)

- BAS Group €129 million (€312 million, 2011/2012) o Bas distributie o Mycom&Vobis o Icidu o MP

- Centralpoint.nl €50 (of which 25% b2c revenue)

- EyeTi Group €60 million (only focused on B2B) o Takeitnow.nl o Acesdirect.nl o Buyonline o Prowarehouse.nl o Rackserver.nl

- Netwerkshop.nl (Hemmp Holding Bv.) €8 million

- SallandAutomatisering €12.3 million

Fashion

- Kleertjes.com €11 million

- Omoda.nl € na. (Thuiswinkel award 2011 and 2012)

- Score.nl €66 million (€12 million online)

- Vente-exclusive.com €16 million (€30 million in 2011)

Household products and consumer electronics

- Budgethouse.nl €6.5 million

- Create2fit.com €37.5 million

- Electrokoopjes.nl €15 million

- Fonq.nl: Revenue more than €14.8

- Scheerfoppen.nl €39 million

- Koopjeskampioen.nl €10 million

- Totaalmarkt.nl €16.2 million

Pharmacy

- Deonlinedrogist.nl : Revenue unknown

- Drogisterij.net €7.2 million

- Toplenzen.nl €7 million

Sport

- Futurumshop €15 million

- Plutosport.nl €10 million

Telecom & Communication

- Alphacomm.nl €27 million (15.6 million online)

- Coolblue €92 million

- Cameranu.nl €43 million

- Cg.nl €8.4 million o Smscity.com


o Condoomfabriek.nl o Beltegoed.nl o Citytel.nl o Giftcards.nl

- Elderswebsales.nl €11 million o Gsm.nl o Besteelmaar.nl

- GSMweb.nl€29.3 million (2009)

- Websend.nl €15.5 million o Studentmobiel.nl o GSMwijzer.nl

Tickets and Postcards

- Cheaptickets.nl €191 million (2011)

- Greetz.nl €10 million

- Poobies.nl € unknown (present in 12 countries in Europe)

- Worldticketshop.nl €15 million

Others

- Bakker-hillegom.nl €143 million (Garden mail-order company)

- 123inkt.nl €43 million (printer cartridges, toners and photo paper)

- Ibood.nl €105 million (31 million in Netherlands): Europe’s biggest one-day deal platform

- Outletplanet.nl €10 million (Outlet stocks online)

- Postnl.nl €23.7 million (Delivery services and ecommerce)

- Readandview.nl €12.1 million (magazine subscriptions)

- Thuisbezorgd.nl or takeaway.com €72 million (world leaders in online food ordering)

-


What people buy?

A bit more than half of total online revenue consists of the sale of products like clothing and books. Revenue from online products increased harder (11%) than the turnover from online services such as travel, insurance and plane tickets (6%). The highest growths in large product segments were products like apparel (+14%, €395mln) and telecommunications (+12%, €685mln). Travel remained largest segment in 2013. The fastest growing segment were toys, growing by 24% and reaching a total market size of €31mln.

There are seven trends that can be predicted to influence on Dutch e-Commerce market.

1. Improving consumer loyalty becomes central

There will still be an increasing amount of people buying online, but eventually this growth will stabilize. Once consumer growth is stabilizing, consumer loyalty is the key to real revenue growth for online retailers. Loyal consumers are important for online stores, since they typically are willing to pay a higher price, buy more products, are easier to reach and are taking care of free publicity.


2. Omni channel (Cross channel) are boosting

In the Netherlands 69% of the consumers buy products via 2 or more different channels. Mobile, tablet and other devices are used more and more for eCommerce. Cross-channel retail is expected to be an important growth in the retail sector

3. Social Media

Around 12% of people are incorporating online purchasing activities into presence on the social networks, such as Facebook and Twitter. Social media provides attractive way to address certain communities, incorporate content marketing components, such as reviews, blogs and recommendation and compare products and services.

4. Product goes directly from manufacturer to consumer

This business model will lead to a broader range of product, because a retailer can aggregate from multiple suppliers. This can also decrease warehousing costs and have impact on the price.

5. Mass-customization

This allows consumers to design, customize or even build their products from scratch. Typical categories and drivers for this are products and services, where customization is common in the off-line word currently.

6. Payments

One of the contributing factors for the success of Dutch eCommerce is the strong local and relatively cheap payment channel, iDeal. Other used payment methods are PayPal and Credit/Debit cards.

7. Mobile Commerce

Mobile provides an additional dimension for simple shopping for simple goods. Mobile allows you to buy or order & pay, where ever you are.Tablet consumption is expected to overtake mobile consumption in coming years.

iii. Commonly used outsourcing destinations and practices

1. Local, near-shore, off-shore Current economic climate is increasing the demand of outsourcing. This demand is fuelled by buyers’ need to respond to the recessionary economic conditions by cutting current operational costs. Based on a Dutch outsourcing study conducted by KPMG (2012|3), 75% of all respondents confirmed that they will continue to outsource at the same rate or more, with 46% saying they will probably or certainly outsource more (Dutch Strategic outsourcing study: 2012|3).

60% of companies are using offshoring (2012), which is 5% higher than previous year. The key driver for a growing satisfaction in this market is the ability to improve outsourcing governance capabilities.

Key reasons for outsourcing were (Dutch Strategic outsourcing study: 2012|3):

1. Cost savings: 68% respondents 2. Access to skills: 47% respondents


3. Financial flexibility: 46% respondents 4. Quality improvements: 38% respondents 5. Time to market: 22% respondents

In terms of offshoring competition, while nearshoring tends to be more common among

smaller ICT companies in the Netherlands, larger companies tend to prefer offshoring to take

advantage of economies of scale by offshoring major ICT operations to Asia. For example,

telecoms companies and banks use offshoring as a cost-cutting measure (Tech Mahindra is a

large outsourcing company in India and popular offshoring choice for Western companies), while

small and growing businesses look to gain advantage through more strategic nearshore partners.

Nearshore partners are considered to have a competitive advantage in terms of project

management and operational culture, offering more of a partnership dynamic.

2. IT personnel costs R&D engineer average yearly salary: €30,000 - €56,000, Median salary €37,384

IT architect yearly salary: €43,000 - €109,000, Median €66,000

CTO average yearly salary: €53,000 - €210,000, Median €82,600

CIOaverage yearly salary: €82,000 - €314,000, Median €82,600

Source: www.payscale.com

iv. Home market and ICT exports Total ICT spending in 2012 was €29.7 billion. ICT services market is much smaller than the market of ICT goods. Even though, the market of ICT services is growing fast. The export of ICT service from the Netherlands rose by 20 % per year between 2002 and 2009. Germany is an important trading partner for the Netherlands, in terms of imports and exports followed by UK and France. Value of ICT imports was €68.4 billion in the Netherlands. ICT is contributing 15.3% of total Dutch imports in 2011. ICT goods represent major share of total ICT imports (91% in 2011). ICT exports were €12.9 billion in 2011 (€5 billion worth of ICT goods and €7.8 billion worth of ICT services (CBS, ICT knowledge and the economy 2013). The major share of ICT exports concerns re-export. This represents 82% of total export of IT. 20% of all ICT exports are sold in North America and two third of total exports of the software sector goes to Western Europe.

