Bbk ict market uk 11 2013

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

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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

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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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3. Introduction For the purposes of this report we are using the term United Kingdom or UK in its official definition as there is sometimes confusion about the term. The official definition of the United Kingdom (of Great Britain and Northern Ireland) is England, Scotland, Wales and Northern Ireland but not the Isle of Man or the Channel Islands.

The majority of statistics in this report use the currency GBP meaning Great Britain Pounds or Sterling, except where data originates outside the UK when the original currency, usually Euros, has been retained rather than attempting any conversion into Sterling.

The UK economy has faced 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 in certain sectors, in particular those sectors which have embraced the full range of ICT technology to drive up efficiencies and reduce costs. In addition, there have been signs that UK manufacturers are beginning to bring back some previously outsourced production from the Far East, including China. In August 2013, the Bank of England predicted2 the UK economy would grow 1.4% in 2013 and 2.5% in 2014, up from earlier estimates of 1.2% and 1.7% respectively. It also reported that a recovery appeared to be taking hold, but the legacy of adjustment and repair left by the financial crisis meant that the recovery is likely to remain weak by historical standards. Consumer Price Index (CPI) inflation rose to 2.9% in June 2013 and was predicted to remain around that rate in the short term. The unemployment rate was 7.8% of the economically active population, according to data3 published in July 2013.

The UK was Europe’s top destination for foreign investment in 2012 attracting 11% more projects than the year before, according to figures published by UK Trade & Investment (UKTI) 4. Switzerland was ranked the seventh largest investor, ahead of Japan, with the USA, Netherlands and France the top three sources of inward investment. The UK has invaluable assets, including strong rule of law, competitive product markets, flexible labour markets, a world-class university system and science base, and top manufacturing and services firms.

In terms of individual sectors, Software and Computer Services had the largest number of investment projects, followed by Financial Services and Business Services. This reflects a major push by the UK Government to attract overseas investment, which includes reducing corporation tax levels and the use of the so-called “Patent Box”. The Patent Box5 will allow companies to elect to apply a 10% rate of corporation tax to all profits attributable to qualifying patents and certain other intellectual property (“IP”) rights from 1 April 2013.

According to UK Trade & Investment6, the UK ICT sector is estimated at 12% of the UK's GDP and is often cited as a shining example of growth during the economic downturn. In the Global Innovation Index (GII) 20137, published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), the UK was ranked in third place overall after Sweden, with Switzerland retaining its place at the top of the rankings.

The UK was especially strong in ICT factors, ranked fifth, second only to The Netherlands in Europe (Switzerland was ranked twentieth).

It has been said that the UK’s success is a result of a confluence of a growing economy and confidence, together with a strong technology environment, excellent creative and design sectors, complemented by softer lifestyle aspects including a strong history and culture.

2

http://www.bankofengland.co.uk/publications/Pages/inflationreport/2013/ir1303.aspx http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/july-2013/statistical-bulletin.html http://www.ukti.gov.uk/uktihome/media/item/555480.html 5 http://www.hmrc.gov.uk/ct/forms-rates/claims/patent-box.htm 6 http://www.ukti.gov.uk/investintheuk/sectoropportunities/ict.html 7 http://www.globalinnovationindex.org 3 4

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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. Cyber-security and mobile are two of the strongest growth areas in the UK market.

4. UK ICT Market Analysis 4.1. HISTORICAL REVIEW The UK has a long history of innovation with British inventions ranging from the telephone in 1876 (Alexander Graham Bell), through television in 1925 (John Logie Baird), the electronic programmable computer in 1943 (Tommy Flowers) to Sir Tim Berners-Lee’s invention of the World-Wide Web in 1989 (in Switzerland).

There have been a number of significant events in the past thirty years which have led to major changes in the UK ICT market, some a result of external events, others internal, often political decisions by the Government.

In the early 1980s, the then Conservative Government privatized British Telecom and Cable & Wireless and licensed two new mobile operators, the companies which are now Vodafone and Telefonica-O2. This resulted in far-reaching changes in the ICT market, stimulating competition, encouraging innovation and an explosion in mobile products and services. At the same time the rise of the electronic manufacturing industries in Asia and Eastern Europe left the UK unable to compete in mass production of electronics products. The UK’s ICT industry had to concentrate on software and services, rather than hardware and specialise in more sophisticated and higher-end markets. As a result, despite facing steep competition on a global scale, the UK is still a major ICT player within Europe.

Napoleon famously described the British as a nation of shop-keepers, but now they are a nation of online retailers and shoppers. E-commerce is more important in the UK, relatively speaking, than almost anywhere else in the world. This is not just a national activity but a capability being exported internationally.

4.2. OVERVIEW The UK offers Swiss companies the largest ICT market in Europe8 with the largest consumer expenditure per head and an overall spend of GBP140 billion per annum, of which the UK public sector contributes GBP18 billion according to UKTI9. The UK is a strong market for new technology and design with a sophisticated consumer base. UK consumers are early adopters of new technologies and design, making the UK market an excellent ‘test bed’ for Swiss ICT companies.

The UK also has some of the strongest ICT skills in Europe and the highest number of ICT graduates in the whole of Western Europe according to UKTI. The UK has adopted flexible labour laws that ensure that both direct and contract staff can be employed under fair terms that will allow flexibility as a UK business develops (although there is currently a discussion in which one side argues that the employment terms are not fair!).

The INSEAD/World Economic Forum Global Information Technology Report 2013 10 rated the United Kingdom 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 country offers one of the most conducive environments for ICT development. In particular, it offers a sound and conducive political and regulatory environment (7th). The country also boasts high levels of ICT adoption; ICT usage is pervasive among the population, businesses, and the government. Switzerland was ranked 6th in the 2013 NRI report, down one place over 2012.

The U.K. Internet Value Chain, 2012 , a report by AT Kearney11, commissioned by Vodafone, focuses specifically on calculating the value of the U.K. Internet value chain—including the component services, related 8

www.eito.com http://www.ukti.gov.uk/investintheuk/sectoropportunities/ict.html http://www.weforum.org/reports/global-information-technology-report-2013 11 http://www.atkearney.com/en_GB/paper/-/asset_publisher/dVxv4Hz2h8bS/content/the-internet-economy-in-the-united-kingdom/10192 9

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infrastructure, and e-commerce conducted—and mobile connections within this market. Key findings from the study included:   

  

The U.K. Internet ecosystem was worth GBP82 billion a year, of which 16% came from mobile connections; mobile's contribution is increasing rapidly as smartphone penetration rises.

Every GBP1 spent on Internet connectivity—mobile and fixed broadband networks—currently supports GBP5 in wider revenue for the U.K. ecosystem.

Of the total GBP82 billion U.K. Internet economy, GBP37 billion is in the Internet value chain and GBP45 billion in the e-commerce it supports. The value chain is 2.6 percent of the country's GDP, while e-commerce is a further 3.1%.

The United Kingdom 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.

Of the GBP37 billion that makes up the U.K. Internet value chain, connectivity services, including mobile, represent the largest market with 35 percent, or GBP13 billion.

Forecasts of U.K. connectivity revenues suggest that mobile revenues will remain flat even as traffic increases five-fold.

According to a report in the Daily Telegraph12, 6th June 2013, in the UK, the largest markets for online sales are music and video, books and electrical items, representing respectively 80%, 50% and 40% of total sales in those sectors. Online grocery sales account for 5% of the UK grocery market, driven by Ocado (for Waitrose and Morrisons) and the major supermarkets such as Tesco, which have been investing heavily in their online operations. A Mintel report13 about online shopping in Europe published in August 2013, confirmed that the UK is one of the leading markets in Europe for online retail and has one of the strongest demands for buying online and collecting in-store. The report also acknowledged the popularity of online grocery shopping in the UK which has developed more strongly than many other European markets.

4.2.1. UK regional ICT clusters With the UK Government heavily promoting Tech City (which is next to the City of London) as the most important ICT cluster in the UK, it can sometimes be overlooked that the UK as a whole has a long history of ICT clusters outside London. Traditionally, South Wales, Scotland and Northern Ireland were the primary manufacturing locations for the ICT industry, but many were lost as Asia and Eastern Europe attracted ICT manufacturing investment. Those regions have retained some ICT clusters, but have largely lost their former pre-eminence as a result of this loss of ICT manufacturing.

There are many UK ICT clusters outside London and the South-East with a long history of development.

Cambridge and Bristol have proven success in some of the world’s most competitive high-technology industries.

There are also lesser-known clusters, for example derived from the oil and gas industry in Aberdeen and the Formula One automotive industry in the Midlands. The following section provides an introduction to some of these established regional ICT clusters outside London as well as London and Tech City.

4.2.1.1. London - Tech City Tech City (or “Silicon Roundabout”) is a technology cluster located in central and east London, broadly occupying an area between Old Street (the boundary of central and east London) and the Queen Elizabeth Olympic Park in Stratford, with its main focus around the Shoreditch area. Much of the area was in serious economic decline before the developments related to the 2012 London Olympics. Tech City was established with Government support in 2010 and Cisco, Facebook, Google, Intel, McKinsey & Company and Vodafone are amongst the companies which have invested in the area. Imperial College London, Loughborough University, City University London and University College London are among the academic partners in projects based in the cluster. The hub is modelled on Silicon Valley in the United States, although there is considerable scepticism that it could seriously rival Silicon Valley or other established technology clusters.

12 13

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10101747/Amazon-to-expand-online-food-service.html http://www.reuters.com/article/2013/08/15/net-us-shopping-online-europe-idUSBRE97E0QG20130815

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According to the Tech City Map14, there are over 1300 companies in the cluster. In the first nine months of 2012, the Technology sector acquired almost 1 million square feet in the City, an increase of 39% on the same period the previous year – and more space than the financial and insurance sectors combined15. However, in an article in the Guardian newspaper16 in May 2013, some doubt was expressed about the numbers of real technology companies in Tech City, the return on the Government funding and high level of publicity generated.

Apart from Tech City, London has an established creative cluster centred on Soho in central London, which is the heart of the post-production film and TV industry as well as the advertising industry. The City of London, arguably the world’s financial capital, has attracted supporting ICT organisations, although back-office systems are usually located outside London.

4.2.1.2. South-East of England Cambridge is by far the most established, widely recognised and best placed British ICT cluster which has evolved progressively since World War II. Cambridge is also quite unique; despite its relatively small size, it has become highly effective in a range of industries, which whilst seemingly disparate are actually connected by their relationship with the university, with each other, and the unique personal networks that permeate Cambridge. Today Cambridge is home to a range of innovative companies spanning key technology areas beyond ICT, but also including computing (hardware and software), wireless, biotech and physical sciences.

The common link is the University and its acclaimed applied research and many years of patient, grassroots development. One interesting result of this University-industry collaboration is the Raspberry Pi17 . The Raspberry Pi is a low-cost ($US25-$US35) credit-card sized computer that plugs into a TV and a keyboard, that its developers, a Cambridge-based charity called The Raspberry Pi Foundation, want to see being used to teach programming to children all over the world.

Outside Cambridge, the South-East’s largest cluster is centred around Heathrow Airport and along the M4 motorway westwards towards Bristol. This cluster includes most of the major multi-national software, hardware and services companies including Microsoft, Oracle, Dell and Hewlett Packard.

4.2.1.3. Manchester/NW England Having developed the first computer, Manchester, like many of the UK’s industrial cities, suffered in the more competitive late 20th Century. The globalisation of industry, and the modernisation and transfer of manufacturing resulted in the collapse of many local industries, including computer manufacturing (ICL).

However, Manchester is certainly not short of the resources required to reinvent itself. One of its biggest assets is the University of Manchester (UM), a world class research university with specialisations in life sciences and materials science. Partly in preparation for hosting the 2002 Commonwealth Games, the Manchester region has experienced massive capital injections for new infrastructure. In the technology area, TechHub Manchester provides a focal point for digital entrepreneurs. There has been a willingness to fund large scale projects through public funds, for example the National Graphene Institute at Manchester University and The Sharp Project which provides incubation facilities for the vibrant local creative industry. In addition, Salford MediaCityUK18 in the west of the city is a massive public-private initiative with the BBC as “anchor” tenant, bringing together ITV Studios, a new University of Salford campus, independent production companies, videogames developers and creative incubation facilities. In May 2013, a new MediaCityUK facility, described as the UK’s leading user experience environment opened. The Interactive Media Labs at The Landing 19 will enable brands to ensure relevance and usability across multiple end users including patients, consumers, gamers and employees. Manchester has been at the centre of a concerted effort by its local authorities to create innovation through substantial public investments in key infrastructure and institutions.

14

http://www.techcitymap.com http://www.techcityuk.com http://www.guardian.co.uk/technology/blog/2013/may/01/tech-city-funding-uk-startups 17 http://www.raspberrypi.org 18 http://www.mediacityuk.com 19 http://thelanding.org.uk 15 16

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4.2.1.4. Bristol/South-West England Over 100 companies connected to the microelectronics sector are concentrated in a region which includes the key towns & cities of Bath, Bristol, Exeter, Plymouth, Southampton and Swindon. In fact it is claimed 20 to be home to one of the biggest silicon design clusters anywhere in the world outside Silicon Valley.

This strong semi-conductor design cluster partly originated in the decision by Silicon Valley pioneer Fairchild Semiconductor to establish a design centre in the south-west, precisely because there was no existing cluster which might compete for skilled staff. However, it may have been the creation of semiconductor firm INMOS in 1977 and its strong support by the UK Government, which put Bristol and the South-West on the global semiconductor map. Although the creation of INMOS and its financial support by the Government was seen by many as ill-advised, it did create a cluster of semi-conductor design expertise which still exists.

