Opportunities and Challenges
THE UK ICT MARKET
OFFICIAL PROGRAM
THE UK ICT MARKET OPPORTUNITIES & CHALLENGES FOR SWISS COMPANIES This report outlines the current state of the UK ICT market and examines in more detail various sub-sectors, which are growing and are likely to provide opportunities for Swiss ICT companies. The report also examines the competition and barriers to entry within these sub-sectors. In addition, it lists trade events and professional associations which may help Swiss companies to gain a greater understanding of the UK ICT market and identify potential partners and customers. Finally, the report examines regulatory issues, risk and success factors and suggests market access strategies. Using this report, Swiss ICT companies should be better prepared to identify potential opportunities and strategies to enter the UK market. Language: English Number of pages: 45 Author: Swiss Business Hub United Kingdom, CanadaUK Partners Ltd, United Kingdom Other Reports: Are you interested in other Reports for other sectors and countries? Please find more Reports here: www.switzerland-ge.com/reports
UK ICT REPORT 2
Contents
1. FOREWORD ________________________________5 2. EXECUTIVE SUMMARY _______________________6 3. INTRODUCTION _____________________________8
4.2.8.1. Major UK and overseas players _____________ 23 4.2.9. Software and services market _______________ 24 4.2.9.1. Major UK and overseas players _____________ 24 4.2.10. Telehealth/e-health _____________________ 25 4.2.10.1. Major UK and overseas players ____________ 26
4. UK ICT MARKET ANALYSIS ___________________9
4.3. Key UK market entry points _________________ 27
4.1. Historical review __________________________ 9
4.4. Statistical data __________________________ 27
4.2. Overview _______________________________ 9
4.4.1. UK population _________________________ 27
4.2.1. UK regional ICT clusters ___________________ 10
4.4.2. IT services trade ________________________ 28
4.2.1.1. London - Tech City _____________________ 10
4.4.3. Communications services trade ______________ 29
4.2.1.2. South-East of England ____________________ 11
4.4.4. Office of Communications (Ofcom) ___________ 29
4.2.1.3. Manchester/NW England__________________ 11
4.4.5. Market Shares of Mobile Platforms by Country 2013 31
4.2.1.4. Bristol/South-West England _______________ 12
4.4.6. UK videogames charts ____________________ 31
4.2.1.5. Northern Ireland ______________________ 12 4.2.2. The current market ______________________ 12 4.2.3. SWOT analysis _________________________ 14 4.2.4. Future trends across all ICT sectors ___________ 14 4.2.4.1. Cloud computing ______________________ 15 4.2.4.2. “Big Data� ___________________________ 15 4.2.4.3. Mobile _____________________________ 16 4.2.4.4. Social collaboration ____________________ 16 4.2.5. Creative/video games market _______________ 16 4.2.5.1. Major UK and overseas players ______________17
5. ACCESSING THE UK ICT MARKET ____________ 32 5.1. Trade events ____________________________ 32 5.2. Regulatory issues _________________________ 33 5.2.1. EU, WTO, UK specific, including taxation _______ 33 5.2.1.1. EU Directives & CE marking _______________ 34 5.2.1.2. TickIT ______________________________ 34 5.2.1.3. Data protection and privacy _______________ 35 5.2.1.4. Pan European Game Information (PEGI) ______ 35 5.2.1.5. WTO, competition policy and corporate tax _____ 35
4.2.6. eGovernment __________________________ 18
6. RECOMMENDATIONS _______________________ 36
4.2.6.1. Major UK and overseas players _____________ 18
6.1. Background and recent developments ___________ 36
4.2.7. IT security (cyber security) market ____________ 19
6.2. Target sub-sectors and market opportunities ______ 36
4.2.7.1. Government Cyber-Security Initiatives ________ 19
6.2.1. Creative/video games _____________________ 36
4.2.7.2. Major UK and overseas players _____________ 21
6.2.2. eGovernment __________________________ 37
4.2.8. Mobile applications market ________________ 22
6.2.3. IT security/Cyber security _________________ 37
UK ICT REPORT 3
Contents
6.2.4. Mobile applications ______________________ 38 6.2.5. Software and services market _______________ 39 6.2.6. Telehealth/e-health ______________________ 39 6.3. Market entry strategies _____________________ 40 6.3.1. Direct _______________________________ 40 6.3.2. Indirect ______________________________ 41 6.3.3. Summary _____________________________ 42
6.6. Conclusions ____________________________ 43
7. DIRECTORY OF USEFUL CONTACTS __________ 45 7.1. Government organisations___________________ 45 7.2. Trade, membership and professional organisations __ 47 7.3. Regulatory bodies _________________________51
8. ABBREVIATIONS USED IN THIS REPORT_______ 51
6.4. Market and trading risk factors _______________ 42 6.5. Success factors __________________________ 42
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9. PROFILE OF REPORT AUTHOR _______________ 53