In 2012, almost 54,000 companies were active in the service sector. The corresponding figure for the ICT manufacturing sector was 745 companies.

v. Commonly used partnership practices

1. Business culture and languages requirements Many Dutch are familiar with doing business with foreigners, due to the Netherlands long history of international trade. They are the most experienced and most successful traders in Europe. In business they tend to be reserved and formal. The business community is rather close and most senior people know one other. The Dutch take a long term perspective when looking at business, so be clear what your company’s intentions are. The important thing is to demonstrate how your relationship would be beneficial for both sides. Always appear modest and do not exaggerate


claims about what you or your company can deliver. They will want to know Academic credentials and amount of time your company has been in business. Old, more bureaucratic companies may still judge you by how you are introduced so it is wise to have a third-party introduction if possible, although it is not mandatory.

Dutch people value their own personal time, do not ask them to work late or come in over the weekend if you want to foster a good working relationship. The Dutch are extremely direct in their communication. They may sound blunt if you come from a culture where communication is more indirect and context driven (e.g. UK). They expect to be told yes or no in clear words. In general, ideas will be discussed quite openly at meetings, with everyone entitled to their opinion. Information is shared across departments and corporate strategies and goals are usually communicated to all employees, especially in more entrepreneurial companies. Decisions are often consensus-driven in these cases.

The Dutch are very international nation and they commonly speak two to three languages. English and Dutch are common business languages, but it is not rare for Dutch people to communicate with other continental European languages as well. Your word is your bond and making claims that later prove to be untrue will brand you as unreliable. The Dutch take punctuality for business meetings very seriously and expect that you will do likewise. It is wise to call with explanation if you are late. Lateness, missed appointments, postponements, changing the time of appointment or a late delivery deteriorates trust and can ruin relationships.

The Dutch tend to get right down to business. Business negotiations proceed at a rapid pace. Presentation should be practical, factual and never sloppy. Business strategy is cautious and pragmatic, usually involving step-by-step plans. In many companies the decision making process is slow and ponderous, involving consultation. Consensus is vital. The Dutch keep talking until all parties agree. Once decisions are made, implementation is fast and efficient.

2. Practices and partnership schemes Dutch enterprises are shifting their focus on software as a service, in order to avoid additional overhead costs, reduce application management and at the same time eases deployment. Whole range of partnership schemes can be considered.

3. Procurement practices and regulations Standard format of procurement practices are followed in the Netherlands. A candidate for ICT provider is expected to go through: request for information (RFI), followed by request for proposal (RFP) process. Candidates will be asked to submit an extensive list of questions, including company information, cost drivers and references, which are typically followed by several rounds of negotiations. The public procurement process is typically stricter and takes typically longer than the private one.

Bid ranges for Dutch contracts can range between €70,000 and several million Euros while individual contractors receive an hourly rate of around €60-120, compared with €250-400 per day for nearshore company services, €280-360 per day for Lithuanian company services, and offshore company day rates of €40-250.

vi. IT associations, and other organization bodies One of the largest ICT associations is called Nederland ICT. This is a trade association for more than 550 IT, telecom, internet and office companies in the Netherlands. The business community


that Nederland ICT represents has a turnover of almost €30 billion and has over 250,000 employees, making it the foremost advocate and representative of the Dutch ICT sector.

Major associations:

Nederlandict.nl (see above)

FIAR CE: Association of manufacturers, importers and agents on radio field

Werkgeversvereniging ICT: ICT employer association

ICT Milieu: Dutch association for ICT and office organizations

E-Commerce: Thuiswinkel.nl 2000 online stores

CRM Associations: crm association.nl, crmsystemen.nl, ictwaardborg.nl, itdirectory.nl, strategic-sourcing.nl

Market research: ESOMAR

eHealth: Nictiz, project Aorta


5. Internal analysis

Grouping based on four attributes: industry sector, distribution synergies, complementary skills and existing partnerships

There are 14 representative companies participating in this project. Each of them has ambition to enter in Germany, The Netherlands and/or UK markets. After selecting companies, we created 8 groups based on four attributes (with key questions):

1. Industry sector. Does these companies belong to same industry sector? 2. Distribution synergy. Do they have distribution synergies? Do they have common logic

with market entry (not necessary same players, but similar logic)? 3. Complementary skills. Do they have complementary skills? Do they have similar skills,

but different target audience and/or target distribution channels? 4. Existing partnerships. Do they have existing partnerships with each other?

a. 3D CAD sector

InfoEra: UNDET

UndetToolBox is a plug-in for AutoCAD and its verticals. It facilitates and speeds up evaluation, visualization, processing, and advanced modelling of point clouds and is suitable for both


buildings and sites. Best value for users whowant to work in traditional AutoCAD workflow with enhanced point cloud processing capabilities.

Websites: www.infoera.lt (parent company), www.undet.com (product). Key product characteristics

Pricing Unique selling points Market presence & partnerships

License fee for Basic and Pro versions, plus annual maintenance fee.

High performance for dense point clouds & Comprehensive point cloud data management.

Interactive visibility, coloring management & orthophotos directly from point clouds.

Automatic recognition of various objects.

Irregular surface mesh creation.

TrueView (perspective mode).

Smart Board (for 3D modelling and sectioning).

Deformation analysis.

Distribution: classified.

Strategic partners: classified.

INRE: SolidAce

Integrated workflow application for intelligent structural data exchange in AEC (Architecture, Engineering, Construction) and plant design. Websites: www.inre.lt (parent company), www.solidace.com (product).

Key product characteristics

Pricing Unique selling points Market presence & partnerships

Confidential.

SolidACE solution is able to combine two worlds of CAD systems together: AEC (Bentley, AutoCAD and others) and Mechanical CAD applications (such as SolidWorks).

Fluid and simple way to exchange data between these two worlds.

Can be acquired as add-in applications or stand-alone (in the near future).

Existing references inLithuania and Norway (Greenland Group).

Group synergies

• Industry sector.Both companies are working in3D sector, butcompetition between themis not likely, as the products serve totally different purposes.