In addition to semi-conductors, Bristol and the South-West also has a strong creative sector, the best-known of which is Aardman Animations, creators of the Wallace & Gromit series. Bristol is also home to the BBC’s Natural History Unit, which has a world-wide reputation.

4.2.1.5. Northern Ireland According to Momentum (see Trade, membership and professional organisations), the Northern Ireland ICT association, Northern Ireland has the best record of any UK region in creating jobs and reducing unemployment. Northern Ireland is probably one of the least well-known UK ICT clusters, but has over 900 ICT companies with over 16,000 employees. The region has over 100 international ICT investors and Invest Northern Ireland claims21 Belfast is Europe’s top destination city for software development and technical support investment. They also claim that it is the number one location globally for financial technology R&D investment, with more than 65% of existing inward investors having re-invested. Many investors have been in knowledge industries, particularly ICT, including software development, software testing and funds administration.

There has been substantial public investment in infrastructure, including Project Kelvin, a trans-Atlantic cable connection and the new Titanic Wharf in Belfast. Project Kelvin involved connecting a submarine cable to the Hibernia North Transatlantic cable located 22 miles off the Northern Ireland coast and was completed in 2010.

The Project Kelvin network provided Northern Ireland with a fast, low cost and resilient telecommunications link to North America, with improved connectivity in Europe.

Queens University Belfast is home to a new GBP25m Centre for Secure Information Technologies 22 (CSIT) and is the UK’s largest university cyber security research lab.

4.2.2. The current market UK IT spending in 2012 contracted by 0.6%, but is forecast to increase by 2.2% to GBP53.3bn in 2013, according to a report published in April 2013 by Business Monitor International 23 (BMI). The BMI report states that the IT market should see improvements as the economy moves further out of recession. Areas of the market that BMI expects to grow include tablets, cloud computing, real-time data analytics and business software. However, the BMI report states that IT investments will remain constrained if problems continue in the Eurozone. Enterprise spending will also continue to be limited by uncertainty about UK economic recovery and regional economic conditions. In the UK public sector, the IT spending outlook is dominated by the impact of government cuts and a moratorium on projects with a value of more than GBP100million.

BMI’s Expenditure Projections within the UK IT sector can be summarized as: Computer hardware sales reflect a continuing recovery from negative growth in 2012, with demand increased by the supply of cheaper tablets and hybrids.

Software sales are expected to be boosted by upgrades to Windows 8 in 2013 and beyond.

IT vendors have been squeezed on price, but outsourcing and cloud services remain areas of growth.

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http://siliconsouthwest.co.uk/index.php/about-2/ http://www.investni.com/index/locate/smart_sectors/locate_ict.htm http://www.csit.qub.ac.uk/ 23 Business Monitor International - http://store.businessmonitor.com/united-kingdom-information-technology-report.html 21 22

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BMI’s Risk/Reward Rating (RRR) places the UK at 80.7 out of 100.0, first in their latest Europe IT RRR table, ahead of Germany and Sweden.

BMI’s Expenditure Projections within the UK IT Sector 2012-3

60 50 40 30

2012 GBP bn

20

2013 GBP bn

10 0 Computer Hardware Sales

Software Sales

IT Services Sales

Total

Worldwide ICT market 2012 by country/region: 2,550 bln. € (+4.9%)

Rest of the world; 21.7%

Rest of EU; 7.7%

Spain; 1.7% UK; 4.5%

Japan; 8.8% Italy; 2.2% USA; 26.9%

Germany; 4.4% France; 3.7% BRIC; 18.6%

Source: EITO in collaboration with IDC; excluding Business Process Outsourcing and Consumer Electronics * EU without Malta, Cyprus

BRIC: Brazil, Russia, India & China According to the European Information Technology Observatory24 (EITO), the UK ICT market, excluding Consumer Electronics (CE) and Business Process Outsourcing (BPO), is the largest in Europe and was worth around 114 billion Euros in 2012. The UK ICT market has gained in relative size compared to both Germany 24

www.eito.com

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and France, which until a few years ago were first and second largest in Europe respectively. The chart on the previous page, showing the relative market sizes of major countries and regions, illustrates the EITO report’s findings.

4.2.3. SWOT analysis The UK has many strengths in ICT, having developed the world’s first stored program computer at Manchester University in 1948. Although that early lead in computing was not sustained, areas of strength remain.

One of the UK’s major weaknesses is an ICT skills shortage. A report25 on ICT skills across the EU in November 2012, highlighted that in the UK just over one in ten IT and telecoms professionals think they lack sufficient sector knowledge or experience. A third of UK IT employers report skills gaps for IT Information and communications technology professionals. Shortages are mainly concentrated among programmers / software development professionals and Web design / development professionals.

SWOT Summary – UK ICT Market Strengths 1. Largest ICT market in Europe 2. Early adopters of new technology & design 3. Open, transparent market 4. Established distribution channels 5. Excellent engineering & software development skills 6. World class universities 7. Excellent communications infrastructure 8. London is a world financial centre

Weaknesses 1. Value Added Resellers (VARs) often poor at helping build markets 2. High costs of doing business 3. Key executives in potential clients difficult to reach 4. Shortage of ICT skills & difficult to bring in non-EU staff 5. University fees have risen substantially creating a fall in student applications 6. Demand places strains on some infrastructure, especially transport 7. Government austerity measures reducing budgets in public sector

Opportunities 1. Swiss seen as strong in engineering and software skills 2. Swiss well educated with high quality of universities and research 3. Switzerland seen as politically & economically stable country able to guarantee continuity of supply chain 4. PRISM revelations may offer new opportunities for Swiss companies 5. Strong language skills including English.

Threats 1. Swiss economy & products seen as high cost and expensive 2. UK looks first to US for innovative ICT products & services 3. Cost of doing business in the UK high, requires long term commitment 4. Finding the right channel to market for a sustainable market entry takes time.

4.2.4. Future trends across all ICT sectors The ICT industry is on the edge of an unprecedented digital revolution. Cloud Computing, Big Data, Mobile and Social Collaboration are four major disruptive forces that together will transform the way companies do business and react to market changes. In June 2013, the UK Government announced its Information Economy Strategy26, following consultations with industry and others. The majority of respondents agreed that the five growth opportunities (cloud computing; big data; e-commerce, internet of things, smart cities) were the right areas on which to focus. Cloud computing was commonly cited as the most important of the five because effort spent in this area would drive the other areas, facilitate access to data, reduce costs and improve efficiency. Most respondents recognised the importance of linking the five areas together and not viewing them as “discrete sectors” but “interdependent concepts”.

25 26

http://euskillspanorama.ec.europa.eu/docs/AnalyticalHighlights/ICTProfessionals_en.pdf https://www.gov.uk/government/publications/information-economy-strategy

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4.2.4.1. Cloud computing According to UK Trade & Investment27, the UK Cloud Computing annual market value is predicted to grow from GBP2.4bn to GBP6.1bn by 2014. Currently 18% of UK SME businesses use cloud solutions but a further 30% plan implementations within the next year. By 2015 half of all new IT spending by the public sector is predicted to be on public cloud services.

The UK Government is committed to the adoption of cloud computing and delivering computing resources. The G-Cloud28 is an iterative programme of work to achieve this which will deliver fundamental changes in the way the public sector procures and operates ICT. See also section 5.2.6 eGovernment.

The UK data centre market, upon which cloud computing depends, is the largest in Western Europe and the growth in the amount of data and new services is creating new sources of demand. In May 2013 the UK was ranked as the lowest-risk destination in Europe for businesses to locate their datacentres, according to the Data Centre Risk Index 2013 report29 by global consultancies Cushman & Wakefield, hurleypalmerflatt and Source8.

This was the second year running that the UK was ranked as the highest-placed European country for building a data centre facility.

The UK’s high scores are a result of international internet bandwidth for datacentre resilience and ease of doing business, which helped it maintain the lead, according to the consultancies. “The UK remains the safest location for a datacentre in Europe, Middle East & Africa (EMEA) and consequently continues to see a reasonable level of activity supported by its status as a major economic global hub,” said Keith Inglis, partner in the EMEA Data Centre Advisory Group at Cushman & Wakefield.

In June 2013, the “PRISM” allegations of widespread US-UK surveillance sent shockwaves around the world and one of the lasting consequences could be a dwindling trust in secure cloud providers. Neelie Kroes, VicePresident of the European Commission, gave a speech30 warning of multi-billion euro consequences for cloud providers and highlighted an interesting point; in the wake of this scandal, there is an enormous opportunity for IT vendors to sell beefed-up secure servers to clients who hold sensitive information. However, countries like the UK, where data spying concerns now exist, could see interest in hosting cloud services disappear.

Conversely, countries outside of the EU, such as Switzerland, may benefit from this. A Swiss company apparently benefitting from a heightened level of paranoia is Artmotion, one of Switzerland's biggest offshore cloud providers, who reported31 that the company saw a 45% rise in demand for secure cloud services in the wake of the PRISM scandal.

4.2.4.2. “Big Data” The term ‘Big Data’ has many definitions but is commonly applied to describe the voluminous amount of structured, unstructured and semi-structured data a company creates32. Typically these data sets are beyond the ability of commonly used software to capture, manage and analyse. Experts and analysts also tend to refer to the characteristics of volume, velocity and variety when seeking to define big data. The ability to analyse these huge data sets offers organisations an opportunity to better understand the drivers of their own business, customer behaviour and how apparently unrelated information can be linked, deriving substantial economic advantages.

One sector keen to embrace the opportunities of Big Data is health, because it promises the ability to access, integrate and apply different types of data. Volume is the defining nature of Big Data, but in health, Big Data is big because it documents and manages complex and vast health concepts, such as the human genome.

Documenting the comprehensive clinical state of an individual and articulating the research lessons that person brings to the broader population is a big challenge, which it is hoped Big Data technology can solve.

27

http://www.ukti.gov.uk/investintheuk/sectoropportunities/ict.html http://gcloud.civilservice.gov.uk/ http://www.cushwake.com 30 http://europa.eu/rapid/press-release_MEMO-13-654_en.htm 31 http://www.infosecurity-magazine.com/view/33369/prism-sends-swiss-hosting-companies-a-windfall/ 32 http://www.thebigdatainsightgroup.com/site/content/about-us-0 28 29

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4.2.4.3. Mobile There is a big opportunity for enterprises to revolutionise business processes and customer interactions using mobile applications. Research published by U.K. regulator Ofcom 33 suggests the U.K. leads international markets for mobile device adoption and usage, with mobile social networking a key driver of device sales and use. Internet shopping on mobiles is also on the rise, in line with the UK’s lead for online shopping generally.

Ofcom reported (see Section 5.4.4) that about 51% of the adult population owned a smartphone in 2012, and 24% of U.K. households owned a tablet by the first quarter (Q1) of 2013.

The completion of the UK’s 4th generation spectrum auctions for LTE (Long Term Evolution) in 2013 should see a further explosion of new mobile data services and applications. The winners of this auction were the existing mobile operators, Telefonica UK (02), Vodafone Ltd, Everything Everywhere Ltd (“EE” a TMobile/Orange joint venture) and Hutchison 3G UK Ltd (Three) plus Niche Spectrum Ventures Ltd, a subsidiary of BT Group plc, which runs the major part of the UK’s fixed line infrastructure. A further boost was given in the summer of 2013 when Ofcom agreed that 4G services could be provided by Vodafone, O2 and Three using their 2G and 3G spectrum. The communications regulator had already given mobile operator EE the green light to use its existing 1800MHz spectrum to deliver 4G services in August 2012.

4.2.4.4. Social collaboration Social collaboration is one of the key disruptive forces that will transform the way companies do business and react to market changes and the UK has embraced it with enthusiasm. In June 2013, a global strategic partnership was announced34 between Twitter and the world’s largest communications services group WPP, whose headquarters are in the UK. WPP plans to integrate data posted by Twitter users into its array of marketing products to provide more up-to-the-second insights.

4.2.5. Creative/video games market The UK has one of the largest and most diverse creative industry sectors in the world. According to figures35 from UK Trade & Investment the sector accounts for 6% of GDP and employs 2.3m people. The UK is home to world renowned businesses in advertising, fashion, TV, film, design and architecture.

The UK’s creative industry adapted from producing television programming, film and music to meet the demands of the video-games market. There is also a strong tradition of artistic works including painting, writing and music. According to UK Trade & Investment over 50% of the apps in the UK are games and two thirds of games developers are self-publishing. Growth in the sector is coming from social and mobile games companies. The key change in the mobile eco-system in the UK has been the simplification of the value chain, enabling content creators improved access and payment transparency when it comes to reaching the end user.

The UK’s creative sector employed 2.5 million in 2012 according to Nesta36 and the creative industries’ share of UK Gross Value Added (GVA) was 5.8% in 2010 compared to France’s 2.8%, and the USA’s 3.3%, according to an UNCTAD report37.

The UK video games industry is the largest in Europe and according to a 2012 report by Newzoo38, the U.K games market generated $US 5.2bn of revenues in 2012 with the total number of gamers at 33.6million. In the UK, 37 % of the population aged between 16 and 49 describe themselves as ‘active gamers’ according to PEGI39, a pan-European trade organisation.

