Comparing the information industry in Amsterdam and Helsinki

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1 Research institutes all over the world are using a number of different information industry 1 classifications. Every classification has its own advantages and disadvantages. For instance, the widely used OECD 2 classification only defines manufacturing and sernummer 1 januari 2003 Comparing the information industry in Amsterdam and Helsinki In both Helsinki and Amsterdam the employment in the information industry has risen sharply since the early nineties. Growth in the information industry in the two capital cities is widely regarded as one of the major boosts behind economic growth in general. A brief outline of the information industry in Amsterdam and Helsinki is presented in this paper. It will address the development during the second half of the nineties and the composition of the information industry. Apart from comparing the development and constitution of the information industry in the two cities, the focus will be on describing the information industry cluster dynamics in both cities. Development of the ICT sector and total employment, Amsterdam and Helsinki (1995 and 2000) index figure Amsterdam ICT Amsterdam total 1998 Helsinki ICT 1999 Joint Finnish-Dutch information industry classification 2000 Helsinki total vices within the information industry. The OECD classification is useful in comparing developments in different countries. On the other hand, some relatively young information industry sectors, such as content manufacturing, content distribution and telecommunications, are not included. Therefore the OECD classification cannot be used in comparing the information industry in Helsinki and Amsterdam. Both the research institute of the city of Helsinki and O+S Amsterdam have been using their own information industry classifications. The Finnish definition defines: the production of goods, production of services and content production. The Dutch definition 3 distinguishes between six branches: content, hardware, telecommunications, financial, software and consultancy. The Finnish and Dutch classifications have been useful in describing local developments. Both classifications are also adapted to the latest developments in the information industry. However, because data in Finland could not be transferred to the Dutch classification and vice versa, it has proved difficult to compare cities in different countries.

2 2 The difference between the older OECD classification and the newly developed classification in terms of employment figures is striking. According to the OECD, 22,767 peof a c t s h e e t pagina The research institutes of the cities of Helsinki and Amsterdam have therefore put effort into the construction of an international classification, which can cover the information industry in both countries on a city level. The new classification had to meet a number of criteria: It must be applicable in both the Finnish and Dutch situation. Comparing cities in two different countries should be easy. New developments in the information industry must be taken into account. An example of such a development is the rise of the content sector. The classification must be based on the use of so-called ISIC 4 codes. The main sub sectors in the new joint Finnish-Dutch classification are: Consultancy Content Software Hardware Telecommunications. The classification meets the criteria that were stated earlier: all of the modern information industry sectors are included and the classification is applicable on a city level in different countries. The newly developed classification is used in this paper to describe the developments in the Helsinki and Amsterdam information industry 5. Employment in the ICT sector in Amsterdam and Helsinki ( ) number of jobs Amsterdam Helsinki ple in Amsterdam where employed in the information industry in When the new classification is used, 42,235 people are found to participate in the information industry. The difference is explained by the abundance of content and telecommunications jobs in the OECD definition. Comparing the information industry in Helsinki and Amsterdam It is always interesting to compare the development of the information industry in different cities. This paper presents an international comparison of the IT developments in the cities of Amsterdam and Helsinki. The newly developed classification is used to that end. There was significant economic growth in both Helsinki and Amsterdam in the period The number of jobs rose by 18 percent in Amsterdam, resulting in a total employment of 390,000 jobs. The growth rate in Helsinki (21%) was comparable to that in Amsterdam. In Helsinki, the total employment amounts to 357,000 jobs. The growth pattern in the two cities was more or less the same in this period. In Amsterdam and Helsinki, the information industry is truly regarded as a major engine behind economic growth. Since 1995, the employment in the information industry in Amsterdam has risen rapidly by 45 percent. The total number of jobs in 2000 in the Amsterdam information industry was slightly more than 42,000. About one out of ten ICT jobs in the Netherlands were found in the city of Amsterdam 6. However, the employment in the Helsinki information industry has risen even faster than in Amsterdam. The growth rate in Helsinki ( ) was 59%. The total number of ICT jobs in Helsinki in 2000 amounts to 44,000. About one third of all of the jobs in the Finnish information industry are found in the city of Helsinki. Amsterdam and Helsinki are comparable where it concerns the number of ICT jobs. The Netherlands and Finland however, are not comparable: the total number of ICT jobs in the Netherlands is approximately two to three times higher than the Finnish number. Other ICT clusters in Finland, apart from Helsinki, are in the cities of Espoo and