• Distribution synergies.UNDET is theadd-on solution for AutoCAD, while SolidACE is focused on a stand-alone solution and is integrated with multiple platforms. This results in limited distribution synergies.

http://www.infoera.lt/

http://www.undet.com/

http://www.inre.lt/

http://www.solidace.com/


• Complementary product and/or skills.Both products could be sold as add-ons. Although addressable market is very limited.

• Existing partnerships.No overlapofindividual partners. However, similar partnership logics to enter into market exists.

Market entry scenarios


Explanation

Hardware VARs

Partnership with Hardware value added resellers as a scenario to enter into market (hardware resellerscould sell software together with their hardware).

Software VARs

Partnership with software value added resellers as scenario to enter into market (Software resellers could sell add-on solutions together with their platform):

• SolidWorks and Bentley for SolidACE; AutoCAD for UNDET.

3D Consultants

Partnership with 3D consultants as a scenario to enter into market (3D consultants would cross-sell both services and add-on solutions).

Software vendors

Direct partnership with software vendors (SolidWorks, Bentley, AutoCAD, etc.). Possibilities:

• incorporated add-on feature optional for all users,

• provide more features for existing offering of add-on software development providers

Partnerships with other add-on software developers.

Market entry scenarios: pros and cons


Pros Cons

Hardware VARs

Typically good access to market (if VARs represent major brands).

Potential motivation for partners: attractive additional revenue source.

Not familiar with selling software.

Limited to certain brand(s).

Requires training and active involvement.

Not very active sales force for software sales.

Software VARs

Used to sell software.

Existing know-how about software limitations.

Sweet spot with VARs selling both AEC and Mechanical 3D CAD software –SolidACE.

Potential motivation for partners:after sales opportunities.

Addressable market is limited to one brand or certain brands.

Potential setback for partners: some features may compete against new upgrade sales (add-on vs. new upgrades).

3D Well positioned to generate leads. Not a natural fit.


Consultants Potential motivation for partners:

SME consultants are more likely to become reseller channels, as they likeadditional revenues,

opportunity to cross sell solution and consultancy.

Potential setback for partners: major consultant companies typically want to keep their independent position.

Software vendors

Typically large addressable market and billing relationships with customers.

Potential motivation for partners:add-on solution providers are able to provide more added value, if working in partnership together.

Longer sales cycle.

Potential setback for partners:add-on solution couldcompete with software upgrades in some cases.

Country-specific insides

Market Entry Scenarios

Germany UK Netherlands

Hardware VARs

N.A. Companies:Altodigital, Inition.

Example entry scenario: major VARs like Misco are part of the education consortium Crescent.

AECMag.com offers insight into the UK AEC industry.

N.A.

Software VARs

Companies: Solidline AG, DPS Software, C-CAM, Dascce, Coffee, SolidPro, Technik, Cadmes, MB CAD.

Top companies: AutoCad, SolidWorks, Bentley, Cadline.

Example entry scenario: Leverage Autocad/SolidWorks partnership by direct collaboration with other partners in the network in the UK.

Companies: cad2m.nl, cadmes.be, design solutions.nl (SolidWorks) Cadac.com, itannex.com, greenock.eu.

Suggestion: utilize existing partnership network of SolidWorks and AutoCAD.

3D Consultants

Companies: Geoconsult.eu, arup.com (Global).

Top companies: Delcam, Autodesk, Rolta UK, SolidWorks.

Example entry scenario: Leverage AutoCAD/SolidWorks partnership by direct collaboration with other partners in the network in the UK.

Companies: Delfttech.com, 3D capacity.com.

Suggestion: utilize market knowledge of consultants, in order to gain leads and contacts in AEC industry.

Software vendors

Add-on solution providers: cadaplus.com

Bundled add-ons to create more value-add and opportunity to tap UK market. Example companies: Envisage UK.

N.A.

b. Business platform sector and related


iTO& Tele2: TASKER

Service & solution description

Tasker is a solution created for companies, employing staff that performs tasks moving around a city or country. Office employees can assign tasks using their environment on Internet browsers while mobile workers use the solution app on their mobile devices.

www.tasker.lt (product).


Website and Pricing Unique Selling Points Market presence & partnerships

Lithuanian price ~ €15/user/month.

Tasker is easily adaptable to any business, no costs are needed to start.

Amount of licenses can be modified monthly.

Personal attention regarding solution upgrades for each single customer.

Currently present in Lithuania only.

Partnership with TELE2 (co-developed in partnership).

SynergyCloud


An advanced Sales process management platform. Synergy Sales helps to pick the right deals and activities so you can stay focused on delighting your customers and beating your competitors.


Pricing Unique Selling Points Market presence & partnerships

Lithuanian price ~ €19/user/month

Synergy Cloud focus on simplicity, usability and brilliant design to create business success for our users that makes Synergy Cloud a unique assistant for you.

Focus on companies with active sales force.

Currently present in Lithuania only.

Agmis


Agmis has developed a paperless tablet-based sociological survey platform. Android-based survey system can be easily deployed to the surveyor's tablet. Tablet can function both online and


offline, registering exact geographical location where survey took place. All new questionnaires can be prepared using web-based LimeSurvey system and distributed to the surveyor's tablet via air.

Websites: www.agmis.lt(company).


Pricing Unique Selling Points Market presence & partnerships

30€/month/tablet

Survey can be completed in much shorter time, compared to the regular process.

Customers of market research companies get higher result reliability.

Research company has much better control of the surveyors and cantrack their progress in real time.

As there are no paper-based questionnaires, there is no need to digitize them, this saves time and money.

Survey can be easily adapted for the self-service kiosks in the public places.

Market presence

• Lithuania

• Sweden

Partnerships

• Classified

Group synergies

• Industry sector.All belong to business solution group. Although no synergies between target segments.

• Distribution synergies.No distribution synergies.

• Complementary product and/or Skills.No real product synergies, except weak connection between Synergy Cloud (sales organizations) and Tasker (remote workers).

• Existing partnerships.Similar partnership principle, but no synergies between existing partnerships.



Explanation

Add-on for existing business platforms (CRM, ERP, etc.)

Partnerships with business platforms – service provided as add on solution.

Business solution VARS

Partnerships with business solution value added resellers. Resellers would sell services as add-on solutions or stand-alone solutions for their clients.

Business platform consultants

Partnerships with business consultants. Consultants would function as lead generators and cross-sales or direct sales reseller for add-on

http://www.agmis.lt/


solution.

Market research companies

Direct sales tomarket research companies (applicable to Amis only).



Pros Cons

Add-on for existing business platforms (CRM, ERP, etc.)

Billing relationships with customers.

A new way to differentiate from competition.

An attractive way to provide awareness and position for potential exit.

