2007 june sme white paper

The initiatives described in this report are born of Microsoft’s deep commitment to entrepreneurship and the SME sector in Europe, which is such a vital source of growth and jobs across the continent. We are also very proud of the vigour and innovation of the thousands of SME technology firms across Europe that are building their businesses on Microsoft´s platform, and committed to supporting their ongoing success.

Introduction Microsoft has a simple but powerful view on partnerships: they work and are fundamental to our vision and success. Through partnerships with businesses, including new players – telcos, advertisers, mobile carriers - and governments across the European Union, we help foster win-win outcomes that promote innovation, jobs and growth.

With a new generation of innovation, spurred on by the Windows Vista software platform, the Internet and mobile technology, a synergy is being created generating new revenue streams and creating unique technology across our 250,000 strong partner ecosystem which we believe important to advancing Europe’s position as a global economic leader.

Jean-Philippe Courtois President, Microsoft International

Helping SMEs grow and prosper is crucial to Europe’s future At Microsoft we believe in the potential of small companies to generate big ideas that can literally change the world for the better.

For Europe to grow and succeed, small companies need to be able to grow and succeed – at home and as global players. We need more of the positive entrepreneurial spirit, and a regulatory environment that supports entrepreneurship.

We also need public and private partnerships to encourage venture capital investments for startups, ensure cost effective intellectual property rights protection, and promote ICT skills throughout Europe’s workforce.

Microsoft’s third annual SME Day in Brussels on 4-5 June 2007, focuses on what Europe needs to do to achieve this – by bringing together leading venture capitalists, the academic world, small and medium sized enterprises and members of the policy community to share their views and expectations for education system reform, IP technology transfer, policy reform, and R&D investments, and to make recommendations on policies needed for the future success of Europe and our entrepreneurs.

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This report describes how Microsoft and its partner community of 250,000 companies (what we call the ‘Microsoft software ecosystem’) are contributing broadly and deeply to empower Europe’s SMEs, from helping them access private and public funding, to supporting delivery of skills and other opportunities for employability, and providing customized technology tools for innovation.

Europe needs its entrepreneurial small companies to grow and succeed. Innovation is the key driver for growth, and fostering such innovation within the broader IT ecosystem, through deep partnerships, is central to our business model and our role as a responsible leader. Microsoft innovates as much for the IT industry as we do for our customers, and Microsoft’s technology platform is a key asset for innovative SMEs in Europe.

Jan Muehlfeit Chairman Europe, Microsoft

The Microsoft eco-system in Europe Microsoft’s business model is based on providing accessible and scalable technology platforms that enable innovation and delivery of new products and services, and promoting continuous innovation in local ICT eco-systems.

In Europe today, Microsoft employs directly over 10,000 people.

The Microsoft software eco-system - companies offering products that run on Microsoft software or that service or distribute such software - employs almost 2.8 million people, almost 35 percent of European ICT employment.

In 2005, these businesses generated over US$ 107 billion in company and employee taxes.

They earned US$ 7.68 for every US$ 1 earned

by Microsoft.

And of this revenue, some of the hardware revenue, much of the software revenue, and most of the services revenue, was earned by local European companies.

MOST OF THESE COMPANIES ARE SMES. They hire locally, fuel the local software/ innovation economy, and contribute to their countries’ overall economic wellbeing.

Microsoft plays an active role in supporting its local eco-system partners and helping them to build skills, create new businesses and expand existing ones.

Like them, we know that for local innovation eco-systems to really thrive and grow rapidly, local conditions must also be supportive – through policy frameworks that support R&D, enable new business startups, promote intellectual talent and respect intellectual property rights.

“Microsoft helps us develop our business worldwide.

For a company of our size, this kind of support, and the backing of Microsoft as a partner, is important for gaining new business.”

Philippe Gaillard Chief Executive Officer, Neocase Software

Strengthening these core enabling conditions for local innovation ecosystems and the SME technology sector will be critical for Europe to secure its future as a globally competitive and successful knowledge economy.