The UK boasts a substantial and highly qualified talent pool with some of the finest video games studios globally. The UK also has technical as well as creative excellence and an ability to generate products that sell well globally and to create original video games Intellectual Property. UK based studios have developed video games such as Grand Theft Auto IV (the fastest selling entertainment product of all time), Runescape, the Fable 33

http://media.ofcom.org.uk/2012/12/13/uk-a-nation-of-hi-tech-tv-lovers-3/ http://www.wpp.com/wpp/press/2013/jun/06/twitter-and-wpp-announce-global-strategic-partnership/ http://www.ukti.gov.uk/investintheuk/sectoropportunities/creativemedia.html 36 http://www.nesta.org.uk/ 37 http://unctad.org/en/Pages/Publications/Creative-Economy-Report-%28Series%29.aspx 38 http://www.newzoo.com/trend-reports/uk-games-market-2012-summary-report/ 39 http://www.pegi.info/en/index/id/23 34 35

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series, Broken Sword and LittleBigPlanet. Grand Theft Auto V (GVA V), launched in September 2013, was created by Rockstar North studios in Edinburgh and is reported to have had a budget of GBP170m and expected to generate revenues of $US1bn. It was reported40 in GfK Chart-Track that after only five days on sale, GVA-V had become the 24th biggest selling title of all time in the UK (11th biggest on Xbox 360 and 10th on PS3). It sold more in its first week than the launch weeks of all other GTA titles combined.

According to TIGA41, the industry association, the UK games development sector contributes approximately GBP1 billion to UK GDP per annum and employs over 9,000 highly skilled development staff, 80 per cent of whom are employed outside London.

TIGA reported in May 2013 that employment and investment in the UK video-games sector increased in 2012, following a three-year period of decline in staff numbers. By the end of the year there were 118 more studios and 336 more creative staff than there had been in 2011. Studios also invested GBP427m in games. The report concluded that increasing numbers of mobiles and tablets had provided a boost to video-games development.

The UK game development sector is R&D intensive. Two fifths of UK game developers have a budget dedicated to R&D. UK game developers spend on average 20% of turnover on R&D. UK game developers are export focused, with 95% of UK game businesses exporting at least some of their games/services to overseas markets.

The independents have won UK government backing for development tax breaks in the face of concerted lobbying by the industry, using Canadian video game tax breaks as a lever.

In September 2013, Microsoft announced42 it would be accepting applications from UK technology and gaming startups for a new accelerator programme in London. The 12 week programme will focus on helping highpotential startups grow their business through a combination of one to one mentoring, technical assistance and access to resources designed for startups striving to break new ground in cloud, internet, mobile or gaming.

Despite these positive views from TIGA and UK Trade & Investment, the UK industry has declined over the years due to increasing overseas competition and in September 2013 one of the UK’s largest and oldest studios, Blitz, announced43 it would be closing down. The industry problems are in part more general, coinciding with the end of the Xbox 360 and PlayStation 3 life cycles, but also reflect the success of overseas companies in attracting young British talent overseas. Attracting replacement overseas talent has been challenging because of the expense and difficulty of obtaining work visas for non-EU nationals.

TIGA says the tax issue is one reason the industry in Britain has slipped from third place in the world in 2007, behind the US and Japan, to fifth, overtaken by Canada and South Korea, both of which TIGA claims receive generous government support. TIGA succeeded in persuading the government to introduce a proposal for Games Tax Relief for developers in the March 2012 budget. However, the EU, which launched an investigation, is still to make a ruling, despite the fact that French firms enjoy similar support.

One area of growth, according to the industry press44, is mobile gaming with over 80% of the 133 new studios opened within the UK in the last 18 months. working on games for Apple’s iOS platform, and over 70% for Google’s Android operating system. Part of the reason is the large number of users and the open distribution channels through the App Stores, making a very low barrier to market entry. However, the competition for attention amongst such a large and diverse number of applications makes success difficult to predict.

4.2.5.1. Major UK and overseas players The UK games industry is clustered around ten regional centres spread right across the UK, each of them dominated by a couple of large studios. Clusters exist in Edinburgh, Dundee, Newcastle, Liverpool, Manchester, Guildford, Cambridge, Oxford, London and Brighton. These clusters have both UK independent developers and foreign owned studios.

40

http://www.chart-track.co.uk/?i=1700&s=1111 http://www.tiga.org http://www.tiga.org/news/microsoft-launches-accelerator-for-uk-gaming-tech-startups 43 http://www.blitzgamesstudios.com 44 http://www.mcvuk.com/news/read/why-is-mobile-gaming-such-a-success/0121737 41 42

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The leading UK casual games developer is King (www.king.com). Since 2003 King has been a world leader with over 190 million monthly players and more than 26 billion game plays. They make games for the web, mobile devices (both iOS & Android) and for social networks - Candy Crush Saga is the world’s most popular game on Facebook, having displaced Angry Birds. In June 2013 King announced plans for a US public offering (IPO).

Other leading UK developers include Codemasters (www.codemasters.com - 50% owned by Reliance of India) which produces games for most platforms including XBox360, PlayStation, Nintendo, Wii, PC and mobile.

Codemasters has two UK studios and one in Malaysia. Another leading UK independent games producer is Kuju (www.kuju.com) which produces games for all major platforms and in a wide variety of genres. Kuju has two studios which operate under the names of Headstrong Games and Zoë Mode.

Apart from a few major companies, the UK creative and video games sector is very diverse and fragmented and many of the players relatively small and specialist.

Leading overseas players with UK studios include Microsoft, Activision, Square Enix, Capcom, Sony, Electronic Arts and Disney. Many of these have UK studios which have come from acquisitions of UK developers such as Microsoft’s takeover of Lionhead.

In Section 5.4.5 Statistics we have provided a sample weekly chart of the best-selling UK video games and it is worth noting that no UK independent studios had products in the top 10.

4.2.6. eGovernment The UK has expanded its eGovernment services to help it meet substantial budget cuts across most departments which are likely to continue for the foreseeable future. Providing online transactional services has been a high priority both in central and local government, reflecting the area where most savings can be made.

Other areas being addressed include standardising core systems throughout Government, such as Human Resources (HR) and Payroll, rather than each department developing its own solutions as has been the practice in the past. Open Source Software is being trialled in some areas and the use of non-Microsoft office software, such as Google Docs, encouraged where possible.

In May 2013, the government announced45 that purchases through the cloud should be the first option considered by public sector buyers of IT products and services, using the CloudStore http://gcloud.civilservice.gov.uk/cloudstore/ . Central government departments have a target to achieve 50% of new IT spend on Cloud and 25% use of SME’s by value, by 2015. In the Cloudstore there are more than 800 suppliers and more than 7,000 services across all types of cloud service models, including Public, Private and Hybrid. Services are offered in four categories: Infrastructure as a Service (IaaS); Platform as a Service (PaaS); Software as a Service (SaaS); and Specialist Cloud Services (SCS). The store was built by UK SME Solidsoft and is hosted in the Microsoft Azure cloud. Products range from e-mail and collaboration tools to more tailored services such as health records and case working for police forces.

There is also a strong push for so-called Open Data; the Open Data Institute - http://www.theodi.org – was established to help businesses that want to use public sector data to create new products and services. The Cabinet Office is improving access to data by ensuring that data is released in anonymised, open formats to enable people to use the data and encourage the development of a market for services based on public-sector information for entrepreneurs and businesses.

4.2.6.1. Major UK and overseas players The UK eGovernment market has historically been dominated by a few multinational suppliers including EDS, Oracle, HP and Microsoft. Two factors are changing that, a reduction in the number of very large contracts of GBP100m and above and a drive to increase the numbers of Small and Medium Enterprises (SMEs) winning government business. Other major suppliers include CGI which acquired UK-based Logica in 2012 and from the UK Northgate Information Systems and Capita, a broadly-based outsourcing company. The latter company

45

https://www.gov.uk/government/news/government-adopts-cloud-first-policy-for-public-sector-it

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announced46 a joint venture with the government in April 2013. The new company will own a portfolio of stateowned intellectual property rights including the Prince2 project management training scheme and ITIL, a widely-used IT services standards programme. UK Microsoft Azure partner, Solidsoft, built the UK government’s Cloudstore, noted above.

4.2.7. IT security (cyber security) market The June 2013 “PRISM” revelations about allegations of widespread US electronic surveillance sent shockwaves around the world. Individuals and companies started thinking much more carefully about what they did online and about information security generally. Whether this will lead to a rise in the already healthy demand for cyber security in the UK and create distrust of some US and UK providers remains to be seen, but the impact could be significant.

According to Price Waterhouse Coopers (PwC) the Cyber Security market (or industry) is comprised of companies that provide products and/or services for defensive and offensive applications across the IT, telecoms and industrial domains. This is the definition we have used in compiling this report.

According to Kaspersky’s report47, “The evolution of phishing attacks 2011-2013” the UK remains one of the most attractive targets for phishing, as in 2012 it saw a threefold jump in attacks on people and businesses based in the country. Approximately 3,000 individuals were targeted by a phishing attack every day in 2012, compared to 1,000 the year before, according to a Kaspersky analysis on 50 million of its users.

The UK is a very important market for cyber security products and services and it is one of the fastest growing sub-sectors of the ICT market. The internet-related market in the UK is now estimated48 to be worth GBP82 billion a year and British businesses earn 20% of their revenues from the internet. Protecting this level of revenue is becoming increasingly important.

Industry sources suggest that if cyber-security were a sector in its own right, it would be bigger than the UK agriculture or utilities sectors. The UK cyber security sector is estimated to be worth GBP3.9bn in sales, (UK Security Sector Report for 2011, KMatrix Report, March 2012, quoted by UK Trade & Investment May 201349).

It is estimated that there are over 2,000 UK companies operating in the sector. The UK Government’s National Cyber Security Programme, with a budget of £650m over four years has added significantly to this spend, creating a focus on the subject in several Government Departments. In terms of total national spend on cyber security the UK is one of the leading cyber security nations and almost certain to provide a major stimulus to spending in future, as threats evolve and government and private sector alike place increased emphasis on modernised, network-centric defence. The cyber security market transcends traditional defence expenditure and the private sector increasingly recognizes the increased importance of safeguarding online transactions and intellectual property. The potential threat to national infrastructure is being taken very seriously in the UK and has attracted major funding.

4.2.7.1. Government Cyber-Security Initiatives In November 2011, the UK Government committed GBP650m over four years to a National Cyber-Security Strategy and established the Office of Cyber Security and Information Assurance (OCSIA) within the Cabinet Office (see Section 8.1 Government organisations). The strategy outlined a vision for the UK by 2015 to derive huge economic and social value from a vibrant, resilient and secure cyberspace. Objective 1 of the strategy’s implementation plan recognised that cyberspace is an important and expanding part of the UK’s economy. It set out the approach for tackling cybercrime and making the UK one of the most secure places in the world to do business. It is estimated by industry sources that the UK derives around 9.7% of GDP from the digital economy and therefore maintaining the UK as a safe place to conduct online business is a high priority.

46

http://www.capita.co.uk/news-and-opinion/news/2013/capita-selected-to-form-jv-ip-business-with-cabinet-office.aspx http://media.kaspersky.com/pdf/Kaspersky_Lab_KSN_report_The_Evolution_of_Phishing_Attacks_2011-2013.pdf http://www.atkearney.com/en_GB/paper/-/asset_publisher/dVxv4Hz2h8bS/content/the-internet-economy-in-the-united-kingdom/10192 49 http://www.ukti.gov.uk/uktihome/media/item/503520.html 47 48

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In September 2012, it was announced50 that the UK’s first Academic Research Institute to investigate the “Science of Cyber Security” had been launched. It is a virtual organisation involving seven universities. It will allow leading academics in the field of Cyber Security including social scientists, mathematicians and computer scientists from across the UK to work together. In March 2013 the UK’s second Academic Research Institute was announced51, which will investigate new ways of automatically analysing computer software to reduce its vulnerability to cyber threats.

Other academic funding announcements include Oxford Martin School at the University of Oxford which will host the Cyber Security Capacity Building Centre52. It is hoped that the Centre will become a leading global resource for understanding how to achieve effective cyber security and will work with the UK and other countries to deliver a safer cyber space.

In addition, in May 2013 it was announced53 that Oxford University and Royal Holloway College, University of London would receive GBP7.5m in government funding for cyber security research. This funding aims to address the UK’s shortage of cyber security experts and boost the number of doctoral graduates with relevant skills.

In March 2013, the Cyber Security Information Sharing Partnership (CISP) - https://www.cisp.org.uk/ - was launched to deliver a key component of the UK’s cyber security strategy. CISP will facilitate the sharing of information on cyber threats in order to make UK businesses more secure in cyberspace. Members of CISP have access to an online collaboration tool that provides a trusted and functional environment for industry and government to share cyber threat and vulnerability information, best practice and appropriate mitigations.

In April 2013, UK small businesses were pressed by the Government to spend more to tighten computer security to curb an explosion in cyber-crime and meet the terms of a proposed tough EU directive54 on data security. A survey55 by Price Waterhouse Coopers (PwC) commissioned by the Department of Business, Innovation & Skills (BIS) had shown a 50% upsurge in computer crime in 2012 and blamed lax management for some of the security breaches. Almost 90% of small companies were victims of computer attacks by hackers as well as their own staff. The average cost of the worst breaches was between GBP35,000 and GBP65,000, the equivalent of 6% of turnover for most of them.