May compete against future upgrades of their own platforms to some extent.

Business platform companies may require some exclusive period.

Business solution VARS

Used to sell software already.

Existing know-how about software limitations.

Highly motivated due to after sales opportunity for VARS.

Some features may compete against new upgrade sales – Add on vs. new upgrades.

• Limited addressable market to brand or certain brands

3D CAD Consultant • Important lead generator

• Germany: Critical partner to connect customers and software solutions

• Option to get involved into large projects

• Option to combine service and cross-sale

• Major consultant companies typically want to keep their independent position

• Not natural fit – not primary distributor

• Requires primary distribution channels to be present in country – local partner.

Software players • Plenty of companies present and possibility to target offline market research companies (Agmis)

• Possibility to connect via associations (See country specific details below)

• Some exclusivity might be requested, especially larger companies

• Working with companies with extensive IT department – possibility to develop similar in house


Market Entry Germany UK Netherlands


Scenarios

Add-on for

existing business

platforms

Find trading partners via

bitkom.org, cebit.de,

crm-expo.com,

entscheiderforum.net,

germantop500.de,

systems.de.

Example companies:

Metaphorix, Consult CRM,

Precision Point.

Example entry scenario:

Target UK cluster networks

to create competitive add-

on bundles for platforms

such as Dynamics.

Find trading partners

via crmassociation.nl,

crminnovatie.nl,

crmsystemen.nl,

ictwaarborg.nl,

itdirectory.nl, strategic-

sourcing.nl.

Business solution

VARS

Interesting players:

cas.de, cobra.de,

curexus.com, cursor.de,

flowfact.de, pavone.de,

crm.proteam.de,

sumerasoft.de, tesla.de,

wice.de.

Top companies:

Computacenter, Bytes,

OCSL, BT Business Direct.


target SME networks in UK

clusters to create

competitive add-on bundles

for larger companies, e.g.

OCSL.

Interesting players:

alexioncrm.nl,

appenta.nl, archie.nl,

efficy.nl, levi9.com,

perfectviewcrm.nl,

salesmanager.nl,

scope.nl, sugarcrm.nl.

Business

platform

consultants

Major sectors using

CRM are

telecommunication and

financial services

industry.

Intermediaries are

extremely important

channel: softselect.de,

schwetz.de.


target CRM, ERP and other

business platform VARs by

direct contact and exploring

partnership opportunities.

Major sectors using

CRM are healthcare,

financial services and

governmental sector.

Major consulting

companies are

crmconsultants.nl,

gpic.nl.

Market research

companies

IWD market research,

insight europe, I+E

Berlin Market Research,

ACE-international,

KQR, Gfk Germany,

Attfield Dykstra &

Partners, ASK

international market

research.

Market research companies

and associations: Ipsos

Mori, Market Research

Society, the DMA.

Meet with big data

companies which can

benefit from primary

research tools.

121research, calls &

More (field research,

Desan research

solutions, Haystack,

I’m research BV,

Knots research,

MetrixLab, PMR (field

research), RSVO.

More companies from

ESOMAR.

c. E-Health Softneta


Service & solution description:

• MedDream PACS

• MedDream DICOM WEB Viewer (MedDream Report module, MedDream ECG module, MedDream Video module, MedDream 3D module)

• MedDreamX Telemedicine

• Surgery Workstation

• SendToPacs

• Optomed Workstation


Website and Pricing USP Market presence & partnerships

www.softneta.lt

Pricing based on # of

connected doctors /

devices.

All products can be integrated

with customers information

system.

Demo version available for 45

days trial without limitation

before purchasing the product.

European countries

Canada

US

Partners: Classified

Rubedo Sistemos


Rubedo sistemos offers safe and effective solutions of robot adaptation to precision-sensitive tasks tailored specifically for even the most demanding industries, including healthcare. iGuide 2.0 and induRob

Rubedo designs and implements custom software solutions. Their good quality management practices are ISO-certified, business and development processes – formally defined.



Rubeco.lt

Business engagement model

Dedicated development centre model

Fixed price model

Time and Material model

Strong technology competency.

State of the art IT

infrastructure.

Experienced professionals,

masters of CS.

Connections to academic

institutions.

Germany

US

Partners: Classified


Hybrid model

Well-thought development

process.

Certified ISO 9001:2008.

ISO 12207:2008 compatible.

Experience in providing

services to large enterprises.

‘Value for Money’ at every

stage of the process.

Group synergies

• Industry sector: Both companies active in eHealth sector

• Distribution synergies: No strong synergies between distribution channels – Option to share leads and opportunities

• Complementary product and/or Skills: Some synergies exists – e.g. critical surgery software together with video sharing and recording

• Existing partnerships: Companies have existing partnership

Market entry strategy scenarios and explanation

Market entry

scenarios

Explanation

Healthcare information

system providers

Existing healthcare information system providers function as resellers.

Add-on solution for existing service.

Device resellers

Device resellers cross-sell hardware and software together.

Software solution sold together with device.

Direct sales:

Large regional hospitals

Direct sales for large regional hospitals.

Direct sales:

Private clinics

Direct sales for private clinics.


Market Entry Scenarios: pros and cons

Market Entry Scenarios Pros Cons

Healthcare information system providers

Great way to get connected is via

trade or industry associations.

Joint development projects and

organizations are present in all

countries.

Typically large companies with

international presence.

Market is fairly fragmented –

growing addressable market

would require multiple

partnerships.

Often some exclusivity is

required.

Device resellers

Large addressable market: UK and

NL small amount of large

multinational companies capturing

large portion of market.

DE medical sector is more

fragmented – SME sector has large

market share.

UK & NL: Long sales time

and highly competitive.

DE: Multiple partnerships

required, in order to get access

to large portion of market.

Direct sales: Large regional hospitals

The best scenario is to create

partnership with existing software

vendors.

Other attractive way is to

participate national programs and

look into potential partnerships

within program.

DE: Direct sales is long and

hard process.

NL & UK: Dominated by

major players.

UK & DE: Very competitive

markets.

Direct sales: Private clinics

The best scenario is to create

partnership with existing software

vendors.

Other attractive way is to

participate national programs and

look into potential partnerships

within program.

NL: Private clinics are

typically small generalist

clinics, which function as

gatekeeper for specialist and

university hospitals.


Market Entry Germany UK Netherlands


Scenarios

Healthcare information system providers

Find partners via German

Healthcare Export group

(ghec.de).

Compugroup Medical

(CGM).

Agfa healthcare, AOK

Systems.

Look into BVMed

association.

Attend and demo

products at UK

Telehealth Care’s

“MarketPlace” events.

Network within the E-

Health Insider (EHI)

network and attend

events (EHI Live 2014).