3 Satama Interactive Satama Interactive Amsterdam is a good example of a joint Dutch-Finnish company. The firm originally started as an Amsterdam start-up with the name General Design. General Design specializes in user-friendly software for Internet applications. The start-up location was at the Amsterdam Science Park. After a couple of years, General Design had grown; it had approximately 50 employees. In 2000, the firm was incorporated in the Helsinki-based Satama Interactive Group. The new firm, Satama Interactive Amsterdam, moved to a business park in the western part of the city. 3 Composition of the ICT sector in Amsterdam and Helsinki (1995 and 2000) number of jobs Telecommunications Amsterdam Software Hardware 1995 Content Helsinki Grow rates ( ) in the information industry (1995=100) index figure Consultancy Content Amsterdam Hardware Helsinki Software Telecommunications Total ICT 2000 Total employment Consultancy Tampere. In the Netherlands, Eindhoven and Enschede are other important ICT cities. At first glance, the composition of the information industry in Amsterdam and Helsinki is comparable. In both cities, the majority of ICT jobs is found in the content sector (more then 40% of the total information industry employment). The second largest sub sector in the two cities is the software sector; telecommunications jobs are third in line. The consultancy sector is the fourth largest sub sector in Amsterdam, whereas the fourth position is occupied by the hardware sector in Helsinki. The conclusion is obvious: the structure of the information industry in Amsterdam and Helsinki is basically the same. However, there are some differences as well: the share of hardware jobs is decreasing in Amsterdam. The total number of hardware jobs also declined in The IBM factory in Amsterdam is the only significant local hardware employer. In Helsinki, on the other hand, the total number of hardware jobs and the share of hardware jobs have continued to rise. Another difference between the two cities is found in the size of the consultancy sector. In Helsinki, this sector is of minor importance only, whereas in Amsterdam more than one out of ten ICT jobs are in the consultancy business. The growth-rate differs strongly between sub sectors within the ICT-industry. In Helsinki, the growth has been particularly strong in the number of hardware and software jobs. The hardware production in Helsinki is concentrated in larger companies. Nokia is an example of a company with a plant in the city of Helsinki. In all of the sub sectors, the growth rate is higher than the average growth rate for the entire Helsinki economy. The number of software jobs in Amsterdam has risen very fast in the period The number of jobs in 2000 was almost four times higher than in The growth rate in the software sector is not only much higher than the growth rates in the other sub sectors, but it is also substantially higher than the software growth rate in Helsinki. The importance of the consultancy sector for the Amsterdam information industry has already been mentioned. The number of jobs in this sector has doubled from 1995 to The telecommunications sector in Amsterdam has been growing in accordance with the average growth of the information

