EKN Steering Committee Meeting NHO

Transcription

1 Norwegian School of Management Norwegian : Industry and/or enzyme? EKN Steering Committee Meeting NHO June 16, self@espen.com Dr. Espen Andersen Associate Professor BI Norwegian Business School 1.0

2 -industrien er sentralisert 1.1

3 The industry s value creation happens largely in other industries 1.2

4 Revenues of the main categories International - equipment and software International - consulting and services Norway - equipment and software Norway - consulting and services

5 Value creation per employee, Balassa indices 1 200,00 Annual value creation, CPI-adjusted Norway - consulting and services 1 100,00 Norway - equipment and software International - consulting and services 1 000,00 International - equipment and software 900,00 800,00 700,00 600,

6 Centralization in numbers employees, by county Oslo Akershus Hordaland Rogaland Vestfold Sør-Trøndelag Buskerud 8000 Østfold Oppland Hedmark Møre and Romsdal Telemark Nordland Aust Agder Vest Agder 2000 Troms Sogn and Fjordane Nord-Trøndelag Finnmark 1.5

7 Centralization in numbers (relative) 2,50 2,00 1,50 1,00 0,50 - Balassa indices, employees, by county Oslo Akershus Vestfold Sør-Trøndelag Buskerud Østfold Hordaland Rogaland Oppland Aust Agder Hedmark Telemark Møre and Romsdal Troms Vest Agder Nordland Sogn and Fjordane Nord-Trøndelag Finnmark 1.6

8 The Norwegian workforce is dominated by engineers and increasingly international 6,00 Education type, industry 5,00 4,00 Balassa ind dex 3,00 2,00 Science Administrative/business Engineering Foreign employees 1,00 0,

9 The Norwegian workforce is well educated, but not research-based 3,00 Education levels, industry 2,50 2,00 Balassa ind dex 1,50 Changes mostly from recoding Master Bachelor PhD High school 1,00 Secondary school 050 0,50 0,

10 is no longer something you learn on the job Education level, sector 100 % 90 % 0,44 % 0,47 % 0,47 % 0,47 % 0,43 % 0,44 % 0,44 % 0,42 % 11,74 % 12,29 % 12,69 % 12,79 % 13,86 % 14,24 % 14,62 % 14,94 % 80 % 70 % 60 % 50 % 40 % 36,26 % 35,79 % 36,52 % 36,27 % 36,64 % 36,54 % 36,55 % 35,94 % Ph.D. Master Bachelor High school Secondary school 30 % 39,35 % 39,12 % 38,68 % 38,65 % 37,07 % 35,80 % 33,59 % 32,04 % 20 % 10 % 0 % 10,74 % 10,77 % 10,21 % 10,10 % 9,92 % 10,34 % 11,24 % 11,33 %

11 people work in or telecom, consulting and media. Source new employees, 2008 Balassa index 7,096 Telecommunications 3,179 KIFT 2,488 Media 1,584 Retail 0,804 Renewable 0,794 Finance 0,701 Reiseliv 0,551 Oil 0,346 Maritime 0,300 Bygg 0,291 Metal 0,239 Health 0,224 Fish 0,

12 A customer overview Small Large Individual Consumer Prosumer Business SMB Corporate Public International Municipality International consumer National International business 1.11

13 5 mechanisms of knowledge in the Norwegian (and international) industry Research-based technology institutions (UiO/Simula, NTNU/Sintef, UiTø, other universities) M.Sc./Ph.D. education, research collaboration Technology dominates Vocationally oriented programs (HiO, NH, BI, others) Educating personnel and managers organization/management g dominates, technology application- oriented Industry organizations (Dataforeningen, IKT-Norge, Abelia) Updates and discussioni forums, advocacy Vendors (Microsoft, Oracle, SAP, consulting companies) Certification programs for individuals Partnership programs for developers and implementors Industry-oriented research and advisory groups (Gartner, IDG, McKinsey Institute) Arbiters of taste, evolution and decision criteria 1.12

14 Research-based institutions deliver engineers, but have little influence (with exceptions) IFI growing, NTNU stable, recruiting the best students main worry Connections to industry mainly through students and research programs Moving towards less technical focus IFI s new building new center in Norway? 1.13

15 Mid-level educational institutions provide the bread and butter personnel in Norway Focus on Bachelor programs and basic courses Many teachers come from business Application oriented, frequently aimed towards certification Focused development based on student interest Large drop in students after dot-com bust, no rebound yet 1.14