According to this survey, larger companies with more than 250 employees were the main targets with 93% of them struggling to cope with losses of between GBP450,000 and GBP850,000. The Government is offering modest help to small and medium-sized businesses to recruit security consultants to tighten defences. This is being run by the Technology Strategy Board (TSB - https://www.innovateuk.org) which has extended a scheme to allow small and medium enterprises (SMEs) to bid for up to GBP5,000 from a GBP500,000 fund to improve their cyber security by bringing in outside expertise.

BIS is also publishing guidance to help small firms make cyber security part of their normal risk management procedures. In addition, The IASME (Information Assurance for Small and Medium Enterprises http://www.iasme.co.uk) standard is a maturity-based information assurance standard for small businesses. It was created from a Technology Strategy Board funded project to create an achievable cyber security standard for small companies. The international standard, ISO27001, is comprehensive but extremely challenging for a small company to achieve and maintain. The IASME standard is written along the same lines as the ISO27001 but specifically for small companies. The gold standard of IASME demonstrates baseline compliance with the international standard.

50

http://www.gchq.gov.uk/Press/Pages/UK%27s-First-Academic-Research-Institute-to-Investigate-the-%27Science-of-Cyber-Security%27.aspx http://www.gchq.gov.uk/Press/Pages/Second-Cyber-Research-Institute-launched.aspx www.gov.uk/government/news/oxford-will-host-cyber-security-capacity-building-centre 53 http://www.cs.ox.ac.uk/news/641-full.html 54 http://europa.eu/rapid/press-release_IP-13-94_en.htm 55 https://www.gov.uk/government/publications/information-security-breaches-survey-2013-technical-report 51 52

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Increasingly, customers and suppliers are starting to be concerned about how well SMEs protect their data.

This is due to a growing number of high profile data losses and cyber-attacks, increasing fines for data loss from the UK’s Information Commissioner’s Office and cyber security legislation56 about to be introduced by the EU. This concern for SME’s ability to fight cyber-crime was highlighted by a report57 published by the Federation of Small Businesses (FSB) in May 2013, which found that cyber-crime is costing its 200,000 members a combined GBP785m a year – or GBP3,750 for every small business. The report said that over the past year 41% of the group’s members have been a victim of cyber-crime, often through frauds carried out by a customer or client, or so-called “card not present” situations (when purchases are made online, over the phone or by mail order).

Virus infections hit 20% of respondents; 8% said they had been a victim of hacking and 5% suffered security breaches.

During 2013 IASME joined with the ICT KTN (Knowledge Transfer Network) and others to run a series of cyber security awareness events around the UK for small companies. Each of the events was a half day seminar designed to educate SMEs on the cyber threat to their business, give some simple steps on how to protect against the threat and how to provide confidence to their suppliers and customers that they are doing so. The Government is also worried about the legislative costs and the absence of coverage for micro-businesses from the EU Directive but is supporting measures that would mean reporting any security breach to a regulator.

In May 2013, further recognition of the importance of the cyber security sector was given by UK Trade & Investment (UKTI) launching a strategy for UK cyber security exports. The document, entitled ‘Cyber Security – The UK’s Approach to Exports’58 acknowledged the growing impact of cyberspace on the UK’s economic prosperity, and the increasing importance for businesses to protect against the threat of cyber-attack.

The report estimates that the global cyber security industry is now worth in excess of GBP100bn per annum and with cyber security accounting for just under a third of UK exports in the security sector in 2011, its prominence is set to grow. The plans outlined in the strategy will be implemented by developing a Cyber Growth Partnership, a joint industry and Government initiative inspired by the successful Aerospace Growth Partnership model. The report claims that the UK is ranked as the world’s number-one cyber power in the Economist Intelligence Unit’s Cyber Power Index59. UK exports of cyber security products and services were GBP805m in 2011, approximately one-third of all UK security exports (UK Trade & Investment May 2013).

Although this strategy is principally focused on the export of UK capability, UKTI will encourage inward investment for cyber security opportunities, bringing foreign businesses and organisations to the UK to create or use cyber security capabilities hosted in the UK and delivered to the country of interest. Promoting the UK as a secure location, from a cyber-security viewpoint, is seen as key to encouraging overseas banks and financial institutions to maintain, expand or establish a UK presence.

4.2.7.2. Major UK and overseas players One of the UK’s major players in cyber security is Detica (https://www.baesystemsdetica.com/), British Aerospace's (BAE) cyber and security division. Alongside its more traditional defence business, BAE offers services to companies to help them collect and manage data, as well as manage risk and respond to breaches of cyber security and protect themselves in future. Press reports in June 2013 stated that BAE was hiring more people for its Detica arm, reflecting Britain’s growing need for cyber security.

In July 2013 it was announced60 that the Ministry of Defence (MoD) was teaming up with nine large defence firms and telecoms providers to strengthen the UK’s cyber security. The Defence Cyber Protection Partnership (DCPP) is one of a series of cyber security initiatives by the government since cyber threats were categorised as one of the national defence priorities in 2010. The DCPP includes BAE Systems (www.baesystems.com), Rolls-Royce (www.rolls-royce.com), Lockheed Martin (www.lockheedmartin.co.uk), 56

http://europa.eu/rapid/press-release_IP-13-94_en.htm http://www.fsb.org.uk/News.aspx?loc=pressroom&rec=8083 http://www.ukti.gov.uk/uktihome/item/503140.html 59 http://www.boozallen.com/insights/insight-detail/cyber-power-index 60 https://www.gov.uk/government/news/defence-partnership-tackles-cyber-security-risks 57 58

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Cassidian (www.cassidian.com), Thales (www.thalesgroup.com), Hewlett Packard (www.hp.com), BT (www.bt.com) and the government intelligence agency GCHQ (www.gchq.gov.uk).

According to Reuters, the partnership will look to implement controls and share threat intelligence to increase the security of the defence supply chain. The DCPP will also work to establish higher standards of security for smaller companies in the supply chain. According to the BBC, government officials say they hope the plan will serve as a model for other sectors. Supply chain security has become an increasing priority as cyber attackers have turned to infiltrating weakly defended companies to work their way up or down the supply chain to their end target.

US-based McAfee (www.mcafee.com) has a major facility in the UK in Aylesbury and provides a wide-range of IT security protection products and services. Sophos (www.sophos.com) has its global headquarters in Abingdon near Oxford and provides a wide range of network, server and end-user IT security protection products. Becrypt (www.becrypt.com) is a leading UK supplier of certified cyber security solutions and services.

Cogent Systems (www.cogentsystems.com) is a leading supplier of biometric identification systems for law enforcement, government, civil and commercial customers and counts the UK Border Agency, UK Police and Post Office as clients. Deep-Secure (www.deep-secure.com) is a UK-based software specialist providing systems for organisations in defence, security, private and public sectors to securely share information. Entrust (www.entrust.com) provides identity-based security solutions and has been active in the UK for many years.

QinetiQ (www.qinetiq.com) is a leading international provider of technology-based services and solutions to the defence, security and related markets and was originally part of the UK’s defence research establishment.

Symantec (www.symantec.co.uk) , provides a broad range of content and network security solutions to individuals and enterprises in the UK. 4.2.8. Mobile applications market The UK is one of the most advanced mobile markets in the world, and is often viewed as a test bed for mobile services for the rest of Europe by overseas companies, especially North American. The UK was the first European market to launch BlackBerry services and one of the first to launch the iPhone and Android handsets.

Penetration rates exceed population, suggesting that ownership of multiple devices is common. Often this has been a result of “locked-down” corporate devices spurring the purchase of advanced personal smartphones to run a variety of mobile applications.

The UK’s traditional strengths in the video, music and games industries are the dominant content on mobile devices. The rise of the mobile application has created an attractive and compelling platform for users, content providers and advertisers to create, access and monetise content. Big brands have been early adopters of mobile applications to engage their customers and create loyalty, with mobile advertising becoming a key part of their traditional digital media strategies.

The UK mobile applications market was worth GBP447m by the end of 2012, according to the App Market Monitor report from Research2Guidance61. It is by far the largest market in Europe, surpassing all of its neighbours by revenue generated from application downloads and in-application advertising, as well as volume of downloads and number of users. It is the only country where BlackBerry applications have a significant market share. There is also huge competition, which means applications must get significantly more download numbers to reach the top ranks.

In the UK, out of a huge 532,798 iPhone and iPad applications in total, 281,223 are free and 251,575 are paid according to Madvertise’s Madreport62 in November 2012. According to The Guardian63 in April 2013, the growing popularity of smartphones and tablets and a huge rise in the use of applications caused mobile advertising in 2012 to almost triple to over GBP500m, as total UK digital advertising spend hit GBP5bn for the first time. UK mobile advertising grew a staggering 148% year-on-year in 2012 to GBP526m, up from GBP203m in 2011, with growth continuing to accelerate in the second half of last year. The revolution in handheld devices 61 62 63

http://www.research2guidance.com/shop/index.php/smartphone-app-market-monitor-united-kingdom http://madvertise.com http://www.guardian.co.uk/media/2013/apr/10/mobile-advertising-triples-record-levels

UK ICT REPORT 22

– almost two-thirds of the UK population owns a smartphone – has had a massive effect on the advertising market.

Given that the UK has a strong mobile applications market, developer skills are difficult to find and highly competitive. One US company has reported that they have not attempted to aggressively recruit mobile developers in the UK, because the market for contract Apple iOS and Android developers is so competitive.

These contractors can charge such hefty contracting fees that the company could not offer a competitive annual salary. They also spoke of the difficulties in finding the right technical skills in the UK market. This problem has been recognized by the current government, which is overhauling the computing curriculum in schools to equip more students with competitive computer science skills.

4.2.8.1. Major UK and overseas players The mobile applications market is extremely diverse and fragmented, with no real dominant players. However, one of the most successful UK mobile application companies is Shazam (www.shazam.com), which uses audio “fingerprinting” to recognize music and allow users to buy downloads and other services. In July 2013, América Móvil invested GBP27m in Shazam and will install the application on all Smartphones it sells across Latin America. Shazam has grown rapidly, claims 350m users and plans a stock market flotation in 2014.

The UK has spawned a number of mobile payments companies which are attracting serious attention, in part perhaps because the UK has proven such a strong market for online services and e-commerce. Amongst the first was Monitise (www.monitise.com), the largest Mobile Money specialist in the world, which announced in 2013 that it had become the preferred Mobile Money technology partner for Telefónica Digital to develop and manage new and existing mobile payment and commerce services for its customers.

Newer entrants include Paddle (www.usepaddle.com), which impressed leading UK retailer Marks & Spencer sufficiently to partner with them to allow their customers to use their mobile phones and Paddle to buy products from one of its websites. Another UK start-up, Ensygnia (www.ensygnia.com), based in London, is working in a similar area to Paddle, enabling users to scan a QR code on a website to make a quicker transaction, but the firm is more interested in authenticating a user’s identity than processing their payments.

Ensygnia’s backers include Wayra, the accelerator fund run by Spanish mobile operator Telefonica, as well as Jesus College, Cambridge. Birmingham-based Droplet (https://dropletpay.com/) is going another route. It is more focused on using smartphones for making payments at a retailer’s point-of-sale or sending money to friends and family. Early clients include Chiltern Railways and Airparks and in mid-2013 it was in the process of negotiating GBP3m in financing from undisclosed backers.

In contrast, Weve (www.weve.com) is a somewhat unconventional UK mobile start-up as it is owned by the three largest mobile operators in the UK. It launched a service in the UK in 2013 offering a common platform for advertisers to reach all the operators’ subscribers - operators normally act on their own, which makes it harder for brands. Weve says it will launch mobile wallet and payments in early-2014.

UK firm GoCardless (https://gocardless.com), which launched in 2012, offers a service aimed at businesses which want to arrange regular payments, such as direct debits, from their customers, but do not accept card payments. The service is not primarily mobile, although some developers have come up with mobile apps for GoCardless that enable merchants to accept payments on the go.

The UK has a number of services that enable small merchants to process payments on their smartphones using a card reader. One such example is German firm SumUp (https://sumup.co.uk/), which launched in 2012 in the UK and other markets and is backed by American Express and Groupon.

UK ICT REPORT 23

4.2.9. Software and services market Top Software & Services Vendors In Europe 2012 - By Country of Origin (Source: Truffle Report64) Country Germany UK France Netherlands Sweden Norway Finland Italy Switzerland Belgium

Software Revenues 2011 €m 18,146 5,497 4,041 2,188 2163 1,111 1,005 618 530 516

% of total 48.8 14.8 10.9 5.9 5.8 3.0 2.7 1.7 1.4 1.4

Companies 15 22 17 8 9 4 6 3 5 1

It is worth noting that the figures for Germany in the Truffle Report are distorted by the presence of SAP, which accounts for around 77% of the German software industry’s revenues. In contrast, the UK’s top company, Sage, accounts for about 26% of the UK’s software industry revenues. The UK had the largest number of companies in the 2012 edition of Truffle’s top 100 European software vendors.

The €80bn UK IT market is expected to grow 4.6% in 2014, according to a July 2013 forecast65 by analyst firm Forrester Research. In its latest IT spending predictions, Forrester claimed the UK market would edge up by 0.5% to hit €80bn sales in 2013, before rising by 4.6% in 2014. The report found the areas of IT spending most likely to grow were mobile applications and middleware, analytics, security and collaboration software.