ECONOMIC IMPACT OF WINDOWS VISTA In September 2006, an International Data Corporation (IDC) study examined the economic impact of Windows Vista in 6 European markets (Denmark, France, Germany, Poland Spain, and the UK). The IDC study found that: •

In the first year of shipment, Windows Vista-related employment will reach more than 20 percent of the total IT employment, or 1 million jobs across the six countries’ markets.

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More than 150,000 IT companies in those countries will produce, sell, or distribute products and services running on Windows Vista.

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Windows Vista will have a strong positive impact on those local economies.

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Local companies are projected to sell over $40 billion in products and services related to Windows Vista in 2007 alone.

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Investing in the next generation of SMEs: Through partnerships with the Venture Capital and Startup Communities Microsoft is actively investing in startups in innovative ways to drive real growth and value.

“Microsoft CRM was a valuable opportunity for us. By leveraging the Microsoft product platform and market footprint, we have been able to open up an entirely new market segment.

Without the Microsoft connection, we simply couldn’t reach many of these customers with our standard products.”

Christopher Ranze Chief Executive Officer, encoway

During the last four or five years, we have had hundreds of extremely successful engagements that have helped startups drive their shareholder and end-customer value. To learn more, visit the Microsoft Emerging Business Team website: www.microsoftstartupzone.com Investing in startups. Microsoft has a strong commitment to work with the Venture Capital and startup communities worldwide. While we no longer directly invest in startups in the traditional venture capital way, we do actively invest and share our resources, programs, people and technologies with high-potential companies. Our aim is to create tangible success for startups by helping deliver market-leading solutions, proven channels to market and strong revenue growth.

These objectives are driven by Microsoft’s Emerging Business Team (EBT) whose origins lay in Silicon Valley and now comprises more than 25 individuals working within the world’s major capitals and emerging markets (including US, UK, France, Germany, Israel, India and China). The team’s goal is to work proactively with the VC community to enable innovation and create value in startup companies through technical and commercial acceleration.

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Technical acceleration. Microsoft is, at its core, a software platform company and we are currently in the middle of an unprecedented product release cycle. Highlights of this include SQL Server TM 2005, Windows LiveTM and Windows® Vista. The EBT’s role is to provide entrepreneurs with insight on where our platform assets can be best applied and help them plug into our partner ecosystem by leveraging available tools, platforms and programs.

Tangible engagements also include ‘proof of concept’ development on our most advanced products, working with our leading technologists. encoway, a German spin-out from the University of Bremen, benefits from technical and commercial resources delivered via Microsoft Germany’s Founder Initiative. Its core product configuration software originated from a collaborative R&D effort with the German industrial innovator and strategic investor Lenze, who also backed the spin out. Working with Microsoft, encoway strengthened and extended its solution through integration with Microsoft CRM. Microsoft also facilitated an introduction of encoway to a larger Microsoft Gold Certified Partner, thereby strengthening encoway’s market presence through additional sales and channel capability.

www.microsoftstartupzone.com COMMERCIAL ACCELERATION Microsoft’s global scale and market presence can significantly help startups create opportunities and better monetize their businesses through our existing world-wide channels and field force. Startups can benefit from leveraging our existing install-base and partner channels.

Specific industry sectors and dedicated sales teams are also keen to offer innovative solutions and co-marketing funds help enable Microsoft partners to rise above the competition.

IP VENTURES Launched in May 2005, Microsoft’s IP Ventures program licenses and spins out leading-edge technologies from Microsoft’s research and product groups. This strategy is aimed at driving broad IT innovation as well as recouping some of our own R&D investment by allowing others to exploit the commercial possibilities of innovations created by our labs that are not destined for Microsoft products. IP Ventures focuses on the unique needs of startup highgrowth companies by offering flexible deal terms and payment options, including equity.

