In global terms, Europe's information and communications technology (ICT) industry is small, overshadowed by the massive software industry and the extensive electronics industry in East Asia. But it does have some world-class companies, such as telecom equipment providers Nokia and Ericsson, online music platform Spotify, e-commerce company Zalando, enterprise software provider SAP, games developer Supercell (now owned by Tencent), embedded processor designer ARM (now owned by Softbank) and Skype (now owned by Microsoft). Moreover, some of the region's telecom groups, Deutsche Telekom, Vodafone, Orange, and Telefónica, are major multinationals with operations spanning several continents.
Although it has only one of the top 10 artificial intelligence (AI) research institutionsa (CNRS in France) and no major cloud service providers or Internet platforms on the scale of Amazon, Microsoft, or Google, Europe does innovate in ICT. Nontech companies, particularly automakers, banks, and pharmaceutical firms, such as BMW, Deutsche Bank, BNP, and Bayer, drive much of this innovation. Whereas Europe's tech industry is cash-strapped, non-tech companies in Europe have more cash holdings than their counterparts in the U.S. or China.b
"Europe is made of tens of different cultures, it's our biggest advantage. The more diversity you can find among entrepreneurs, the more you will find innovative businesses, creativity, and value created."
As one of the world's leading financial centers, London hosts a thriving fintech industry, which is harnessing big data analytics to personalize financial services. Germany and France are home to many of the world's leading players in transportation, which are adopting ICT rapidly, as they move to semi-autonomous vehicles and ultimately self-driving cars. BMW, Daimler, Siemens, Bosch, and Airbus are among the major European companies embracing the Internet of Things to improve trucks, trains, planes, and cars. For example, the region is leading trials of platooning—the use of wireless technologies to enable semi-autonomous trucks to drive in convoys along motorways, while their drivers take a break. Platooning could cut fuel costs, reduce congestion, and increase efficiency.
At the same time, the region's tech ecosystem is renewing itself: In Europe, $3.5 billion was invested in so-called deep tech companies in 2017 across more than 600 deals, up from $2.5 billion in 2016.c Deep tech refers to software, semiconductors, and other digital hardware. Many of these investments take advantage of Europe's renown computer science institutions—the continent is home to half of the top 10 computer science institutions in the world.d Moreover, Europe is producing more than twice the STEM Ph.D's graduating in the U.S.e
AI is the hottest area for investment. AI companies in Europe have raised more than $4.6 billion since 2012 across over 1,000 deals. Europe has also spawned several hundred blockchain companies and augmented reality or virtual reality startups since 2012.f Helsinki has the second highest concentration of app developers in the world behind the San Francisco Bay area.g Minsk in Belarus ranks sixth, Stockholm eighth, and London ninth on this measure.
"The level of capital available has skyrocketed in the past years," noted Xavier Niel of Station F, in an interview with Atomico. "Europe is made of tens of different cultures, it's our biggest advantage. The more diversity you can find among entrepreneurs, the more you will find innovative businesses, creativity, and value created."
In 2015, the value added by the EU ICT sector amounted to $654 billion, 5.2% more than the previous year.h The sector employed 6.4 million people and spent $34 billion on business R&D expenditure.
Major regional disparities in pay. Yet, Europe still sees many of its entrepreneurs and ICT specialists emigrate to North America, either to obtain funding, expertise, or higher pay. On average, software developers in Switzerland earn $85,709—more than anywhere else in Europe, but less than their peers in the U.S. ($92,240). Norway is next with $70,776, followed by Denmark ($70,082), the U.K. ($59,268) and Germany ($57,345).i In fact, there are major regional disparities. Whereas the median salary for a software engineer in Berlin, London, and Paris is over $50,000, the equivalent figure in Warsaw is less than half that and just $15,000 in Bucharest. By way of comparison, a software engineer in Tokyo, Japan, earns almost $54,000 on average.j
However, by some measures, Europe is better than other regions at harnessing its talent. Indeed, some of Europe's education systems are the envy of the world: Estonia and Finland are in the top five globally, while 13 European countries rank above the U.S. in terms of education outcomes, according to the PISA 2015 study of 15-year-olds' performance in math, science, and reading.
a. Ranked by most cited AI-related research papers. The Nikkei & Elsevier, Atomico State of European Tech 2017; https://2017.stateofeuropeantech.com/
b. The S&P CapitalIQ Platform. Atomico State of European Tech 2017; https://2017.stateofeuro-peantech.com/
c. Dealroom.co. Atomico State of European Tech 2017; https://2017.stateofeuropean-tech.com/
d. Times Higher Education World University Rankings 2018. Atomico State of European Tech; https://2018.stateofeuropean-tech.com/
e. The OECD. Atomico State of European Tech 2017; https://2017.stateofeuropeantech.com/
f. Tracxn. Atomico State of European Tech 2017; https://2017.stateofeuropeantech.com/
g. A study by Caribou Digital; http://bit.ly/2REupYi
h. The European Commission, https://bit.ly/2sGADYP
i. Daxx.com; https://bit.ly/2FKh7Dl
j. Glassdoor; https://bit.ly/2RKEKBZ
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