Structural changes in the Finnish software sector offer more growth opportunities to both international and domestic firms.
The software industry in Finland is undergoing a significant change. For years, firms have been struggling with finding skilled workers, and now a shift away from some mobile technologies will open up a wealth of resources.
“The software industry is healthy at present,” says Jaakko Salminen, CEO of the Finnish Software Entrepreneurs’ Association. “Sales were growing by about 10 per cent annually until 2008. They dropped a bit during the recession, but turnover probably grew between five and six per cent in 2010. Mid-sized companies, in particular, are doing quite well.”
The Association has some 450 member companies, most of which are privately held. There are almost a dozen public companies on the Helsinki Stock Exchange that specialise in software. These range from the small QPR Software with a market capitalisation of about 10 million euros to F-Secure, which is valued at approximately 400 million euros. Others, like Tieto, are more diversified in the information technology industry but also have software operations.
International focus
The Software Industry Survey, an annual study on the industry, estimates that the Finnish industry generated about three billion euros in revenue last year. Approximately a quarter of those sales were by subsidiaries of foreign corporations, showing that international firms are a significant player in the Finnish market. These statistics don’t include foreign branches operating in Finland, so the international presence is probably significantly underestimated in the survey of the Finnish software market.
“Global players are interested in Finnish companies because of the innovation and technology,” says Salminen. “We have special strengths in mobile applications and infrastructure. Some international corporations use us as a landing point to enter the Russian or Central European market.”
Also noteworthy is the international exposure of Finnish firms. Salminen says that the vast majority of domestic software companies are looking abroad for partners and customers.
“The international market is very important for Finnish software firms,” he explains. “About half are active internationally now, and another quarter say they are planning to go abroad. Initially, many companies look to the Nordic region or Central Europe, but Asia is becoming very interesting. Some companies immediately go to the Chinese market.”
Nokia
The big news throughout the entire Finnish business world is Nokia. Interestingly, most software firms think Nokia’s change in direction will directly and positively help the industry.
“The Nokia decision doesn’t negatively affect us a great deal,” Salminen says. “We took a survey of our members and only 3-4 per cent thought it would hurt us. One in five said it was good for their business that Nokia dropped Symbian. Also, it is very difficult in this industry to find skilled personnel, and now with these layoffs companies will get the personnel resources they have been craving for. I would imagine that most of the persons made redundant will get a new job in six months, or even less.”
Currently, several large multinationals are hiring in Finland. Intel is looking for staff members in Tampere and Helsinki. Google is also advertising over a dozen job openings in Hamina and Helsinki. The sudden supply of highly skilled people will likely benefit more than just existing companies: the industry expects a blossoming of new start-ups.
New entrepreneurs
“Many of the people leaving Nokia or the subcontractors [it works with] are likely to look at entrepreneurship,” explains Salminen. “Many of the individuals may take their severance package and decide to open up their own business. Overall, Nokia’s decision has created more upside than downside for the industry.”
Will Cardwell, the head of Aalto University’s Centre for Entrepreneurship, says that many students today are interested in software as a service instead of packaged software products, which used to be the norm. He says that there is “huge interest” in software development.
“The future of the software industry looks very promising, especially from an entrepreneurial standpoint,” Salminen concludes.” These entrepreneurship programmes in universities have launched some very interesting start-ups. Most impressively, the students run the Aalto Entrepreneurship Association. They are the ones most interested.”
Text: DAVID J. CORD, Helsinki Times