1. Foreword Dear reader, When computers were developed and the internet was born, few people expected such technology to become a central component of everyday life. Today, the ICT sector is a core industry and as Europe’s biggest ICT market, the UK spends billions in this sector every year. Ranging from hardware and software to mobile technology and secure storage solutions, opportunities can be found across the board. The private and public sector are looking for innovative and trusted solutions and Switzerland and its ICT sector are well placed to step into the UK market with their products. The following Report on the UK's ICT sector was commissioned by the Swiss Business Hub United Kingdom and Switzerland Global Enterprise, as part of ongoing trend spotting efforts. Trend spotting is an integral part of the services provided by the Swiss Business Hub and Switzerland Global Enterprise and we endeavour to identify and assess industry sectors in the UK that would be of interest to Swiss SME’s due to strong growth or a need for expertise and skills. The report has been prepared by George Edwards, Managing Director at CanadaUK Partners Ltd. George Edwards has over 30 years of experience in assisting IT and Telecoms companies develop their business in the UK and has extensive knowledge of the UK ICT sector. The Swiss Business Hub UK and Switzerland Global Enterprise would like to thank George for the excellent work and collaboration throughout the conceptualisation and delivery of this report. It is thus with great pleasure that we present this report to you and we hope that you will enjoy reading the report and benefit from its content. We remain, wishing you every success in the global markets. Thorsten Terweiden
Head of Swiss Business Hub
UK ICT REPORT 5
2. Executive Summary The UK economy has had some challenges during 2012-13 from weak consumer demand and reduced spending, Government austerity measures and the impact of the Eurozone crisis, but there are some positive signs of growth, including an increase in manufacturing activity and a strong inward investment performance, especially in the ICT sector. The UK is now seen as a natural location for a technology business. Regulatory issues are generally not a major factor for a Swiss ICT company and the Government takes a limited role in the economy, largely allowing market forces to work. The political framework is very stable overall. Swiss technology enjoys an excellent reputation in the UK and customers are open to purchasing from overseas companies, provided that there is local support. The UK ICT market is the largest in Europe according to research by the European Information Technology Observatory (EITO – www.eito.com ). In an April 2013 report by Business Monitor International (BMI), UK IT spending in 2012 contracted by 0.6%, but is forecast to increase by 2.2% to GBP53.3bn in 2013. Areas of the market that BMI expects to grow include tablets, cloud computing, real-time data analytics and business software. The UK is a strong market for new technology and design with a sophisticated consumer base and well established distribution channels. UK consumers are early adopters of new technologies and design, making the UK market an excellent ‘test bed’ for Swiss ICT companies. The UK has a much stronger business-to-consumer e-commerce sector than other countries and the proportion of business-to-business e-commerce to GDP is triple the global average. The UK has been a pioneer of online grocery shopping through Tesco, the UK-based global retailer and although online grocery sales represent only 5% of overall sales, they are much higher than other major markets like Germany. It is estimated that in the UK 80% of music and video sales are conducted online, 50% of book sales and 40% for electrical items. The INSEAD/World Economic Forum Global Information Technology Report 2013 rated the UK at 7th in the Network Readiness Indicator (NRI) table, up two places over 2012 and the biggest rank improvement among the top 10 economies. The UK is welcoming to overseas companies with an active programme of inward investment attraction and many major UK companies are now foreign owned, with the ICT sector especially dominated by overseas companies. Software and Computer Services has been the leading sector for UK inward investment in recent years. We review a number of sub-sectors of the UK ICT industry in some detail in this report as we believe them to have excellent potential and furthermore there is a demonstrated depth of Swiss expertise in them:
Creative/video-games eGovernment IT security (cyber-security) Mobile applications Software and services Telehealth/e-health
The UK has a long history of excellence in the creative sector, including art, literature, music and film, which has continued with the development of video-games. Whilst many of the UK’s original video-games studios have been acquired by industry giants such as Microsoft and Sony, they have retained a strong presence in the UK and are complemented by innovative independent studios and publishers.