Nictiz: organizer of joint

development projects

Interesting ICT

companies: 21st Century

informatics, Wolter

Kluwer, Tieto.

Device resellers

Siemens AG, Bayer AG,

Fresenius Medical Care

AG, Draegewerk AG, Paul

Hartmann AG.

SME enterprises make up

to 86% of the German

medical tech sector.

Top companies:

A.Somerville Ltd.,

Euroteck Systems,

Varian Medical Systems

UK.

Consider re-selling

opportunities via NHS

Supply Chain (public

health procurement

channel).

Large global companies.

Find resellers of

Koninklijke Philips

Electronics NV, MSD,

Johnson&Johnson,

Medtronic, Abbott,

TEVA, AstellasPharma,

DSM, Novartis and

PURAC.

Large regional hospitals

The best scenario would be

to partner with existing

software suppliers, such as

Agfa, Siemens, iSoft,

TietoEnator, Nexus,

Fliegel, Compugroup and

Meierhofer.


Consider partnering with

Tunstall which is the

lead supplier for the

NHS’s Whole Systems

Demonstrator programe

(world’s largest

telehealth pilot).

NICTIZ (National ICT

institute for Healtcare).

Large project called

AORTA is creating

common standards and

national infrastructure.

Around 100 hospitals in

country.

Private clinics

The best scenario would be

to partner with existing

software suppliers, such as

Agfa, Siemens, iSoft,

TietoEnator, Nexus,

Fliegel, Compugroup and

Meierhofer.

Top companies:

A.Somerville Ltd.


Engage with leading

operators and clinics.

E.g., The TeleMedicine

Clinic (TMC), a leading

teleradiology provider

working with the NHS.

Large project called

AORTA is creating

common standards and

national infrastructure.

Private clinics are

typically fairly small and

function as gatekeepers

for specialists and

hospitals.


d. Payment and financial service Paysera

Service and solution description:

• Online payments

• Money transfer

• International money transfer



Paysera.com

Transaction based pricing.

Cheap global and EU

payments, payment collection,

bank link services.

Market presence

Lithuania & Latvia.

UK (money transfer).

Partnerships

Classified info.

iTero

Service and solution description:

SmartCity platform, for city transport. It includes transport service delivery for customer using mobile phones: mTickets, mParking, mTaxi, mRoller. Tight integration with city systems, payments and etc. Brochure is attached.



www.itero.lt

NA

Market presence

Lithuania

Denmark

Partnerships

Classified


Group synergies

• Industry sector: Both involved in payment and financial service industry, providing complementary services

• Distribution synergies: Synergies with banks, operators, other service companies and existing platforms

• Complementary product and/or Skills: Iterofocussed on ticketing applications, whereas PaySera active in eCommerce and payment sector

• Existing partnerships: No existing partnership or shared partners


Market entry

scenarios

Explanation

Banks active in

field

Direct sales or partnership with banks aiming to provide new and leverage

existing services.

Cross sector opportunities taken into consideration (e.g. Bank active as

MVNO, bank aiming improve service portfolio).

Operators active in

field

Direct sales or partnership with operators aiming to provide new and

leverage existing services.

Cross sector opportunities taken into consideration (e.g. operators actively

involved or searching for mobile financial service opportunities).

Service companies

(international

money transfer

and others

Direct sales or partnership with other service providers, such as

international money transfer companies, wallet solution providers, or

others.

Add on solution between companies or international opportunity via

partnership.

Existing platforms

Enable transaction with existing and established platforms, such as

ecommerce and other transaction supportive platforms.



Banks active in field Attractive opportunities and some Long sales cycle.


active banks exists (e.g. Rabobank).

Banks moving towards factoring

services.

New emerging platforms

challenging banks, making banks

to move into wider space.

Requires thorough market

research before entrance.

Requires local partnerships

and ecosystem creation.

Typically slow innovators.

Operators active in field

Large subscriber base.

MVNO cross industry

opportunities (Retailers: e.g. Lidl,

Aldi, Albert Hein; Banks: e.g.

Rabobank).

Many trials conducted.

Limited knowledge about

payment and financial

services.

Complex ecosystem.

No successful benchmarks.

Service companies

(international money

transfer and others)

Large amount of immigrants in

each country.

Ability to capture critical mass via

partnerships (attractive when

volume based pricing).

Attractive opportunity to partner

with e-commerce payment

providers e.g. Weve.

International money transfer

requires ability to control

both end of corridor

(receiving and sending).

Local partnership critical

(especially in Germany).

Existing platform

New innovative platforms entering

into space.

Flexibility is key, providing

opportunities for nimble SME

companies to enter with innovative

solutions.

Interesting underutilized

ecosystems present (e.g. co-

operatives, large retailers, etc.).

Complex partnerships can be

hard to manage.

Requires thorough evaluation

of power structure before

entering into partnership.

Mobile payments are in

infancy stage.




Banks active in field

Deutsche bank heavily

involved with evolution of

Supply chain finance services.

Interesting companies: Fidor

Retailers with banks

offering cross-sector,

opportunities in

insurance, e-commerce,

RaboBank recently

launched NFC

trial in NL.

AbnAmro and


bank and ELV

(ElectronischesLastschriftverfa

hren- 30% reach).

telecoms, retail: Sainsbury,

Tesco, The Co-Operative

Group/Bank.

Also consider Building

Societies.

ING expected to

follow.

Operators active in field

Some trials conducted (mainly

around NFC).

Vodafone (owner of MFS

platform).

Market consolidation on

going.

Cross-sector opportunities.

Several MNOs.

O2 is the best bet among

operators and Virgin

Money is also interesting

as it is an MVNO.

KPN and

Vodafone

expected to launch

own mobile

financial service

offerings.

Opportunities via

MVNO e.g.

Lebara – int.

money transfer,

RaboBank – MFS.

Service companies (international money transfer and others)

Consumers clearly prefer

direct debit payments followed

by credit cards, online bank

payments such as Giropay, and

Sofortuberweisung, and e-

wallets.

Paypal 10+ mln accounts.

TorFX& Currency

Solutions.

HiFX& Smart Currency.

Square and Dwolla.

Possibilities to partner

with leading e-commerce

payment providers, e.g.

Weve.

iDEAL: Market

leader and national

online payment

provider.

Many international

players in online

payment market.

Existing platform

UseMyBankGiroPay int.

money.

Directebanking (intermediary

services), Uberweisung.

eNets (direct debit

authorization).

Caxton FX partnered with

Newcastle Building

Society and Visa to

introduce fee-free prepaid

global debit card.

Provide add-ons to

transfer players: Skrill and

Barclays’ Pingit.