ACQUISITIONS Microsoft is continuing to invest in great young companies with 22 acquisitions announced during fiscal year 2006.

Approximately one third of these acquisitions have been international and of those, four are European. We are courting great companies wherever they may be and we’re counting on our relationships with VCs worldwide to help us deepen our dialogue with the companies we should consider. To that end, the EBT also works alongside Microsoft’s Corporate Strategy and Development functions to screen potential partnerships and acquisition opportunities.

Miyowa, a French company backed by TechFund Europe Management and Sophia Euro Lab, is a European leader in mobile Instant Messaging and entertainment services for online communities. Though partnership with Microsoft France’s IDEES Program, Miyowa expanded its service to include the millions of Windows Live Messenger users and now work directly with the Microsoft Mobile product group to create additional community driven mobile offerings. Most tangibly, Miyowa estimates that it has doubled its revenue with leading mobile operators through its Microsoft MSN relationship

“Our customers want to see products that have best of breed services.

The partnership with Microsoft is a real business booster and brings a lot of credibility to our offering.”

Skinkers, a UK-based company backed by NewMedia SPARK, is the market leader in direct-to-device software technologies including desktop alerts and online notifications.

Skinkers’ customers include the BBC and Motorola. In June 2006, Skinkers signed an Innovation Partnership with Microsoft, acquiring peer-to-peer streaming technology from Microsoft Research’s Cambridge lab that will help enable it to significantly enhance and accelerate its product offering. The IP Ventures deal also included direct engineering input from Microsoft to ensure implementation success and alignment with upcoming Microsoft offerings.

“We were delighted to be chosen as one of the 50 launch partners for Vista, and we are very excited about the potential of the technology, especially in the areas of security and the enhanced user experience that Vista enables. Coupled with our technology, we believe that we will be able to deliver highly innovative, yet functional, desktop services in the years to come.”

Pascal Lorne Chief Executive Officer, Miyowa

Matteo Berlucchi Co-founder and Chief Executive Officer, Skinkers

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Supporting SME innovation and productivity: The European Union Grants Adviser The EU Grants Adviser (EUGA) is an initiative developed by Microsoft, in partnership with HP and Intel, as well as other local public and private partners, through which Small and Medium-sized Businesses (SMBs) and Local and Regional Governments (LRGs) are able to increase their awareness and understanding of EU funds, as well as utilise a facilitated application process should they wish to apply for funds for which they are eligible.

Originally piloted in 2004, officially launched in 2005 and now available in 19 countries across the EU, the primary goal of EUGA is to stimulate growth and innovation thus, enhancing business and helping to grow competitive and dynamic local economies.

FACTS AND FIGURES: • Around 22 million SMEs in Europe

RESULTS OF EUGA TO DATE: • EUGA available in 19 countries

•

• SMEs in Europe employ 120 million people

• EUGA to be launched in remaining EU countries by end of 2007

• 57% of the European GDP contributed by SMEs

• 1500+ grants applications projects either completed or in progress through EUGA

• €230bn available through EU and national funding opportunities from 2007-2013 • 11,000+ grants identified in technology and growth related categories for 2007-2013

• 2.300 project consulted, 780 grants applications supported by EUGA • 84% success rate of applications submitted through EUGA

€120m of EU and national government funding awarded as a result of EUGA

• 68 consortium members across the region • 106,000+ people to be trained from grants awarded • 113,000+ SMEs benefitting • 347 local government and public organizations benefiting

SLOVAKIAN HOSPITAL USES FUNDS TO UPDATE ITS IT INFRASTRUCTURE The Hospital Alexandra Winter Piestany, located in Slovakia, had an outdated IT infrastructure.

Patient records and other hospital information were paper-based and often needed to be transferred by the patient to consultants and surgeons. The hospital wanted a system that stored information centrally and that was easily accessible to the right people at the right time.