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The UK Government is actively encouraging large companies to make more use of SMEs in delivering business to government. It is also committed to improving the way it uses management information and making available data it collects on reasonable terms, to enable SMEs to develop innovative new applications. It has set a target to devote 50% of new IT spend on Cloud Computing and 25% of contract value to SMEs. In addition there have been Small Business Research Initiatives1 (SBRI) competitions in a number of sectors, including IT security and health. The SBRI programme uses the power of government procurement to drive innovation and provides opportunities for innovative companies to engage with the public sector to solve specific problems. It is also indicative of where specific opportunities may lie for Swiss companies. An increase in the ageing population, reducing Government budgets for healthcare and a drive to go paperless by 2018, combine to create a market conducive to opportunities in telehealth and e-health. The mobile market offers up a variety of opportunities taking advantage of the increasing ownership of smartphones and tablets together with the expansion of 4G services. Most notably is a move to mobile transactions and payments, which is a logical development of the UK’s existing strong business-to-consumer ecommerce sector. The common factor which all these sub-sectors we have discussed require, is IT security. Videogames commonly provide purchasing opportunities within the games to upgrade their scope, these purchases need to be secure. Applications for eGovernment require the highest level of security for information collected on citizens and organisations, especially with the emerging emphasis on cloud-based solutions. Mobile applications expanding into the core of the enterprise, as smartphones and tablets proliferate, need high level security and any business to business (B2B) or business to consumer (B2C) transactions have to be secured to retain users’ confidence. Healthcare requires some of the highest levels of IT security. The UK Government has recognized the importance of IT security to the whole economy and put in place a number of programmes to encourage greater understanding and use, especially amongst SMEs and supply chains. In this report we discuss the advantages and disadvantages of direct and indirect market entry strategies and provide information about the capabilities and strengths of the various regions within the UK. It is important to consider these regions outside London, which can offer considerably lower costs when entering the UK, either directly or indirectly. Public unease about the perfectly legal tax avoidance policies of some well-known major overseas companies may affect supply chains although we wouldn’t expect Swiss companies to be directly affected. However, the “PRISM” revelations about snooping by US and UK government organisations may prove to be an advantage to Swiss companies, to further enhance their already good reputation for quality products and a sound financial base. Swiss companies are also seen to be independent of US/UK government control. Detailed market research, the right market entry partner, trade events and associations are very important to a sustainable UK market entry. It is important to build up personal relationships with UK partners and potential customers as time invested in doing this is rarely wasted. Swiss companies with innovative and potentially disruptive ICT solutions, especially those embracing mobile technology and cyber-security, will find UK buyers open-minded and interested in any solutions which can drive up efficiency and/or lower operating costs. Potential clients generally do not discriminate against overseas-based companies, provided that they can satisfy their requirements and standards, including offering local support. Cyber-security and mobile are two of the strongest growth areas in the UK market.
1
https://www.innovateuk.org/-/sbri
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