Credit

management

companies provide

attractive

opportunity to

enter into

otherwise mature

market

(InkassoUnie).

e. E-commerce and e-signature

Estina


• Web applications architecture design and development (PHP5, Symfony2, Yii, Zend framework)


• Frontend design and development (JS, HTML5, CSS3)

• Third party integration services (REST, SOAP)

• Database design, development, optimization (MySQL, Doctrine)

• Server-side technologies (Cache infrastracture design, LAMP, LEMP stacks) Key product characteristics


www.estina.lt

eSignature: €0.1 per

transaction

Web development

Hourly fee

Revenue share

Regarding Estina software

development services - Estina

employs the certified, senior

level team of software

engineers and analysts who

have a deep knowledge of e-

commerce business and 10

years of experience in product

management and development.

iSign.

Market presence

Lithuania

Sweden

Ireland

Partnerships

Classified

Group synergies

Not applicable


Market entry scenarios Explanation

eCommerce: Direct sales

Big brands

New entrants

Direct sales with big brands, product owners

and manufacturing companies.

Special attention on new entrants entering into

market.

eSignature (NL only)

Operators

MVNOs

Direct sale to operators or service partnership.

Cross sales opportunity with virtual network

operators.

Option to target certain target segments via

virtual network operators.

eCommerce: Ticketing market places (Public transportation, Event ticketing, Taxi ticketing)

Direct sales to ticketing market places,

including public transportation, event ticketing

and taxi ticketing.




eCommerce:Direct sales

Big brands

New entrants

Partnership with related software

providers, such as warehouse and

billing platform developers – lead

generator and reseller.

Co-development partnership with

local eCommerce developer.

B2B platforms expected to grow.

Cumbersome to generate

leads, when not directly

present in country.

Cheap alternatives exists

(although with limited ability

to customize).


Operators

MVNOs

International opportunities exists.

Operators and MVNOs do not

have own eSignature system in

place.

Mobile Money (NFC) trials –

eSignature offered as add on

service.

Local ID programs already

exist:

Open ID community

National ID

Bank ID

eCommerce: Ticketing market places

Public transportation

Event ticketing

Taxi ticketing

Opportunity to partner with local

player as add-on solution provider.

Some smaller municipalities

untouched.

Public transport and taxi

ticketing is crowded in NL

and UK.

Many international event

ticketing companies rolled in

three markets studied.

Long sales cycle.




Direct sales

Big brands

New entrants

Otto (and

Neckermann), Conrad

electronic,

Notebookbilliger.de,

Varlagsgruppeweitbild.

Better solutions needed

to handle the increasing

supply chain challenges.

QuidCo, Actinic,

Seller Deck, Shopify

1:Exhibit at

RetailWeek

Ecommerce Summit,

2: marketing to

mobile-targeting

companies (MNOs,

CRM providers)

Bol.com and Bas Group.

Major increase in product

sales (apparel, telecom

and toys) - New entrants

likely to enter into these

sectors.



Operators

MVNOs

NA NA Open ID community.

Bank driven

identification.

National ID (act on

electronic signature,

2003).

Opportunities in

international context.

Ticketing market places

Public

transportation

Event ticketing

Taxi ticketing

eTicket Deutschland

programme is

facilitating cashless and

seamless travel across

Germany (NFC).

Top players include

SellerDeck, Ticket

Master Systems and

Kick Interactive and

Arepo.

Example scenario:

Direct partnerships

with existing UK

suppliers to enter

market.

Public transportation

ticketing already in place

(NFC).

Event ticketing players

ticketmaster.nl, many

international players,

football ticketing.

Worldticketshop.nl,

cheapticket.nl.

f. ERP Customized Solutions Blue Solutions


Our company optimizes business processes. We implement various Enterprise Resource Planning (ERP) solutions, based on Microsoft Dynamics AX platform. ERP could be implemented in various business management fields from supply chain to finance. We specialize in manufacturing and agro-business systems optimization.

Grain accounting is designed for grain purchasing and processing companies, and manages all functions from signing the purchase contracts to delivering the finished product to a buyer.



www.bluesolution.lt

Development: Fixed fee or

Hourly fee.

Grain Solution: Revenue

share.

Quality – Expert level of

Dynamic Ax resources.

Flexibility – No fixed cost,

resources available on demand.

Price - €360 per day

Market presence

Lithuania

Latvia

References (Norway, Denmark

and Poland)


Partnerships

Distribution: Classified

Strategic: Classified

Hosting and streaming:

Classified

Others: Classified

Softera Baltic


Soft4Leasing is business software for lending and asset finance, automotive finance, leasing and fleet management companies. The software is tailored for the leasing business process and adaptable to the unique needs of your company.

Soft4RealEstate is a flexible solution for commercial real estate companies that own or manage retail, office or industrial properties.



www.softera.lt

Pricing

License fee

Maintenance fee

Implementation fee

Hourly rate for additional

development work

Soft4RealEstate (Focused in study).

Easy to learn and fast to

implement software solution

for commercial property

managers.

Soft4Leasing.

Complete software solution for

small and medium asset finance

companies, built on Microsoft

Dynamic ERP platform.

Market presence

Lithuania

Via partner in Canada,

Philippines, Tanzania

Partnerships

Microsoft NAV partners

Hosting and streaming

partnership

Group synergies

• Industry sector: Both active in ERP customization. Moderate overlap between target industries and segments.

• Distribution synergies: To some extent competitive offerings may limit usage of common distribution channels

• Complementary product and/or Skills: very similar competences


• Existing partnerships: No common partnership network or overlap. Softera belongs to Microsoft NAV and Blue Solution Microsoft AX partnership network – although main differentiation is end consumer size between two business networks



Explanation

Direct sales

Blue Solution: Direct sales for companies active in supply chain and finance.

Specialization on manufacturing and Agriculture information systems.

Softera: Direct sales for real-estate and leasing companies.

Microsoft partners

Blue Solution: Microsoft AX partnership network.

Softera: Microsoft NAV partnership network.

Incubators and associations

Partnership with incubators and association active in field – if applicable.

Lead generator and platform to create partnerships for Softera and Blue

Solution.

ERP integrators and consultants

Companies functioning as integrator in market and consultants supporting

implementation.

Consultants operating in strategic and architectural level.

Consultants operating in process level.

Market Entry Scenarios: pros and cons


Direct sales Possibility to leverage existing

international customer base (if

present in new country).

Hard to identify and get

connected with prospect

customers with local presence

– local partnership is

important.

Microsoft partners Opportunity combine services and

sell add-on solutions in

partnership.

Opportunity to leverage

outsourcing opportunities.

Cross sector and industry

opportunities.

Competitive offerings.