4 4 industry. The telecommunications sector in Amsterdam finds its origin in the presence of the Amsterdam Internet Exchange. More than 100 providers are connected to the Internet via the Amsterdam Internet Exchange. This makes the AMS-IX the second largest Internet exchange in Europe. Although very important to the Amsterdam and Dutch economy, the number of jobs in the Amsterdam Internet Exchange is relatively small. In the other sectors (content and hardware), the number of jobs has been rising but the growth rate is not as high as that pertaining to the entire information industry. Recent developments in the Amsterdam information industry There were 42,235 ICT jobs in the city of Amsterdam at the beginning of the new millennium. The information industry in Amsterdam increased by almost 12% in the year In 2001 however, the growth has come to a complete standstill. The worldwide recession in the information industry as a whole and particularly in the dot.com sector has been noticeable in Amsterdam as well. The total number of ICT jobs in January 2002 is 47,206. Figures for the city of Helsinki are not available as yet. Information industry cluster characteristics in Amsterdam and Helsinki The information industry clusters in both Amsterdam and Helsinki are important engines in the local economy. We have seen a lot of similarities between the Helsinki and Amsterdam information industry clusters. But are the Amsterdam and Helsinki clusters similar in the way that they function? The specific conditions in which the two clusters function have been the subject of research in both Finland and the Netherlands. In The Amsterdam region, ICT cluster study André van der Meer 7 defines a number of important characteristics of the Amsterdam information industry. A prior condition in the Amsterdam setting is the concentration of financial institutes in the city. These institutes made a high level of investments in the telecommunications sector possible. The traditional presence of publishing houses was a stimulus to the development of the Amsterdam content sector. Van der Meer argues that, due to the initial size of the information industry in Amsterdam, it was possible to achieve growth even after the dot.com crisis. In this regard, the sheer number of firms and the high level of interaction between the information industry companies are of importance. Van der Meer also states that there is a lot of interaction in the Amsterdam information industry, but only on a business-to-business level. The level of interaction with institutions for research and education is much lower. Also, strategic co-operation appears not to be relevant on a local or regional level, but only on an international level. Therefore, the future of the Amsterdam information industry depends on its position in global networks. Local government hasn t had much influence on the Amsterdam information industry. However, the local government was present during the start-up of the Amsterdam science park, the Amsterdam Internet exchange and the Amsterdam New Media Association. The figures show the content sector to be the most important sector within the information industry in Amsterdam. Researchers of the University of Amsterdam 8 have stated that the dominance of the content sector in the Amsterdam information industry is rather unique. They have compared the information industry cluster in Amsterdam with other important ICT clusters in Europe and the rest of the world. A similar dominance of the content sector was found only in New York. Unfortunately, Helsinki (with a rather dominant content-sector as well) was not included in the research. Research in Finland 9 has shown the role of Nokia in the information industry cluster to be very important. Nokia plays a key role in the relationships within the Finnish information industry cluster. The outsourcing of the majority of the production processes is common sense for Nokia. Therefore, the company can concentrate on its key activities, namely product design, research and development and brand management. The

5 number of first-tie subcontractors totals some 300 companies. A partnership with a leading firm like Nokia has made it possible for a lot of these firms to access new markets. Because of the fact that the production network has multiple ties, Nokia initiates important multiplier effects throughout the Finnish information industry. In Finland, the nature of subcontracting within the information industry is shifting towards closer co-operation and joint problem solving. Research in Finland also makes it clear that Nokia is not the only significant aspect in the information industry. The presence of a number of universities is also a major condition for the flourishing of the information industry. Therefore, the interaction between research institutes and firms within the information industry is relatively easy. Another advantage of the presence of the universities in Helsinki is the effect on the Helsinki labour force: about half of the Finnish academics live in the Helsinki region. Summary: similarities and differences The economic development in Helsinki and Amsterdam shows a number of similarities. In Helsinki and Amsterdam, as in other western cities, service jobs are a major component in the economy. In the nineties, the growth in the information industry was a major boost for economic growth. The structure and the size of the information industry in Helsinki and Amsterdam are to a large extent comparable. Besides the similarities, there are also a number of specific differences between the Helsinki and Amsterdam situation. In Finland, more than is the case in the Netherlands, the information industry is concentrated in the capital. About one third of the jobs are in Helsinki, while only a tenth of the Dutch ICT jobs is located in Amsterdam. The hardware industry in Helsinki is of major importance; the number of jobs is growing. In Amsterdam, the hardware sector is relatively unimportant. In Amsterdam, however, the number of consultancy jobs is much higher. In the Helsinki information industry cluster, the relations between universities and the information industry are more important than in Amsterdam. In the Finnish cluster, Nokia plays an important role. A relatively large number of Finnish information industry firms has ties with Nokia. In Amsterdam, a dominant firm like Nokia in Helsinki is not present. Although the headquarters of Philips, the Dutch counterpart of Nokia, is located in Amsterdam, the plants and research departments are not. 5 Employment in the information industry total (2002)