4.2.9.1. Major UK and overseas players According to UKTI66 there are over 100,000 specialist software companies in the UK, a figure consistent with data from a July 2013 report67 for the National Institute for Economic and Social Research, undertaken by Growth Intelligence and Google, “Measuring the UK’s Digital Economy With Big Data”. All the major global software companies such as Google, Microsoft, IBM, Oracle and Hewlett Packard (HP) have sizeable operations in the UK. Many of the major UK software and services companies have been acquired by overseas companies in the past few years. Cambridge-based Autonomy was controversially acquired by HP in 2011 for about GBP7bn and at the time of writing is embroiled in legal action by HP shareholders over the valuation of the acquisition. Logica, whose major business was in the UK, was acquired by Canadian IT and business process outsourcing company CGI for GBP1.7bn in 2012 and the Logica name has disappeared.

The Sage Group plc (www.sage.co.uk), a leader in accounting software, is currently the UK’s largest software company and ranked number 3 in Europe according to the annual Truffle Report. The second largest UK software company is Acision (www.acision.com), which was originally part of Logica, providing software for the mobile carrier industry and the third largest is Misys (www.misys.com), a major provider to the financial services sector. On the Truffle list, Acision and Misys are ranked respectively 11th and 13th largest in Europe. In contrast the largest Swiss company in the Truffle Report is Temenos, ranked 15th in Europe, closely followed by Swisslog at 16th. Another overseas company which is a major player in the UK small business accounting software market is Intuit (www.intuit.co.uk).

64

http://www.truffle100.com/2012/ranking.php http://www.forrester.com/search?tmtxt=European+software#/Continued+Gloom+For+European+ICT+Markets/quickscan/-/E-RES98001 http://www.ukti.gov.uk/investintheuk/sectoropportunities/ict.html 67 http://niesr.ac.uk/publications/measuring-uk%E2%80%99s-digital-economy-big-data 65 66

UK ICT REPORT 24

Top five UK Software & Services Companies (Source Truffle Report 2012) Rank

Company

1 2 3 4 5

Sage Group Acision Misys Fidessa Northgate Information Systems

Software & Services Revenue m€ 1461 511 414 321 311

Total Revenue m€ 1538 511 414 321 804

R&D Employees (estimated) 1740 486 900 424 760

4.2.10. Telehealth/e-health The UK’s National Health Service (NHS) is the world’s largest publicly funded health system and is the fourth largest employer in the world. Over the four years 2010-2014 it has been asked to make efficiency savings of GBP20bn from an annual budget of over GBP100bn. The NHS is simultaneously data-rich and informationpoor, with thousands of incompatible IT systems and inconsistent reporting formats. In January 2013, the Health Secretary Jeremy Hunt, said68 that the NHS should go paperless by 2018 to save billions, improve services and help meet the challenges of an ageing population.

The UK is the leading centre for Telehealth outside the USA. The UK Government is placing a strong emphasis on telehealth and e-health to help mitigate the twin effects of an aging population and reducing Government budgets for healthcare services.

In November 2012, the Minister of Health announced69 three million people would benefit from Telehealth by 2017, with seven “pathfinder” organisations to agree contracts with suppliers for 100,000 people in 2013-14. A Department of Health “Whole System Demonstrator ” programme70 is the largest randomised control trial of telehealth and telecare in the world. The programme has demonstrated that Telehealth could result in a 20% reduction in emergency admissions, 15% reduction in Accident & Emergency (A&E) visits and 45% reduction in mortality.

However, in a setback to the industry, it was announced71 in September 2013, that NHS England had axed the 3millionlives industry group as it “redefines” its vision for the campaign to have 3m patients using telehealth and telecare by 2017. The industry group was set up to promote the government’s effort to recruit patients. It has 19 contributors, as well as four trade associations, including Intellect and the Telecare Services Association.

Apparently the industry group will be replaced by a new group, called the Integrated Care for 3millionlives Stakeholder Forum, which will focus less on the technology industry.

One of the most significant re-organisations of the NHS in recent years occurred in April 2013 with the creation of 211 Clinical Commissioning Groups (CCGs) across England. These CCGs are run by General Practioners or family doctors within the areas they cover and commission all services within their region. There is a huge variation of population within CCGs, the largest CCG, in Devon, has a population around 900,000 and the smallest, Corby, a population of about 70,000. There are about 20 Clinical Support Units (CSU) in England which provide administrative support to these CCGs, including technology. Under the previous NHS England structure, there was much more centralisation of purchasing and it is expected that the new CCG/CSU structure will result in more local decision-making of procurement.

NHS Hospitals in England are usually run by either Acute or Foundation Trusts, the latter have more independence from government and are the government’s preferred future operating model. There are around 170 Acute Trusts, a declining number as they convert to Foundation status. There are about 150 Foundation Trusts and both Foundation and Acute Trusts often manage hospitals on multiple sites. Groups of hospitals 68

http://mediacentre.dh.gov.uk/2013/01/16/jeremy-hunt-challenges-nhs-to-go-paperless-by-2018/ http://3millionlives.co.uk/wp-content/uploads/2012/11/14-November-2012-press-release.pdf https://www.gov.uk/government/news/whole-system-demonstrator-programme-headline-findings-december-2011 71 http://www.ehi.co.uk/news/EHI/8866/3millionlives-indu 69 70

UK ICT REPORT 25

have partnered to procure major systems such as PACS (Picture Archiving and Communications System) and RIS (Radiology Information Systems).A major procurement of updated PACS/RIS systems is underway following the launch in 2012 of an NHS procurement to create a single national framework for PACS and RIS. This extends over four years and allows individual user hospitals to choose systems from a limited set of prequalified suppliers.

4.2.10.1. Major UK and overseas players Telehealth has been controlled by some of the major monitoring service providers, such as Tunstall www.tunstall.co.uk , which claims to be the world’s leading provider of telehealthcare solutions. Tunstall has become a gatekeeper in the telehealth sector, as it has contracts with many regional NHS and similar organisations to provide monitoring services and can decide what equipment is attached to its monitoring network. Other UK major players include BT (www.globalservices.bt.com/uk/en/industries/Health), which provided the backbone network for the NHS’s electronic patient record and is trying to establish itself as a major integrator of digital health applications and devices to the NHS and overseas health organisations.

Appello (www.appello.co.uk) is a unique nurse-led telehealth monitoring service that integrates telecare and telehealth to provide high volume tracking and monitoring. Apello is an alliance of four of the UK’s largest telecare and telehealth monitoring providers, CarelineUK, CentriHealth, Volt Delta and Numera. Appello cofounded the Telehealth Forum.(www.telehealthforum.org) in 2012. Cogent Healthcare Solutions (www.cogenthcs.com) claims to be the UK's fastest growing telehealth company. It designs and delivers end-toend solutions for the remote management and self-management of chronic health conditions. Docobo (www.docobo.co.uk) is a UK healthcare solutions provider and has been in the forefront of the development of systems for the management of patients with long term conditions in their own homes. Products and services provided include the doc@HOME® service for the management of chronic disease and the HealthHUB™ for collecting physiological, quality of life and life style data.

Philips is a major overseas player. Philips has a substantial research facility in Cambridge and the NHS is Philips Healthcare’s largest customer. The company provides a wide range of healthcare solutions including patient monitoring and self-management.

Spanish owned Telefonica-O2 is one of the UK’s wireless networks which had identified mobile health applications as an important growth area. However, in 2013, Telefonica-O2 announced72 it would be withdrawing from the telecare and telehealth markets in the UK. The company offered telecare (“Help at Hand”) and telehealth (“Health at Home”) in the UK and stated that they believed e-health was a sector with significant potential and remained an important priority for Telefonica -O2. However, the uptake of mobile telecare and telehealth in the UK marketplace has been slower than the company anticipated and a decision was made to withdraw these two products from the UK marketplace by December 2013. In the UK the company said it would continue to serve the health sector via the Public sector team which provides core mobile and ICT solutions.

The Telecare Services Association (see Section 8.2 Trade, membership and professional organisations) is the industry body for telecare and telehealth, and the largest industry specific network in Europe with over 340 members, mainly from the UK. The e-health market is dominated by overseas multi-nationals for major systems, such as PACS and RIS including GE, Agfa, Fuji and Carestream. Philips is also a major player as noted earlier. Outside of major hospital systems there are more diverse suppliers. A UK company, EMIS (www.emis-online.com) is the leading primary care software provider with more than 39 million patient records running on it systems. Silicon Practice (www.siliconpractice.co.uk) specialises in providing web sites for General Practioners, allowing patients to order repeat prescriptions online. In Practice Systems (INPS - www.inps4.co.uk) supplies the Vision clinical system, which is used extensively within primary care and the wider healthcare sector throughout the UK. INPS is owned by the French Cegedim multinational group.

72

http://www.o2.co.uk/health/healthcareorg

UK ICT REPORT 26

4.3. KEY UK MARKET ENTRY POINTS Entering the UK market requires careful thought and preparation to ensure a sustainable entry. Once a company has gained an initial understanding of the market and their likely position within it, chosen their method of entry, direct or indirect, we recommend working alongside some of the key trade, membership and professional organisations (section 8.2) and the trade events we have listed (Section 6.1) to build up the local contacts you will need to build your business in the UK.

4.4. STATISTICAL DATA 4.4.1. UK population In the annual mid-year population estimates for the UK published73 in August 2013, it was reported that there were 813,200 births and 558,800 deaths occurring in the year to 30 June 2012. This is the largest number of births seen since 1972. The mid-2012 population of the UK ranks third, behind Germany and France when compared to other member states of the European Union. The absolute increase in population of the UK was greater than that of any other European Union member state during the 12 months to 30 June 2012. The population of the UK aged 65 and over was 10.8 million (17% of the UK population) in mid-2012.

The following charts illustrate the population distribution within the constituent countries of the UK and the population distribution by age in 2002 and 2012, showing a spike in the over sixties age group which has had a wide-ranging impact on the economy.

Mid-year population estimates for the United Kingdom by country, mid-2011 and mid-2012

Source: Office for National Statistics, National Records of Scotland, Northern Ireland Statistics and Research Agency – www.ons.gov.uk

73

http://www.ons.gov.uk/ons/dcp171778_320900.pdf

UK ICT REPORT 27

Population distribution by age in England & Wales in 2002 and 2012

900,000 800,000 700,000 600,000 500,000 2012 Total

400,000

2002 Total 300,000 200,000 100,000 ,0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Age Source: Census data, Office for National Statistics – www.ons.gov.uk 4.4.2. IT services trade UK Trade: Computer and information services 2002-2012

10000 9000 8000 7000 6000 GBP million

5000

Exports

4000

Imports

3000 2000 1000 0 20022003200420052006200720082009201020112012 Year Source: Office of National Statistics, The Pink Book 2013 Table 3.7– www.ons.gov.uk

UK ICT REPORT 28

4.4.3. Communications services trade UK Trade in Communications Services 2002-2012

6000 5000 4000 GBP 3000 Millions

Exports Imports

2000 1000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year

Source: Office of National Statistics, The Pink Book 2013 Table 3.4– www.ons.gov.uk 4.4.4. Office of Communications (Ofcom) Ofcom publishes an annual UK Communications Market Report74 each August which provides detailed statistics of the UK communications sector. Key market trends from the 2013 report included the fact that total UK revenues from telecoms, TV, radio and post fell for the fourth successive year in 2012 and in particular telecoms revenues fell GBP0.7bn (0.2%) compared to 2011. In addition, average monthly household expenditure on communications services fell in real terms to GBP113.51 in 2012, with the largest decrease being spending on fixed-line services, reflecting a move to mobile only households. The take-up of smartphones has continued to increase rapidly, with over half of all adults claiming to own one (51%) or 56% of mobile owners.

Household take-up of tablet devices has undergone an even sharper rise, more than doubling over the year from 11% in quarter 1 (Q1) of 2012 to 24% in Q1 2013. Whilst the proportion of households with Internet access has peaked at 80%, the ways people access it has continued to change from fixed-lines to mobile. Almost half of respondents to an Ofcom survey said that they used their personal mobile phone to access the Internet, up from 36% in 2012, with 5% of households having access to broadband via a mobile dongle, down from 13% the previous year. Nearly all tablet owners (98%) say they use it to access the Internet. A fifth of UK adults state that they would miss their mobile more than anything else, double the proportion giving that answer in 2005.

These statistics from Ofcom confirm the importance of mobile devices amongst UK adults and the fact that there is increasing demand for access any time, anywhere to the Internet. The statistics also suggest the competitive nature of the UK communications market, which has allowed spending to fall at a time of increasing use of mobile services by greater numbers of the population.