Many selling industry specific

solutions.

Country specific know-how is

important.

Incubators and

associations

Lead generator.

Microsoft partnership companies

No strong associations or

incubators in this field – may

function as platform to get


(see above). connected with other players

active in ERP world.

ERP integrators and

consultants

Good partnership to get informed

about major deployments and

leads about prospect customers.

Might already have local

partnership.

Requires convincing and

proof, in order to truly

activate integrators and

consultants.




Direct sales

Work with local

consultant or in

partnership is critical for

success.

Direct marketing (for

Softera), including to

insurers operating

telematics/black box

schemes (e.g., iKube,

AppyDriver app).

Work with UK

consultants who can

identify opportunities.

Work with consultant

able to identify local

opportunities and

partnerships are

important.

Major problem areas

are data conversion

and user training.

Microsoft partners

NAV: Business

Systemhaus, Netronic,

agiles (food, trade and

workflow), Liberty

grove software.

AX: aXpact

Target companies using

Microsoft Dynamics (for

Blue Solutions).

Work with UK

consultants who use

add-ons, e.g. Dynamics

Consultants, and re-

sellers, e.g., Advantage

(ABS).

NAV:

AX: pulse.nl

Incubators and associations

Local ICT clusters in

NordheinWestfalen,

bayern and Baden-

Wurtenberg.

Identify incubators in

regional clusters, e.g., in

Tech City.

UKBI. Also UKITA

offers opportunities for

networking and to join

the UK’s National

Suppliers Register for

ERM.


ERP integrators and consultants

NAVAX Corporate

Group.

NAV: Rodl& Partner

Provides lead generation

rather than direct

marketing and sales.

AX: Crimsonwing

g. Telecom (NL & Germany) and Finance & Payment (UK)

Nortal


Nortal’s competence in the telecom industry is built around improving performance and flexibility in sales, customer care, marketing and product development.

Competitive edge in the financial services industry is created through better customer service, efficiency through back-end automation and secure financial transactions.



www.nortal.com

Fixed price

Hourly fee

Combination of above

Nortal success is built on long-

lasting relationships and

delivering the best quality

mission-critical solutions to our

clients in selected industries

across Europe, Middle East and

Africa.

Market presence:

Core markets are Lithuania,

Estonia, Finland, Russia,

Oman, Romania, Serbia

References from 22 countries

Partnerships:

Only subcontractors.

Group synergies

Not applicable



Explanation

Telecom operators

Operators

Direct sales for mobile network operators.

Other Telecom players

Direct sales for large mobile virtual network providers (MVNOs).

MVNEs as resellers for mobile virtual network providers – add-on


Large MVNOs

MVNEs

solution for existing offering.

Small-medium size banks

Direct sales for small and medium size banks.

Cross sector opportunities

Direct sales for consortiums or companies looking possibilities to

open cross sectorial initiatives between telecom and financial service

sectors.



Telecom operators (NL & Germany): Operators

Market consolidation on going

(Germany).

Cross industry opportunities (e.g.

T-Mobile – Ehealth, Dutch

operators – MFS.

On going 4G roll-out allows new

way of consuming services and

creating new once.

Hard to get access to major

operators – decisions made in

group level.

Local partnership is

important/critical.

Other Telecom players (NL & Germany): Large MVNOs

MVNEs

Large portion of subscriber belong

to MVNOs (e.g. 1/3 in Germany).

Access to large portion of MVNO

via few successful MVNOs.

Some MVNOs are fairly

small.

Market is largely fragmented.

Small-medium size banks (UK)

Member owned building societies.

Credit unions becoming important.

Local partnership is

important.

Long sales cycle.

Cross sectorial opportunities (UK)

Cross sector opportunities with co-

operatives (Bank- Retail-

Telecom).

Requires local partnership to

identify prospects and

opportunities.

Long sales cycle.





Telecom operators (Germany & NL):

Operators

T-Mobile creating cross-

sector opportunities

(eHealth, etc.).

Vodafone acquired Kabel

Deutschland.

Telefonica planning take

over of E-Plus.

NA KPN captures major

amount of MVNOs

(Base is umbrella brand).

T-Mobile (cross sector

opportunities).

Tele2 growing a lot (4G

network roll out on

going).

Other Telecom players (Germany & NL):

Large MVNOs

MVNEs

MVNEs: Flexishop,

Mvneco and Vistream,

Moconta.

39% of MVNOs use E-

Plus network, 27%

Vodafone and 24% T-

Mobile network.

120 MVNOs (Largest

Freenet).

NA MVNE: Artilium is

major platform provider.

Tele2 (3G MVNO of T-

Mobile).

RaboBank has own

MVNO (recently

launched MFS).

67 MVNOs in country.

Small medium size banks (UK)

NA Building societies are

a popular type of

smaller bank which

are member-owned.

Popular building

societies include

Nationwide and

Yorkshire B.S.

Credit unions

becoming popular.

NA

Cross sectorial opportunities (UK)

NA Retailers with banks

offering cross-sector

opportunities in

insurance, e-

commerce, telecoms,

retail: Sainsbury,

Tesco, The Co-

Operative

NA


Group/Bank.

Omnichannel

opportunities.

h. Public and institutional sector

ElsisPro


WBX: smart sales and manufacturing process management tool

WBX is developed together with furniture, doors and windows manufacturers, designed for key production processes and most common challenged specific to these industries


www.elsis.lt

Pricing: NA

Deep technological

competences.

Strong process planning

practices (CMMI III/V levels).

Quality management system

(ISO9000 etc.).

A strong record to work

effectively within frames of

agreed time, budget and tech.

requirements.

Deep knowledge and

understand of specific market

segments.

Market presence

Lithuania

Italy

Russia

Germany

Partnerships

Classified

Group synergies

Not applicable


Market entry scenarios Explanation

Software developers involved with defense Partnership with software development


companies possessing contract (or close

relationship) with company or consortium in

defence sector.

Software developers involved with satellite,

drones and airplanes

Partnership with software development

companies possessing contract with company

or consortium in satellite, drones and airplane

sectors.



Software developers involved with defense

Already contract and references

with client.

Often large projects, providing

opportunity for multiple

companies to participate.

Shorter sales cycle via

partnerships.

Lower development costs makes

Lithuanian company attractive.

Requires strong references and

experience from market.

Require complementary skills to

create successful partnership.

Partnership management is

important.

Software developers involved with satellite, drones and airplanes

Already contract and references

with client.

Often large and complex

projects, requiring wide range of

skills from partnership network

– opportunity to enter into

market.

Lower development costs makes

Lithuanian company attractive.

Requires certification and strong

references, in order to be able to

participate.