6 Growth in information industry employment Far above Amsterdam average Above Amsterdam average Around Amsterdam average Below Amsterdam average Far below Amsterdam average Concentration index information industry 2002 (Amsterdam=100) 150 to to to to 90 0 to 50 all others

7 Location of ICT jobs in Amsterdam A number of ICT concentrations are found within the city of Amsterdam. The city centre (inside the circular highway) is the location of a lot of jobs in the content business. Content companies often find it important to be close to publishers and advertisers who are located in this region too. The other ICT concentrations are found in the southeastern and northwestern parts of town. These concentrations can partly be explained by the presence of the telecommunications industry at these locations. Versatel and Cisco are examples of companies at the southeastern location. Not coincidentally, these regions also accommodate the main Internet connection, which makes Amsterdam an important Internet switch point in Europe. A number of ICT jobs, especially in the software business, is located on sites along the circular highway. Accessibility is of major importance to these jobs. The growth in the information industry has not been equally distributed throughout Amsterdam. Locations along the circular highway and a couple of locations in the city centre in particular have known exceptionally high growth rates in the years In the residential areas within the city boundaries, the growth has often been below the city average. Higher growth rates along the circular highway can be explained by the availability of business parks. The concentration of ICT jobs is also (far) above average at a couple of spots along the circular highway and at two locations in the city centre. 7

8 References City of Helsinki, (2002). Helsinki Region, statistical comparisons, Helsinki. KPMG, (2000). ICT in Amsterdam en Haarlemmermeer. KPMG Bureau voor economische argumentatie, Hoofddorp. 8 Manshanden, W.J.J. and Jurgens, K. (2001). Het ICT en nieuwe media cluster in Amsterdam. SEO, University of Amsterdam. OECD, (2000). Measuring the ICT sector. Paris. Paija, L. (2000). Industrial network relationships in the Finnish ICT cluster. The research institute of the Finnish economy. Peelen, E., Jansen, R., Kernkamp, S. and Van Velzen, J. (1998). De Amsterdamse multimediasector en suggesties voor zijn groeibeleid. Onderzoeksteam Multimedia, University of Amsterdam. Suokas, J. and Susiluoto, I. (2001). ICT- supply, demand and projected impact in the city of Helsinki. City of Helsinki, University of Helsinki. Van der Meer, A. (2002). The Amsterdam region, ICT cluster study. Erasmus University Rotterdam, European Institute for Comparative Urban Research. O+S, (2002). Werkgelegenheid in Amsterdam, O+S, City of Amsterdam. Notes 1 The terms information industry and ICT are exchangeable in this paper. 2 Organisation of Economic Growth and Development. 3 The Dutch classification was developed by the University of Amsterdam in cooperation with O+S Amsterdam. 4 International Standard Industrial Classification 5 The classification itself can be obtained at the Dutch or Finnish research institutes. 6 The share of ICT jobs in Amsterdam compared to the whole of the Netherlands is only available when an older ICT classification is used. Dutch figures in the new joint classification are not available. The Helsinki share in the Finnish total is also only available when based on an older classification. 7 Source: The Amsterdam region, ICT cluster study, André van der Meer, Erasmus University Rotterdam, European Institute for Comparative Urban Research. 8 Source: De Amsterdamse multimediasector en suggesties voor zijn groeibeleid, E. Peelen e.a., Onderzoeksteam Multimedia, University of Amsterdam. 9 Source: Industrial network relationships in the Finnish ICT cluster. Laura Paija, the research institute of the Finnish economy. Colofon Weesperstraat VN Amsterdam Tel: Fax: algemeen@onstat.amsterdam.nl Website: Auteur: Rik Lukey