74

http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr13/

UK ICT REPORT 29

Volume of SMS messages sent, by pre-pay and post-pay, 2007 to 2012 (billions)

160 140 120 100 Pre-pay 80

Post-pay

60

Total

40 20 0 2007

2008

2009

2010

2011

2012

Source: Ofcom UK Digital communications services availability (Sources: Ofcom and operators) Platform Fixed line

UK UK 2012 2011 100% 100%

2G mobile

99.60%

3G mobile

100%

100%

100%

N Ireland 100%

99.70%

99.80%

99.30%

98.80%

98.50%

99.10%

99.10%

99.50%

96.60%

97.70%

97.40%

Virgin Media cable broadband LLU ADSL broadband

48%

-

51%

38%

22%

28%

94%

92%

95%

87%

92%

85%

BT Openreach / Kcom fibre NGA broadband

56%

n/a

59%

25%

41%

93%

73%

65%

76%

52%

48%

95%

Digital satellite TV

98%

98%

-

-

-

-

Digital terrestrial TV

99%

-

99%

99%

98%

97%

94.30%

92%

95.50%

90.90%

85.90%

85.40%

85%

85%

90%

75%

60%

-

DAB BBC Network DAB commercial network (Digital One)

England

Scotland

Wales

LLU ADSL – Local Loop Unbundled Asynchronous Digital Subscriber Line Kcom – http://www.kcom.com NGA – Next Generation Access (Broadband with a download speed in excess of 25Mb/s) DAB – Digital Audio Broadcasting

UK ICT REPORT 30

4.4.5. Market Shares of Mobile Platforms by Country 2013

Blackberry

Windows Phone

China US UK

iOS

Android 0.00% 20.00% 40.00% 60.00% 80.00%100.00% Based on smartphone shipments over first half of 2013 Source: IDC – www.idc.com quoted by the BBC September 2013 4.4.6. UK videogames charts Source: www.chart-track.co.uk TOP 10 ENTERTAINMENT SOFTWARE (ALL PRICES), WEEK ENDING 10 August 2013 Rank Title Developer Publisher 1

MINECRAFT: XBOX 360 EDITION

4J STUDIOS

MICROSOFT

2

FIFA 13

EA CANADA

ELECTRONIC ARTS

3

THE SMURFS 2

UBISOFT (OSAKA)

UBISOFT

4

TALES OF XILLIA

NAMCO TALES STUDIO

NAMCO BANDAI GAMES

5

ANIMAL CROSSING: NEW LEAF

NINTENDO

NINTENDO

6

THE LAST OF US

NAUGHTY DOG

SONY COMPUTER ENT.

7

CALL OF DUTY: BLACK OPS II

TREYARCH

ACTIVISION BLIZZARD

8

LEGO BATMAN 2: DC SUPER HEROES

TRAVELLER'S TALES

WARNER BROS. INTERACTIVE

9

TOMB RAIDER

CRYSTAL DYNAMICS

SQUARE ENIX EUROPE

ASSASSIN'S CREED III

UBISOFT (MONTREAL)

UBISOFT

10

UK ICT REPORT 31

5. Accessing the UK ICT Market 5.1. TRADE EVENTS In calendar order January British Education & Training Technology – BETT (annual) London ExCel. An international exhibition and conference aimed at technology in education, primarily for ages 5-18. www.bettshow.com Learning Technologies Europe (annual) London Olympia. Europe's leading showcase of technology supported workplace learning. www.learningtechnologies.co.uk/ February Publishing & Media Expo (annual) London Earls Court 2 - an array of expertise from the leading voices in publishing and media - http://publishing-expo.co.uk/ Mobile World Congress (annual) Barcelona. Although this is not a UK-based show it is where all the key UK mobile industry players meet. The UK is consistently one of the largest country groups with several hundred exhibiting companies. www.mobileworldcongress.com Cloud Expo Europe (annual) London ExCel. The largest dedicated Cloud Computing event in Europe. www.cloudexpoeurope.com/ March TV Connect (annual) London Olympia. This event provides an opportunity to meet a diverse range of service providers, including broadcasters, telcos, content providers and Over The Top (OTT) players. www.tvconnectevent.com/ Retail Business Technology Expo (RBTE) 2014 (annual) London Earls Court, Europe’s biggest and fastest growing retail technology show. www.retailbusinesstechnologyexpo.com April Health Computing (annual) Manchester Central.The leading health informatics event of its kind in the UK. http://hc2014.bcs.org/ Infosecurity Europe (annual) London Earl’s Court. Infosec is Europe’s number one Information Security event. www.infosec.co.uk Internet World (annual) London Earl’s Court. Europe's longest running, best attended and biggest annual event for digital marketing and online business. www.internetworld.co.uk The Big Data Show (annual) London Earl’s Court (co-located with Internet World). The Big Data Show is a live exhibition for professionals responsible for Big Data strategy, analytics and technology. www.internetworld.co.uk/page.cfm/Link=321 Counter Terror Expo (annual) London Olympia. The largest international event to mitigate threats, protect against terrorist attacks and understand current modern day risks in a secure environment. www.counterterrorexpo.com June Cloud World Forum (annual) London Olympia. The Cloud World Forum is the platform for global authorities to present their “how-to” strategy and vision for how cloud can enhance the organisation. www.cloudwf.com/ July The Future of Wireless International Conference (annual) Cambridge. Cambridge Wireless annual conference which draws an impressive line-up of speakers and delegates from across the wireless sector. www.cambridgewireless.co.uk Annual International Congress on Telehealth and Telecare (annual), London - www.kingsfund.org.uk

UK ICT REPORT 32

Farnborough International Air Show (biennial, next event 2014), Farnborough – is one of the two global international events for the aerospace and defence industry and alternates with the other, the Paris Air Show. www.farnborough.com September DSEI (biennial, next event 2015) is the world’s largest fully integrated defence and security exhibition that brings together the entire industry to source the latest equipment and systems, develop international relationships, and generate new business opportunities. www.dsei.co.uk The Emergency Services Show (annual) Birmingham National Exhibition Centre (NEC) is aimed at anybody involved in emergency response and recovery, including all blue light services, voluntary workers and service providers. Now in its eighth year, this annual event attracts buyers and specifiers of relevant emergency kit and solutions. www.emergencyuk.com October eCommerce Expo (annual) London Olympia - the UK's number one event dedicated to all aspects of selling online www.ecommerceexpo.co.uk World of Learning (annual) Birmingham National Exhibition Centre (NEC). The most comprehensive event for all aspects of Learning and Development (L&D). https://www.learnevents.com/ Apps World (annual) London Earls Court 2 - Now in its 4th year, Apps World has grown to be the leading global multi-platform event in the app industry. www.apps-world.net/europe/ November Online Information Conference (annual) London Victoria Park Plaza – a conference designed to deliver an informative and cutting edge programme for information professionals. www.online-information.co.uk OTTtv World Summit (annual) London Millennium Gloucester Hotel - is the major OTT (“Over The Top”) focused event in the calendar. It is now in its seventh year and the venue where discussions shaping the future of the multiplatform entertainment industry take place. It incorporates IP Cable World Summit and a Social TV focus day. http://ottworldsummit.com/ EHI Live (annual) Birmingham National Exhibition Centre (NEC) - a two day conference and exhibition where the e-health community meets. www.ehilive.co.uk London Games Conference (annual) London One Wimpole St - now in its fifth year, the London Games Conference is an afternoon/evening event that combines discussion with networking. www.londongamesconference.com Mobile Gaming Europe (annual) London Grange Tower Bridge Hotel - Mobile Gaming returned to Europe for a second year in 2013 to provide knowledge, understanding and networking in the mobile games sector. www.videogamesintelligence.com/mobile/

5.2. REGULATORY ISSUES Fortunately the ICT sector in the UK is, broadly speaking, free from heavy regulatory oversight and those regulations which are applicable are usually of EU rather than UK origin.

5.2.1. EU, WTO, UK specific, including taxation The major regulatory issues which face potential exporters to the UK are those involving any equipment which connects to domestic or industrial electricity supplies. If the equipment is of a medical nature there will be additional regulatory oversight, depending on its nature. Any equipment which connects to the UK telecommunications networks, wired or wireless, will also face additional regulatory oversight.

One area which affects all UK registered businesses is the Companies Act 75, which since October 2008 requires that a company’s letters, emails and orders must show the following information:  The full registered name of the company (and not just a trading name)  The place of registration in the UK –either England and Wales, Scotland or Northern Ireland  The address of the registered office  The company number 75

http://www.legislation.gov.uk/ukpga/2006/46/contents

UK ICT REPORT 33

5.2.1.1. EU Directives & CE marking CE marking76 indicates that the manufacturer has met the minimum legal requirements for their products in regard to health and safety under European Directives. CE marking is not intended to be a quality mark. If a company manufactures products which fall into the scope of one or more of the “New Approach Directives” (NADs) they will need professional guidance on how to meet all the essential requirements of these directives and, if compliant, the product must carry a CE mark. There are a number of NADs across different industry sectors, but the ones most likely to be of consideration for Swiss ICT companies are those relating to Low Voltage, Medical Devices and Radio Equipment outlined below.

The document for electrical equipment regulation is the EU’s Low Voltage Directive77. The Directive covers electrical equipment with a voltage between 50 and 1000 volts for alternating current and between 75 and 1500 volts for direct current.

The key regulatory agency for companies offering e-Health products and services is the Medicines & Healthcare products Regulatory Agency (MHRA) - www.mhra.gov.uk - which oversees the EU’s Medical Devices Directive78 . In addition, the AALIANCE2 Project is an EU funded 7th Framework Programme, focussing on Ambient Assisted Living (AAL) solutions based on advanced ICT technologies for ageing and wellbeing of elderly people in Europe. One of the project’s main objectives is to build consensus on forthcoming research priorities, standardization and certification needs in the AAL sector, to be published in the AALIANCE2 AAL Roadmap and Strategic Research Agenda. As a first step AALIANCE2 has collected relevant European and international standards and regulations in the field of AAL and published them in a Summary of Standards79.

In the broad area of telecommunications, the UK’s agency with regulatory oversight is Ofcom – www.ofcom.org.uk . Ofcom’s primary roles are ensuring a competitive telecoms market and managing the UK radio spectrum. However, for those wishing to connect equipment to the UK’s fixed or mobile networks, such as British Telecom (BT) or Vodafone, the requirements of the EU’s Radio and Telecommunications Equipment (R&TTE) Directive80 (99/5/EC) must be met as a first step. This Directive states that manufacturers and suppliers of radio and telecommunications equipment must demonstrate compliance with the EU R&TTE Directive in order to apply CE marking to their products and gain access to the UK (and EU) market. Over and above EU approval and CE marking, individual companies may have additional technical requirements a supplier must meet, but it is beyond the scope of this document to explore those.

5.2.1.2. TickIT TickIT81 is the UK and Swedish accreditation scheme, supported by the UK and Swedish software industries, for approving Certification bodies that operated ISO 9001 registration schemes in the domain of IT. According to TickIT, over 800 UK companies are registered and 131 companies from 22 countries, but no Swiss companies are listed as registered. TickITplus82 was launched in 2011 by British Standard Institute's83 Joint TickIT Industry Steering Committee (JTISC) to replace TickIT. It is more than just a certification scheme and also covers more than software development. It is intended to offer a flexible, multi-level approach to IT quality and certification assessment and can be applied at whatever level is deemed appropriate to the quality and process maturity of the organization and the needs of its customers. If multiple IT standards need to be addressed, these can be covered under one certification arrangement. Some of the key goals are to:  

adopt a full process-driven approach to business systems management introduce capability assessment concepts

76

http://ec.europa.eu/enterprise/policies/single-market-goods/cemarking/ http://ec.europa.eu/enterprise/sectors/electrical/lvd/ http://ec.europa.eu/health/medical-devices/documents/revision/ 79 http://nero.offis.de/projects/aaliance2/start 80 http://ec.europa.eu/enterprise/sectors/rtte/index_en.htm 81 http://www.tickit.org 82 http://www.tickitplus.org/information.aspx 83 http://www.bsigroup.com 77 78

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  

accommodate multiple requirement standards, e.g. ISO 9001, ISO/IEC 20000-1 (IT service management) and ISO/IEC 27001 (information security management) strengthen the commitment to improvements enable collaborative assessments to be undertaken more formally

Whilst TickIT and TickITplus registration is voluntary, some organisations may require their suppliers to register, especially in the government sector.

5.2.1.3. Data protection and privacy The Information Commissioner’s Office (ICO) is responsible for enforcing the Privacy and Electronic Communications Regulations84 (PECR), which were updated in May 2011 to include guidance on the EU Cookie regulations. Other areas covered by this legislation relate to unsolicited marketing services and it is a legal requirement to screen lists of phone numbers to be used for telemarketing against the Telephone Preference Service85 (TPS) register. PECR prohibits organisations from making unsolicited live sales and marketing calls to individuals registered on the TPS. The only exception is where the person has given their consent to a specific named organisation to be called.

Any company which holds personal data and communicates online or by email should be aware of the Data Protection Act 199886 and other legislation which the ICO enforces. In particular for Swiss companies, the rules about transfer of personal data overseas may be important. However, the Swiss Federal Data Protection Act (the “DPA) follows similar concepts as the Data Protection Directive. Accordingly, the European Commission has found Switzerland to provide an adequate level of data protection from an EU perspective (Decision 2000/518/EC87).

5.2.1.4. Pan European Game Information (PEGI) Pan European Game Information88 (PEGI) is a European video game content rating system established to help European consumers make informed decisions on buying computer games with logos on games' boxes. It was developed by the Interactive Software Federation of Europe (ISFE) and came into use in April 2003; it replaced many national age rating systems with a single European system. The PEGI system is now used in more than thirty countries, including the UK, and is based on a code of conduct, a set of rules to which every publisher using the PEGI system is contractually committed.

5.2.1.5. WTO, competition policy and corporate tax In addition to technical regulations, the UK is a member of the World Trade Organisation (WTO) and is a strong supporter of WTO rules on such matters as anti-dumping. It is also a strong supporter of the EU’s single market competition policies. One of the UK’s main levers of industrial policy has been a strong competition policy and in general the UK’s regulatory bodies, such as Ofcom, use competition law as their primary lever. The Competition Appeal Tribunal89 (CAT) is a specialist judicial body with cross-disciplinary expertise in law, economics, business and accountancy whose function is to hear and decide cases involving competition or economic regulatory issues.