Like many hospitals in Slovakia and around Europe, a lack of available funds was hindering its modernization project plans. Following the advice of the local European Union Grants Advisor (EUGA) consultant, the hospital decided to apply for a Broadband to regions grant scheme. In March 2006, it was awarded €190,000, or 95 per cent of the total cost of the project.

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Using the funds, the hospital was able to implement a new IT infrastructure. Patient information, appointment times, and general administration are now available over the Internet. The project also includes training for employees who need to familiarize themselves with the new hardware and software.

The comprehensive IT training is conducted by Microsoft® partners in the region. The project is expected to take two years to complete fully.

“The EUGA program held a seminar with the Ministry of Healthcare for all hospitals in the area.

They explained the funds available for updating IT infrastructure and helped us to apply. We are so grateful for their help.”

Ing. Zita Bruncková General Manager

www.microsofts.com/emea/euga

NATIONAL GRANT FUNDS DEVELOPMENT OF HUNGARIAN E-MUNICIPALITY SYSTEM With the European Union listing electronic administration in its Common List of Basic Public Services, Hungarian IT company Geoview Systems recognized the national importance of developing an E-Municipality Solution.

The company launched a project to develop a highly efficient information and external relations management tool based on the Microsoft .NET Framework. The innovative nature of the project prompted Geoview Systems to consult the European Union Grants Advisor (EUGA) for help in finding relevant sources of funding. EUGA matched the project’s objectives with the requirements of the national INNOCSEKK grant, which supports small to medium-sized enterprises to research and develop new technologies.

INNOCSEKK was impressed with the Geoview application—prepared with EUGA’s help—and awarded the company €64,000 to fund the project. This has allowed Geoview to recruit two new developers to help with the research and development of the E-Municipality tool.

With IT playing an increasingly important role in the Hungarian public sector, the solution will aid collaboration across organizations, increase the efficiency of municipal administration, and provide easy access to information for local people.

“EUGA has played an important role in the funding for this project.

This will allow Geoview to play an important role in providing a fast, effective solution for municipalities across Hungary.”

Zoltán Madár Director, Geoview Systems

REGIONAL GRANT SUPPORTS SWEDISH SME’S EXPANSION In spring 2006, Swedish blacksmith Jannebergs Smedja began to expand and recruit new employees. The growing company soon recognized it needed to invest in buildings and machinery to provide a safe working environment for its people.

While exploring the possibility of using public funding for its expansion project, it found the European Union Grants Advisor (EUGA) Web site. A EUGA consultant directed the company to the County Administration of Blekinge, which offers support for small to mediumsized enterprises under its Regional Grant for Company Development.

company’s premises to assess the proposal.

The project focused on the construction of a building adapted for winter production and the provision of better facilities for company employees, such as locker rooms and eating areas. In addition, the company wanted to provide all its employees with machinery and tools that would allow them to better contribute to the company’s success. Impressed with the project, the county administration awarded Jannebergs Smedja €13,000 (U.S.$16,920) in December 2006. A requirement of the grant was that the company employ at least six people; since receiving the investment, Jannebergs Smedja’s workforce has already grown to 15.

“Once EUGA made us aware of the local funding opportunities, we found the application process straightforward.

The relatively short amount of time we spent was very well rewarded, with the grant covering one fifth of our total project costs.”

Maja Lindell Director, Geoview Systems

Jannebergs Smedja found the grant application process straightforward and submitted the details of its project in October 2006.

The County Administration then visited the

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Partnering with SMEs and local universities: The Student to Business Program The S2B program is a Microsoft Community Initiative, connecting Microsoft partners and customers with universities to provide students with real world experience and establish the skills requirements needed to fuel innovation, broaden the recruiting process and enable employability of the next generation.

The program enables students to put into practice what they have learned during their university studies, and gain real work experience to help kick-start their IT careers. At the same time, it offers a channel to inspire local businesses to communicate the competencies required to innovate and operate a People Ready business, leveraging Microsoft and universities to provide the needed skills.

The initiative today engages 500 Small and Medium sized Enterprises and has offered almost 5,000 students an opportunity to work on an innovative IT related project.