16 Industry organizations form meeting spaces and build a nascent political lobby The Norwegian Computing association Meeting gplace for various interest grops Organizes certification and education members, 9 district associations, 50 interest groups struggles with staid image ICT Norway industry association, primarily for vendors documents and promotes industry visible in press and lobbying towards politicians Struggles with rebel image and technology focus Abelia part of NHO, Confederation of Norwegian Enterprise organizes knowledge-based companies, including ICT Documents and comments on role of knowledge in society Struggles with industry dominance and unclear mandate 1.15

17 Vendors address a two-sided* market: Customers and developers Based o Theory n Parker, G. and M. Van Alstyne (2005). "Two-Sided Network Effects: A of Information Product Design." Management Sciencece 10:

18 Commercial research organizations and independent experts do what academia won t and vendors can t 1.17

19 technology providers and service providers face different challenges, business models and futures Technology providers Evolution of technology is main driver Competition mostly global Funding by angels or VCs Pricing an issue: Norwegian market underprices IP? Exit by sale to large, foreign corporation Service providers Evolution of customer need is main driver Competition mostly local Funding from sales or from mother corporation Overpriced and underintegrated? Exit by consolidation i with ih larger service provider 1.18

20 Proprietary Modularized Commoditized Ubiquitous UnnoticedU d Technology providers have to adapt to evolving lin technology phases 1.19

21 Norwegian software IP is sold out of Norway Norwegian investors (stock market) do not value IP? Lack of investor muscle for transition to platform? Knowledge community will change Going abroad as a result of acquirer s decision Reduced as a result of technology maturity Where is the new undergrowth, the pipeline? 1.20

22 Three possible platform plays Kongsberg Maritime 60% market share as control systems integrate across the ship and to the shipowner/manager DNV global knowledge network as certification and maintenance switches from periodic inspection to constant monitoring Synchroport initiative as example of the new maritime industry, software-enabled Opera enabling mobile browsing by centralizing screen rendering and lowering the cost of mobile surfing in developing markets 1.21

23 The march of IS: From internal provider to external partner (I) CEO Staff SSO CEO dpt Step 1: Centralization of distributed IS departments SBU CEO SBU CEO SBU CEO dpt dpt Strategic dpt Strategic Business Unit Business Strategic Unit Business Unit 1.22

24 The march of IS: From internal provider to external partner (II) CEO Staff SSO CEO Central dpt Step 2: Formalization of customer relationship, process organization S L A SBU CEO SBU CEO dpt SBU CEO dpt Strategic Business Strategic Unit Business Strategic Unit Business Unit 1.23 dpt

25 The march of IS: From internal provider to external partner (III) CEO Staff incl CIO CEO AS Service Step 3: IS as captive (and compulsory) subsidiary S L A SBU CEO SBU CEO avd SBU CEO avd Strategic Business Strategic UnitBusiness Strategic Unit Business Unit 1.24 avd

26 The march of IS: From internal provider to external partner (IV) CEO Staff incl CIO Step 4: Sale to external vendor AS Service S L A SBU CEO SBU CEO avd SBU CEO avd Strategic Business Strategic UnitBusiness Strategic Unit Business Unit avd 1.25

27 The march of IS: From internal provider to external partner (V) CEO Staff incl CIO Steg 5: Offshoring, growth in cloudbased distributed apps AS Service S L A SBU CEO SBU CEO 2011 Espen Andersen. All rights reserved. PDF version may be reproduced, with attribution avd SBU CEO avd Strategic Business Strategic UnitBusiness Strategic Unit Business Unit EA EKN avd

28 Norwegian is very consolidated, but integration proceeds slowly EDB Ergogroup 4bNOK market cap, goodwill 4bNOK (2009) C&SI, outsourcing, growth by acquisition Atea ASA 6bNOK market cap, goodwill 2.3bNOK (2009) SMB-oriented sales, support, infrastructure VISMA 11bNOK acquisition by KKR, goodwill 2bNOK (2009) Vertically oriented admin software Future targets: Hospital and utility services 1.27