The area of corporate taxes is a hot political issue, although the UK’s corporate tax rates are internationally competitive (reducing from 22% to 21% in April 2014, comparable to Ireland and Luxembourg). There has been much public debate about the actual UK taxes paid by major US companies such as Starbucks, Microsoft, Google and Amazon, who have sheltered their UK taxable income by routing sales through places such as the Republic of Ireland, Luxembourg or Switzerland. There is increasing political pressure on major companies to increase their payments of UK tax, although their tax arrangements are perfectly legal within the current tax rules. Similar pressure is building within the EU and was high on the agenda of the G8 meeting held in the UK in June 2013.

84

http://www.ico.org.uk/for_organisations/privacy_and_electronic_communications http://www.tpsonline.org.uk/tps/index.html https://www.gov.uk/data-protection/the-data-protection-act 87 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000D0518:en:NOT 88 http://www.pegi.info/en/index/ 89 http://www.catribunal.org.uk/ 85 86

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The BBC reported in May 2013 that there seems to be a growing culture of “naming and shaming” companies with these complex tax structures. Companies have long had complicated tax structures, but a recent spate of stories has highlighted a number of tax-avoiding firms that are seen to be avoiding contributing their fair share of UK tax revenue, relative to their UK sales. Amazon, which had sales in the UK of GBP3.35bn in 2011, only reported a "tax expense" of GBP1.8m. Google's UK unit paid just GBP6m to the Treasury in 2011 on UK turnover of GBP395m. Everything these companies are doing is legal, however, the tide of public opinion is visibly turning against these types of tax arrangements, in part because of the tough economic climate and cuts in public services.

6. Recommendations 6.1. BACKGROUND AND RECENT DEVELOPMENTS In July 2013, a report by the National Institute of Economic and Social Research (NIESR)90, revealed that the UK‘s traditional sectors, such as manufacturing, architecture and engineering, had embraced digital technology more than had been previously thought. The report showed that there were at least 270,000 companies that formed the UK’s digital economy - far more than any Government estimate. The report also concluded that areas with the highest concentration of digital companies were outside London and spread right across the country, in places like Aberdeen, Middlesbrough and Manchester.

6.2. TARGET SUB-SECTORS AND MARKET OPPORTUNITIES 6.2.1. Creative/video games The creative and video games markets are always challenging; predicting the success of individual products and services is an inexact science and even those companies with an initially successful product are not always able to replicate that success for subsequent launches or across multiple platforms. History shows that a commercially successful creative idea can come from any country or culture and Swiss companies should have all the right ingredients, it is a matter of identifying the most appropriate route to market.

The largest growth area is in casual games for mobile devices, which can be developed by small flexible teams or individuals rather than large studios. According to Video Games Intelligence91, mobile is the fastest growing sector of the gaming industry, with 50% growth year on year and 80% of all mobile downloads are games.

However, exploiting this opportunity is not easy as the market is fragmented and the dominance of free-to-play (F2P) games provides an obstacle. The app stores have thousands of new games launched every month and the biggest challenge is to enable new players to discover your game and persuade them to spend money to download it. In Section 5.4.5 we provide market shares for various mobile operating systems in the UK compared to other countries.

One advantage of the mobile games sector is that an overseas company does not need a UK presence in order to be successful, although it is important to ensure that the game is promoted through UK social media channels and events. The key is discovery.

Another, less competitive market worth considering is serious games. There is a Serious Games Institute based at the University of Coventry (www.seriousgamesinstitute.co.uk), which undertakes research into gaming for education and training. Major brands are looking at the opportunities presented by gaming technology to engage with their consumers and the use of gaming in healthcare education has been largely unexplored.

90 91

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6.2.2. eGovernment The Government made a commitment92 in 2011 to promote small business procurement in particular by introducing an aspiration that 25% of government contracts by value should be awarded to small and medium sized businesses. Large suppliers to Government have been encouraged to refresh their supply chains and make more use of SMEs in delivering their business to Government. For example, HP is the largest supplier of IT products and services to the UK public sector market and a significant force in the UK in its own right. With a third of its public sector business subcontracted, HP already has over 600 SMEs in its GBP560m UK supply chain. The company has said that there are four ways that a large supplier like HP can help SMEs work with government; market access, financial assistance, knowhow and facilities and contractual support.

In 2012 the Government published a document93 outlining its ICT procurement policy and desire to improve the success rate of government ICT projects. It should be noted that all public procurements in the UK have to comply with the relevant principles of the EU Treaty, and contracts with a value above certain thresholds are subject to the procedural rules in the EU Procurement Directives, and the UK Procurement Regulations 94 that implement these directives. This procurement process can be lengthy and complex. Also By 2015, central government departments have a target to achieve 50% of new IT spend on Cloud and 25% of contracts, by value, should be with SME’s.

The Read Report95, “Practical Steps to Improve Management Information in Government� published in June 2013, stated that high quality reporting on key cost and operating parameters of government departments was crucial, but lacking in most cases and discussed practical steps to improve the way government uses management information. Any Swiss company with expertise in this field is recommended to review the Read Report.

The main areas of opportunity for Swiss companies are likely to be cloud-based applications which could be utilised across several disparate departments or used to help departments collaborate more effectively. One other area with potential outlined in section 8.1 Government Organisations, is the use of Open Data to develop new applications using government data.

6.2.3. IT security/Cyber security We have already identified that cyber security is a priority area for Government and the UK and there are opportunities in a vast number of areas under the broad cyber security heading. These include authentication, authorisation, trust, identity management, cryptography, cryptanalysis, computer security (largely defence against malware), human aspects of security, privacy, information hiding, anonymity, digital rights management, watermarking and awareness training.

The UK Government has recognized that time to market in cyber-security is critical and often opportunistic, two areas where Government itself and the conventional larger defence companies are weak. The various Government organisations concerned with national security, such as GCHQ, often have weak interfaces to industry and the cyber-security industry itself is highly fragmented, with some of the best ideas emerging from bedrooms and garden sheds as one industry observer described it. There is recognition that it is often better to take a concept rather than a finished product in order to speed up delivery of some capability and various programmes are in place to encourage SMEs to make their skills available. One of these is the Small Business Research Initiative96 (SBRI) run by the Technology Strategy Board. SBRI competitions will indicate an area of opportunity.

The Deloitte Consumer Review series aims to provide an insightful and impartial view of selected consumer trends believed to have a significant impact on consumer businesses. In their fourth edition97, published June 92

https://www.gov.uk/government/publications/making-government-business-more-accessible-to-smes-2-years-on

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http://procurement.cabinetoffice.gov.uk/sites/default/files/files/GP_content/Public_procurement_policy/ICT%20Contracts%20less%20than%20 %C5%93100m%20-%2002_12.pdf 94 http://procurement.cabinetoffice.gov.uk/policy-capability/latest-policy-and-regulations/public-procurement-policy 95 https://www.gov.uk/government/publications/improving-management-information-the-read-report 96 https://www.innovateuk.org/-/sbri 97 http://www.deloitte.com/view/en_GB/uk/industries/consumer-business/consumer-review/index.htm

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2013, Deloitte looked at how businesses needed to rethink their cyber security strategy from the perspective of the consumer. The report stated that beyond responding to the growing regulatory pressures and the revenue loss risk, businesses can capitalise on cyber security by building a more open dialogue with consumers around cyber security resulting in higher levels of engagement, trust and conversion. Key findings included the fact that 88% of those questioned said it was the responsibility of the companies who collect their data to keep it secure and protect them from fraud. Furthermore, 75% of consumers are prepared to go through more security checks despite the additional burden and 66% said they were more likely to use companies that went out of their way to show customers they kept their information safe.

As consumers migrate from buying online to buying from their mobile devices, cyber-security will become increasingly important for both consumer and vendor and this study illustrates, that despite popular misconceptions, those companies which engage in a positive dialogue with their customers about security are those most likely to succeed. There is also heightened awareness of monitoring by government agencies, especially American, which has made consumers suspicious about access to their personal data.

As previously mentioned, the “PRISM” revelations in 2013 may prove an area of opportunity for Swiss companies, both from the perspective of hosting cloud services in a neutral country and also providing IT security from a source outside US/UK overview.

It has been reported98 that US and British intelligence services have allegedly cracked some of the most widely used encryption methods used to secure the web, according to leaked intelligence revealed by PRISM whistleblower Edward Snowden. Vice-president of the European Commission and EU commissioner for justice, Viviane Reding, has stated99 that Europe needs new cross-national data protection laws to countermand the ongoing backlash against businesses, following the PRISM revelations and she claimed the region's economy will suffer unless new uniform data protection laws are created. The Information Commissioner’s Office (ICO) has been reported100 to be launching an investigation into possible breaches of UK citizens’ privacy.

6.2.4. Mobile applications The completion of the UK’s 4th generation spectrum auctions for LTE (Long Term Evolution), in 2013, should see a further explosion of new mobile data services and applications. The winners of this auction were the existing mobile operators, Telefonica UK (02), Vodafone Ltd, Everything Everywhere Ltd (T-Mobile/Orange joint venture) and Hutchison 3G UK Ltd plus Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc). In addition, Ofcom, the industry regulator, is already planning formal proposals on so-called 5G to be published in Autumn 2013, in order to address the exponential demand for higher speed mobile data services. Part of the increased demand is from Machine-to-Machine (M2M) applications or as it is sometimes called the “Internet of Things”. Ofcom calculates that mobile data consumption more than doubled from 2012-13 (see Section 5.4.4 Statistics section for more details of Ofcom’s Communications Market Report 2013).

Operator Everything Everywhere (EE) was the first to launch 4G services in the UK in 2012 using existing 1800MHz spectrum and the other operators followed ten months later in 2013, using their new 800 and 2600 MHz 4G spectrum, for which initially there were a limited number of devices available (e.g. the iPhone’s 4G radio didn’t cover these frequencies). Vodafone, on launch of its 4G service, offered customers free live sport as an incentive. However, it is believed that some operators have doubts about their customers’ appetite to upgrade to 4G services as few customers have defected from these operators to obtain EE’s 4G offering. The operators have therefore been in no hurry to extend 4G services beyond their licence commitments.

The Deloitte Consumer Review 2013101 found that the number of UK consumers with a smartphone has increased to 72%, compared to 58% just ten months previously. Ian Geddes, the head of retail at accountancy firm Deloitte, said mobile was moving from a "project run by the IT department to a strategic priority in the boardroom". Increasing numbers of British retailers are focused on developing new applications for tablets and smartphones. New mobile payment technology, which allows customers to use their phones to pay for goods online or via contactless technology (NFC) in stores, is also driving change in the retail industry. Retailers such 98

http://www.v3.co.uk/v3-uk/news/2293098/us-and-uk-intelligence-services-cracked-encryption-standards-for-spying-efforts http://europa.eu/rapid/press-release_SPEECH-13-720_en.htm http://www.techweekeurope.co.uk/news/ico-to-investigate-the-impact-of-snowden-revelations-on-privacy-127617 101 http://www.deloitte.com/view/en_GB/uk/industries/consumer-business/consumer-review/index.htm 99

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as Argos are introducing Wi-Fi into their stores, to encourage shoppers to use their mobile devices to compare prices and order products. UK retailers are embracing mobile in order to retain customers and offer a competitive advantage. Some have argued that the rise of mobile technology poses a new threat to the British high street. However, the Deloitte report said that smartphones are emerging as a new "shop assistant", with 57% of shoppers using their devices to check the availability of products, and 50% using the device to buy products. The increased use of mobile devices for shopping is likely to accelerate, with 48% of 16 to 24 year olds choosing to shop via Apps, compared to just 14% between the ages of 45 and 64. Mr Geddes added: "The exponential rise in UK consumers’ reliance on smartphones means mobile must become a priority for retailers.

Customer experience, brand loyalty and ultimately sales will all increasingly stem from the mobile channel.”

There is increasing demand to “mobilise” enterprise applications and provide mobile transactional services to consumers who have enthusiastically embraced smartphone and tablet technology. Retail web searches on tablets in the second quarter of 2013 were up 132% against the same period in 2012 and searches on smartphones were up 66% in the same period, according to the Online Retail Monitor102, which is compiled by the British Retail Consortium (BRC) and Google.

In Section 5.4.5 we provide market shares for various mobile operating systems in the UK compared to other countries.

6.2.5. Software and services market As already noted, the UK is Europe’s largest market for software and services and it is highly competitive.

However, there will always be opportunities in certain niches where major players have failed to develop competitive solutions or have ignored the market completely because of its relatively small size. The mainstream areas of Accounting, Payroll, Human Resources (HR), Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) etc are generally well covered, although not always with industryspecific solutions or solutions aimed at smaller organisations. The most promising areas for Swiss companies are therefore likely to be applications targeting specific industry sectors.

It should be noted that applications aimed at the enterprise will be more likely to require substantial local support than those aimed at consumers, which we discuss in Section 7.3 in more detail.

6.2.6. Telehealth/e-health The UK Government is placing a strong emphasis on telehealth and e-health to help mitigate the twin effects of an aging population and reducing Government budgets for healthcare services. Despite some setbacks, such as the axing of the 3M Lives industry group, referred to in Section 5.2.10, there are opportunities for innovative niche products in a number of application areas. These include mental health, which hasn’t so far received the attention the problem deserves and early dementia diagnosis and treatment, which is becoming another priority area for government. Another major problem area, linked to increased obesity, is rising levels of diabetes, early diagnose and treatment is becoming a priority and e-health tools to encourage better diet and exercise provide opportunities.