Increasingly, the IT industry requires students to enter companies with hands-on experience, as well as deep theoretical background.

The S2B program builds on Microsoft’s existing academic initiatives, including providing access to the latest technology to more than 3 million students and professors through the MSDN Academic Alliance.

For the past decade, Microsoft has been expanding its outreach to the academic community in an effort to encourage the development of technology skills to ultimately promote a healthy and vibrant software economy.

Having started in Italy, Microsoft’s S2B program is now available in 10 languages and many countries across Europe including Croatia, Hungary, Italy, Netherlands, Spain, Norway, Poland, Portugal, Sweden, Switzerland and Turkey.

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The project will continue to expand to across multiple disciplines, to all IT related career opportunities for students, and extend the program to more countries around the world.

It is an incubation project from Microsoft’s Developer and Platform Group, Lead by Joe Wilson, Worldwide Academic Director, and Managed by Kimberly Voltero, Worldwide Academic Marketing Manager.

WHAT PARTICIPANTS ARE SAYING ABOUT S2B: Faculty, Italy “There was a gap between the business world needs and the universities education. But now, the S2B program helps university students to improve their practical skills at Microsoft Partners.”

Bulent Tekmen CEO of Netron Technology, Turkey

“S2B has provided a key opportunity to start my professional career and to have a deeper knowledge of Microsoft technologies. Less than three weeks before the end of my internship, my manager proposed to hire me. Now I’m responsible for the development of management applications using C# language. The Microsoft training period has been really helpful, making it easier to collaborate with my manager and my team right from the start.”

Raffaele Perelli Italian Student, completed a stage at TSO in January 2006

“S2B is an important opportunity for the universities to guide and help their students in the fundamental transition from the academic world to the job world.”

Giovanni Pighizzini University “Statale di Milano,” Computer Science

www.S2Bprogram.com 9

Supporting SME employability skills development Employability is about giving people access to the skills they need to gain and retain a job or transfer to a new job. People need different types of employability skills support depending on their level of formal education and previous work experience.

Employability is also about expanding and strengthening the potential workforce available to employers, and facilitating the routes from training to sustainable employment.

As a founding member of the European Alliance on Skills for Employability, Microsoft shares the Alliance’s commitment to help provide 20 million people in the EU with technology access, training and certification in IT and other skills required by current or future employers by 2010.

EUROPEAN ALLIANCE ON SKILLS FOR EMPLOYABILITY Launched in January 2006, the main goal of the Alliance is: •

To help better co-ordinate industry and community investments, services and other offerings, dialogue and engagement with NGOs and public authorities in a way that enhances the positive impact of ICT literacy and professional training on employability prospects of the young, the disabled, older workers and other unemployed or under-employed people throughout the European Union.

Alliance Members: Cisco • CompTIA • European Computer Driving License (ECDL) • EXIN • FIT (Fast Track to IT) • Microsoft • State Street • Randstad

“The Alliance on Skills for Employability is a specific contribution to support the EU action plans on promoting ICT as a relevant competitiveness factor.

It is also intended to have a remarkable social impact by targeting underserved communities with concrete support actions.”

Antonio Herrera President of eSCC.

PORTUGAL TECHNOLOGY, INNOVATION AND INITIATIVE - PROVIDING TEXTILE WORKERS WITH SKILLS FOR THE FUTURE ”Programmes such as Technology, Innovation and Initiative (TII) that aim to improve the skills and knowledge of the unemployed workers by training them in IT have the strong potential to improve their re-employment prospects either in

the same industry or other industries where these skills are required. These were the basic principles that led CITEVE to embrace the challenge led by Microsoft Portugal and partner with them in what we expect is the first of a series of other

relevant partnerships to the performance of the national textile industries.“

The Technology, Innovation and Initiative program (TII) is a pioneering project to provide workers in Portugal’s textile industry with new skills and qualifications to enhance their long-term employability prospects.

together with the Instituto do Emprego e Formação Profissional (The Institute for Employment and Professional Training of the Ministry of Work and Social Solidarity), is working with local companies and unions to help the trainees find new jobs or start new businesses.

material developed for the Microsoft Unlimited Potential program and tailored to suit the specific needs of local employers.