Requires some efforts to

manage partnerships effectively.




Software developers involved with defense

Many international

opportunities with

Airbus – Opportunity to

leverage existing project

for ELSIS.

Emphasis on creating


Attend ADS Group (Air

Defence, Security and

Space) trade shows.

Northrop Grumman is a

leading ICT supplier for

ESA: ASSERT project

on-going.


new partnerships during

project.

defence and security

sectors, including

drones.

Software developers involved with satellite, drones and airplanes

Many international

opportunities with

Airbus – Opportunity to

leverage existing project

for ELSIS.

Emphasis on creating

new partnerships during

project.

Surrey Satellite Tech

(SST) works with NPO

Lavotchkin and supplies

the Technology Strategy

Board.

Consult

SatelliteFinance’s

pipeline.

Join Ukspace trade

association.

ESA: ASSERT project

on-going.


6. Conclusions

The final step of the research is to identify matches between the competencies of participating companies (studied in internal analysis) and the market opportunities (as definedin external analysis).

Six out of eight groups defined in internal analysis have competencies suited to the key or major ICT sector(s) studied in the external analysis – or, alternatively, they are able to use ICT sector as a distribution channel (e.g. business solution providers and telecom MVNOs).

Match between ICT groups and major ICT sectors in three countries


a. Business solution sector

Business solution opportunities

Both in Germany and in the Netherlands there is a large number of mobile virtual network providers and some of them are dedicated to B2B sector. This provides an opportunity for Synergy cloud and Tasker (iTo) to address small and medium size companies via distribution channels of local virtual network operators or other operators (Tasker – Tele2). In addition, we found that both in Germany and the Netherlands there are social media channels dedicated to entrepreneurs which provide market awareness for many SMEs in the two countries (eFactor –B2B Social Media channel dedicated for entrepreneur, which has more than one million entrepreneurs as member).

Business solutions are a key sector in UK and one of major sectors in Germany. For this sector in particular, the first option is to create strategic partnerships with existing business platforms and operate as an add-on solution provider for established business platforms (CRM, ERP or other) in the country. The main drawback to this, however, is a long sales cycle. The second option is to target value-added resellers of business platforms and create reseller partnerships with active players. In both cases (UK and Germany) consultants and integrators will play a critical role, providing leads and insights about the local market.

For Agmis (not applicable to other companies), attractive business platforms are statistics and market research platforms providing solutions for this specific sector. Agmis would function as add-on solution, allowing solution providers to strengthen their offline market research portfolio.

Business solutions: Market entry and partnership scenarios


b. eHealth

eHealth opportunities

The Strongest fit for eHealth sector can be found in the UK (for NL,eHealthis in early market stage). eHealth has typically a long sales cycle, especially when working with large private or public hospitals. Therefore, we advise to partnerwith an existingeHealth ICT vendor(s) that is already contracted, has strong references and/or belongs to a partnership network of local/major hospital(s). Alternatively, partnerships with device resellers can provide leads and create cross-sales opportunities with hospitals. The limitation with device resellers is that they are either large international players - which makes it cumbersome to create partnerships with them - or they are SMEs with (in some cases) a limited addressable market. This would then require multiple partnerships in order to reach adequate addressable market. Direct sales and partnership opportunities can be created by participating in eHealth insider (EHI) networks and events (e.g., EHI Live 2014 in the UK).

eHealth: Market entry and partnership scenarios

c. Finance and Payment services

Finance and payment opportunities

Companies in the finance and payment group are not able to exploit the major potential in the telecom sector (particularly in the Netherlands and Germany), but could potentially facilitate emerging cross-sector opportunities with some telecom players. Both in Netherlands and


Germany there have been extensive trials by telecom operators to open mobile financial services (MFS) in each country. KPN and Vodafone are expected to launch mobile financial services after participating in the initiation of NFC services in partnership with three major banks and operators (one of these initiatives, SixFlags, failed due to not meeting competition authority standards). There are also interesting virtual network operators, such as RaboBank, which recently launched an MFS trial in Netherlands, and Lebara (offering cheap international calls for expats and immigrants), which recently created an international money transfer partnership with MoneyGram. There are no existing strong benchmarks for successful MFS opportunities in UK (only some trials) driven by the telecom sector, but O2 is the best bet among operators to succeed with MFS, and Virgin Mobile is also an interesting MVNO belonging to same group as Virgin Money.

Due to the market entry model chosen by Paysera and iTero, there are limited opportunities with banks in Germany and Netherlands, except perhaps creating international services or services to open new bank accounts. There are more opportunities to create partnerships with local financial service companies (including international money transfer providers, online payment companies and others).

Payment and Finance: Market entry and partnership scenarios

d. eCommerce&eSignature

eCommerce opportunity

eCommerceis a key sector in all three countries. Since Estina has only chosen direct sales as a market entry scenario, this can make it cumbersome to generate leads given thatEstina is not present in any of the three countries. Partnerships with related software providers can potentially generate leads and functionality as a reseller. Warehouse and billing platform providers are optimal parties, since those are not directly competing with each other, but function as complementary platforms for new brands or entrants that are soon to open online stores in the country.

In Netherlands,eSignature can be attractive for operators and MVNOs that already have authentication services in place. eSignature can also be an attractive way to combine national and


international authentication services together and, additionally,enable contract signature across borders.

eCommerce: Market entry and partnership scenarios

e. Custom ERP solutions

Custom ERP solution opportunities

Out of all three countries, UK provides the most attractive opportunity for ERP custom solutions. Business solutions are also a major sector in Germany. In both countries, but especially in Germany, it is important to create good partnerships with either ERP integrators or consultants in order to become informed about prospective customer deployments and leads. Incubators and associations are also important, in order to get connected with other active players and create partnerships in the ERP world. Microsoft partners are the most natural partnership for Softera and Blue Solutions. Partnerswhich havecomplementary skills can allow differentiation and boost the value proposition of both parties.

Custom ERP solutions: market entry and partnership scenarios


f. Telecom, Finance & Payments

Telecom and finance & payment opportunities

Both in the Netherlands and Germany, the telecom sector has been identified as a key sector, indicating great opportunity. Major cross-sector opportunities can be found in both countries (e.g., eHealth and MFS). T-Mobile is actively looking at new opportunities in eHealth in Germany and Dutch operators are expected to soon launch mobile financial services. Both countries also have a large virtual network operator subscriber base: Germany has 120 and the Netherlands 67 MVNOs. Mobile virtual network enablers (platform provider for mobile virtual network operators) provide access to large end-consumer bases, making them an attractive alternative to address these markets.

Telecom, finance & payment: Market entry and partnership scenarios


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http://www.bcs.org/content/conWebDoc/36808

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