29 The services industry in Norway Numbers from 2008 unless otherwise noted. Listed in terms of service size Revenues Mrk cap Employees Business Ownership EDB Business $1.3* Partner r $700m (merged Ergo Group $1b* 2011) 3,700* Mostly post office and other public services + Netcom 6,000* 55% operations, 19% solutions, 26% applications. Little synergy between divisions. Strong in banks and industry Accenture $300m* n/a 1,000 Telenor partner, large companies, 40% public sector Tieto $200m $1.3b 670** Norway is 5% of their business), application management, m n development. 25% offshore Cap Gemini $195m 700 Focus on application management (ops by EDB) 51% owned by Telenor, rest on OSEX. Growth by acquisition of contracts and boutique consulting companies. 100% Post Office Norwegian office also Nordic HQ. Avanade has about 200 empl. Finnish/Swedish, listed NASDAQ. Rejected $1.1b offer % Cap Gemini Logica $166m 571 Retailers, utility, oil and gas. CMG, listed, came from WMData, Strong Indian connections. Steria $127m* 391*,** Mostly applications and systems development. Offshoring to Eastern Europe acquired SBS. French owned, listed, comes from Bull (which came from Norway). IBM $210m*** 1000 (total) 60% services, rest HW/SW. 100% IBM B i b bl Oil industry and health focus. HP/EDS $100m 400* Some services, primarily in oil and gas. 100% IBM. Business probably higher (HW sold through Ireland.) 100% HP Atea $2b $1b 4,800 Infrastructure Listed on OSEX sales/service/support. *2009 **FTEs ***estimate 1.28

30 11 hypoteser om norsk JA Norsk -bransje er større enn vi tror, men usynlig - delvis fordi bransjen er ung og mangler selvfølelse, delvis fordi teknologien forsvinner inn i andre bransjer. JA Norsk -bransje har, historisk sett, mest drevet med tilpasning av utenlandsk teknologi til norske forhold, men dette er i endring JA Norsk -bransje er i stor grad konsulentselskaper - delvis fordi de kan tilby en fleksibilitet det vanlige arbeidsmarkedet mangler. TJA Norsk -bransje er i stor grad fokusert mot det offentlige marked, men spydspissene er rettet mot spesifikke nisjer innen privat næringsliv JA Norsk -bransje ligger etter engelsktalende land med offshoring, men er relativt aggressive i forhold til andre europeiske land. NEI Norsk -bransje har klare konstellasjoner av selskaper som jobber sammen mot de samme kundene. JA Utenlandske samarbeidskonstellasjoner er i liten grad førende for samarbeidskonstellasjoner i Norge. TJA Når folk flytter seg i -bransjen, skjer det i større grad mellom firma innen samme tjeneste eller produkt, enn mellom kunder og tjenestebedrift. NEI Personlige relasjoner betyr mer i Norge enn i andre land, også i -bransjen. JA Alle konsulentselskaper ønsker å løse problemer, men de fleste er timeselgere. JA Dramatisk lavere teknologi- og personalkostnader vil bety store endringer for - servicebransjen. 1.29

31 Funcom and Playfish epitomize the advanced/immersive vs. the light/platform-based software company Two-year product release cycle Immersive games, CGIbased, need games machine Bet your company every two years Social network games (Facebook) Rapid release Occasional use Viral marketing 1.30

32 Value creation per employee is the name of the game 1.31

33 Where will the future come from? 1.32

34 The new face of 1.33

35 Industry implications Norway is too small to let international rivalries limit cooperation The industry needs to act as one to assume the responsibility of increasing public sector productivity See consulting industry as resource Take responsibility for effects Do not respond, as industry, to dysfunctional RFPs The industry needs to stop recruiting copies of itself The future employee sips latte at Grünerløkka and does not want a Volvo Start industry promotion at younger age levels Strenghten collaboration with universities and research institutions Entrepreneurs need to think beyond earning a comfortable living 1.34

36 Public policy implications The industry is valuable, but value creation from happens outside the industry itself hampered by lack of available technological talent new companies will not have many employees even if they grow quite big Scale up from simple projects rather than down from complex ones The industry is best supported by addressing the problems felt by the industry (lack of general financing, lack of talent) Stop forcing it to fit geographical pipe dreams The centralization of to Oslo is not a problem the relative provinciality i of Oslo towards the rest of the world is Norway needs an aggressive, strategically oriented, authorized Chief Information Officer, like the USA 1.35

37 An idea for Norway? Vivek Kundra U.S. Chief Information Officer 1.36