Launched in early 2006 by Microsoft and the Technological Centre for the Textile and Clothing Industries of Portugal (CITEVE), TII is a three-year initiative that will equip at least 3,000 unemployed workers with the ICT skills needed in the local economy. In parallel, CITEVE,

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TII training is provided at four community technology centres providing technology and skills training in a welcoming, open-access environment.

The expert staff lead three daily sessions, teaching a curriculum based on

Helder Rosendo General Manager, CITEVE

The impact of globalization and change is often felt most acutely by the least qualified workers. And as Portuguese companies adapt, by moving into research and development, design, logistics and distribution, ICT-proficient workers are increasingly in demand.

GERMANY IT FITNESS INITIATIVE Following the official endorsement in November 2006 by Bill Gates, March 2007 saw the official launch of the IT Fitness initiative in Berlin which aims to reach 4 million people nationally by 2010. They will get access to self-testing and self-learning tools and receive a valuable IT fitness description for their job applications.

Founding members of the IT Fitness partner network include Randstad, Microsoft, State Street and Cisco. The German Association of the IT Industry (BITKOM), and the German Confederation of Skilled Crafts (ZDH) have already joined the partnership and will support the initiative alongside two new members: Deutsche Bahn AG and the German Federal Employment Agency, who were officially introduced in March.

The aims of IT Fitness are to: • Strengthen public awareness of the need for IT skills to boost jobs and growth of the local economy.

• Improve political and industry dedication towards investing in specific digital inclusion activities for disadvantaged target groups.

• Provide self-testing and self-learning tools through a single portal posted online at www.it-fitness.de • Facilitate access to the website for those who do not own a computer or do not have internet connectivity • And improve employability of individuals by delivering IT skills training and certification through existing programs of IT Fitness partners such as the Microsoft IT Academy and Cisco Networking Academy that are not available in the traditional education system.

Two initial projects were unveiled at the IT Fitness launch: • Together with the German Confederation of Skilled Crafts, Microsoft has developed an online platform, on which 480,000 apprentices (one-third of all apprentices in Germany) can improve their IT skills.

• Together with the Saxonian Technology Center Zwickau, Cisco and Microsoft will help disadvantaged young people to acquire essential IT knowledge.

www.it-fitness.de

"E-SKILLS - THE KEY TO EMPLOYABILITY AND INCLUSION IN EUROPE" An IDC survey of more than 600 employers in ten European countries, released in January 2007, showed that: •

ICT skills are needed for almost 80% of jobs, and this will only increase, as even traditional industries are increasingly demanding high levels of ICT proficiency.

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While two-thirds of the employers sampled think that over 60% of their staff has basic e-skills, 14% of the employers think that less than 40% of their staff has these competences. Also, there are skill gaps in the intermediate and advanced use of ICT, which is becoming increasingly important to businesses.

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Lack of basic e-skills reinforces exclusion from the labour market (40% of employers said a person without ICT would likely not be considered for a job), while low technological competencies are seen by businesses as an obstacle to their growth (66% of employers said staff’s ICT skills would have an impact on business development).

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Many employers lack resources to provide formal ICT training (60% of respondents mentioned lack of time and money). They largely rely on informal, on-the-job training. Not only does this mean that there is a shortage of supply of ICT training, but also that the unemployed or underemployed who do not have access to on-the-job training will not be able to improve their skills.

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Microsoft Corporate Affairs Europe Troonstraat / Rue du Tr么ne, 4 1000 Brussels, Belgium Tel: + 32 (0) 2 550 06 10 Fax: + 32 (0) 2 550 06 11 www.microsoft.com/emea