A new generation of business intelligence (BI) tools, often called ‘data discovery’ software, to help healthcare professionals make sense of the vast volumes of health data being generated are another area of expanding opportunity. There is potential for a transformative role for health analytics, with the use of citizens’ selfmonitoring with smartphones, tablets and other digital devices. The UK’s enthusiasm for mobile devices provides an excellent platform to develop applications for monitoring and analysing personal health, although allowing the data generated to be entered into personal health records automatically has hit a regulatory road block at the present time.

It is obviously very important to understand the regulatory implications in the health environment, many of which are yet to be fully formulated in areas such as mobile apps (see Section 6.2.1 Regulatory Issues). The UK healthcare market can be very complex with a plethora of different organisations who are potential clients and understanding the landscape is clearly an important element of success.

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http://www.brc.org.uk/brc_online_retail_monitor.asp

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6.3. MARKET ENTRY STRATEGIES Swiss technology enjoys an excellent reputation in the UK and customers are open to purchasing from overseas companies, provided that there is local support, which can either be provided directly by the Swiss company establishing a presence in the UK or through a partnership with a local company. In the following sections we explore these two options for UK market entry.

It should be noted that the requirements across different ICT sub-sectors may vary, for example enterprise software will almost certainly require a local presence in the market, either through a partner or directly by the supplier itself. On the other hand a mobile game developer will usually rely on the operating system’s App Store as the distribution channel and not necessarily need a local presence in the UK. 6.3.1. Direct There are a number of factors to consider when deciding on a UK market entry strategy, many of them applicable across different industry sectors; one of the key issues is the available resources, human and financial, which can be deployed to support the market entry. The direct approach has a number of advantages in that it maintains tighter control of your market entry and you can deploy the full level of resources you have available to ensure its success. It also demonstrates to potential clients that you are serious and planning for a longer term presence in the UK market, which in the case of a complex ICT product or service can be an important factor in the decision-making process.

UK legislation provides that a UK corporate entity will be subject to UK tax. Furthermore, a Swiss entity trading in the UK is likely to be subject to UK tax as well, but principally only on its activities in the UK. The issue to be considered is whether an activity creates a UK tax liability and, if so, what type of entity the Swiss company should establish. Most overseas companies considering a direct approach in the UK incorporate a UK limited company as their chosen vehicle, although it is not the only option and others should be discussed with your professional advisers, especially accountants. The main types of UK business structure likely to be applicable are:  Limited company – either private (Ltd) or public (Plc)  Limited Liability Partnership (LLP)  Partnership or Sole trader There is a very straight-forward, quick and inexpensive process to register a UK company, there is no requirement for an officer to be resident in the UK. However, it is highly recommended that professional advisers familiar with the UK environment guide you through the options. The organisation which maintains the UK Companies’ Register is Companies House, and an online search will quickly reveal any other companies trading with a similar name – www.companies-house.gov.uk .

Other potential implications of incorporating a UK company include liability to corporate taxes and ValueAdded Tax (VAT), National Insurance Contributions (NICs) for any employees and employer legislation. Again professional advice should be sought about the likely impact and costs. See also Regulatory Issues.

One direct entry method is by acquiring a suitable local company, if the resources are available. This has the potential advantage of an existing client base which could be sold your products or services. The disadvantage is the potential risk of the complexities of integrating the two companies and that key staff of the acquired company might leave when faced with the acquisition.

A Joint Venture could be considered a direct or indirect route, depending on what each party contributes. The most common vehicle for joint ventures is to use a limited company set up specifically for that purpose.

However, other vehicles that may be appropriate are a general partnership, a limited partnership, or limited liability partnership. In the absence of a specific business vehicle (i.e. a legal entity), the parties may simply enter into a contractual arrangement governing their respective rights and obligations and the management and conduct of the business between them. Irrespective of the type of Joint Venture being contemplated, it is very important to seek professional advice.

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One final option to consider is really a virtual direct presence. Using this approach an existing UK company provides a virtual company under contract and acts as your UK company, providing a UK address, a telephone answering service, a UK web site perhaps in your name and some staff who operate in your name. The advantage of this approach is it allows you to test the market without committing to incorporating a UK company and particularly hiring your own staff. Once again it is very important to seek legal advice before entering into any agreements, to ensure that if the relationship breaks down, it allows you to regain control of the UK market without any disruption from your previous partner. This is particularly important for local co.uk etc domain names which should always be registered in your name not your partners.

The main challenge for an ICT company taking the direct approach is hiring the initial staff who know the UK market and the particular ICT sub-sector which the company is targeting; the UK market is extremely competitive for skilled ICT staff with good sales and marketing skills. There are a number of executive recruitment agencies specialising in the ICT sector, although of course personal recommendation from a trusted source is always preferable. Expect to pay anything up to 40% of the first year’s salary in commission if using an executive recruiter.

6.3.2. Indirect The indirect approach to the UK market usually offers the potential advantages of reduced resources being required and access to an established channel to the ICT market. However, it is important to carefully consider the actual resources which will be required to ensure your chosen partner remains engaged in supporting your market entry.

Depending on the product/service, various partnership models may be more appropriate than others. However, a typical indirect distribution model might be a master distributor with sub-distributors, Value-Added Resellers (VARs) and System Integrators. It is worth saying that the reputation of UK distributors and VARs amongst their suppliers is not very high and often the supplier finds themselves having to undertake much of the marketing and sales effort themselves and the distributor or VAR simply adopts the role of high margin order taker. Margins of 40% and above are not uncommon and anyone contemplating the indirect route needs to quantify what their partner is prepared to undertake to justify this margin. It is also prudent to have a sales target in mind over a specific period and have it written into the contract with clearly defined roles and responsibilities on each side. The perceived problem from the point of view of the potential partner is that if they aren’t particularly successful their supplier will drop them, but if they are too successful the supplier will operate directly and cut them out of the business. Striking the right balance of risk and reward for each party is a key to a successful relationship. In that regard, it is essential to have a clear understanding of the potential market, the competitive pressures, sales cycles etc. in advance of negotiating your agreement with an indirect channel.

There are prohibitions in EU competition policy affecting distribution arrangements and professional advice needs to be taken about any proposed distribution agreement. The use of a standard agreement may be suitable, but often such agreements will, by default, contain clauses that breach EU regulations, or infringe English law, such as limitations on liability.

Another indirect route which could be considered is a Commission or Commercial Agent, which canvasses for sales on your behalf and receives a specified commission once a sale is agreed. Unlike North America, where the “Manufacturers’ Representative” is a well-established and used route to the ICT market, the UK has never fully embraced the concept. There are EU rules governing the operation of Commercial Agents (The Commercial Agents Directive 1993, amended 1998103 ) and professional advice should be sought before entering into any agreements. There are two main registers promoting the use of Commercial Agents in the UK and providing introduction services for principals, AgentBase – www.agentbase.com - and The Manufacturers’ Agents Association - www.themaa.co.uk . Sales Agents are to be found in all spheres of business and are ideal solutions for companies who want to avoid the high fixed costs of an employed salesman. Using Commercial Agents fixes sales costs as a percentage of the price and a Sales Agent only gets paid when they sell. However, sometimes the

103

http://legislation.data.gov.uk/uksi/1998/2868/made/data.htm?wrap=true

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Principal may agree to provide some assistance in a lengthy start-up phase, for example by providing an advance on commission.

One other indirect channel to consider, which is often overlooked, is the potential for licensing your technology.

In order to do this you should have protected your Intellectual Property (IP) through patents and trademarks to establish a strong negotiating position. This again is an area for professional advisers to guide you, but the advantages can be substantial with upfront licensing fees and a steady flow of licensing revenue without much capital investment or risk. Again prior research is the key to a successful agreement.

If you adopt an indirect approach to the market, do not allow your partner unrestricted use of your name, brands and trademarks without a clear break clause allowing you to regain control of these assets in the event of any breakdown in your relationship. This is especially true of web site domains; any co.uk web domain should be registered directly by you not your UK partner, to ensure that you have full control over it at all times.

6.3.3. Summary In the UK ICT sector, both direct and indirect routes to market are widely used and neither one can be said to be perceived by potential clients as preferable, generally speaking. Usually the choice is decided by the size of the company and the financial resources it has available rather than by any UK market preferences. It is much more important to hire the right person if going direct or choose the right partner if going indirect, than which method is used to enter the market. In both cases, good informal networks for those representing your interests can be as important as the existing formal client relationships they may have in forging new business on your behalf. These networks should include many of the trade & professional associations we have listed in Section 8.2.

6.4. MARKET AND TRADING RISK FACTORS We have highlighted some of these in discussing market entry strategies, but the most important way of mitigating market and trading risk is to undertake thorough market research before making a decision to enter the UK market and the manner in which to enter. Understanding the dynamics of the market, the regulatory environment, competition and potential customers’ propensity to buy, reduces the risk significantly.

One factor to consider is the political climate, especially if major potential clients are government organisations or private sector organisations whose propensity to buy is dependent on regulatory issues. Typically government life cycles in England are five years and the next election is due in 2015. The terms of the Fixedterm Parliaments Act 2011 mandates that the election will be held on 7 May 2015 (except in the event of a collapse of government or a two-thirds majority of Members of Parliament (MPs) voting for an early election).

In Scotland, the Scottish independence referendum will take place on 18 September, 2014, which could have a de-stabilising effect on the UK economy, depending on the result. The next Scottish Parliamentary elections are in May 2015 and are held every four years. The results of Welsh and Northern Ireland elections are unlikely to have a significant economic impact outside their own regions.

One factor we have highlighted already (see Regulatory issues), is a growing public unease about the tax treatment of major overseas companies with significant UK commercial interests such as Amazon and Google.

Whilst we wouldn’t expect any Swiss ICT companies to be directly affected by this, there may be some sideeffects felt by those in the supply chains of these companies.

6.5. SUCCESS FACTORS We cannot over-emphasize the importance of detailed market research before taking any steps in the UK market and we strongly believe that those who adopt such an approach will be much more likely to make a successful and sustainable entry. For those from outside the UK looking in, it can appear that the market is very transparent. It is, generally speaking, but it is all too easy to be lulled into a false sense of security and take short cuts. There are no short cuts to developing a sustainable UK business.

It may sound obvious, but identifying the right partner, if using an indirect channel, is a key to success; it is all too easy to be seduced into trying to partner the largest company in your market sector, whereas it may be

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better to partner a hungrier, growing company. For those planning the direct route to market and hiring UK staff, identifying the right person to lead your market entry will clearly be a key success factor.

Personal relationships are very important in the UK and working with someone who has already developed a broad cross-section of contacts is likely to improve your chances of success. Key executives in organisations tend to be difficult to access unless you already have a relationship with them or can use someone else who is already in their trusted network.

We have listed a number of events which embrace the ICT market across different industries and it is important to review this list and other sources carefully and consider attending the events which your target industry supports. This will assist you to gain deeper insights into your target industries and establish some initial relationships. We particularly recommend considering the many conferences which the trade associations for your target industry organise. In addition, if you enjoy a good relationship with a customer in that industry, perhaps they would be willing to present a case study of how your technology helped their business, either online or even in person. Having a customer outline how a product or service benefitted their organisation is always much more powerful than the manufacturer or developer describing the possible benefits.

The Swiss Business Hub in London has some facilities to enable Swiss companies to present their products and services to potential UK partners and customers and can also recommend suitable other venues for different purposes. Companies are encouraged to discuss their requirements with the Swiss Business Hub directly.

6.6. CONCLUSIONS The UK economy has had some challenges during 2012-13 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 one of the leading global locations for technology-based businesses and compared positively with established clusters like Silicon Valley. It has been said that there is a confluence of a growing economy and confidence, together with a strong technology environment, excellent creative and design sectors, complemented by softer lifestyle aspects including a strong history and culture.

The UK ICT market is the largest in Europe, but fragmented into many different sub-sectors, many parts of which are dominated by overseas companies rather than UK companies. UK companies have strong technical capabilities in many areas, although we have highlighted some weaknesses. There are well established channels to market, in many cases active trade and membership organisations to help signpost opportunities and potential partners.

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 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 Initiatives104 (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.

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.

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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.

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 core enterprise applications, 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. The UK already experiences high levels of online transactions, increasingly these are migrating to mobile devices. 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.

We have discussed the advantages and disadvantages of direct and indirect market entry strategies and provided 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. The “PRISM” revelations about snooping by US and UK government organisations may indeed prove to be an advantage to Swiss companies, to further enhance the already good reputation for quality products and a sound financial base.

Detailed market research, the right market entry partner, trade events and associations are very important to a sustainable UK market entry. A customer who may be willing to present a case study on the benefits of a Swiss product or service, will be a much more effective marketing approach than anything stated by the Swiss company itself. It is important to build up personal relationships with UK partners and potential customers as time invested in doing this is rarely wasted.

A Swiss company with an innovative ICT product or service, especially in the areas we have highlighted, such as IT security, should have every chance of being successful in the UK. However, Swiss companies should thoroughly research the potential opportunities which the UK market presents and seek the appropriate advice at each step of their journey, to ensure that these opportunities are converted into sustainable business.

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7. Directory of useful contacts 7.1. GOVERNMENT ORGANISATIONS The UK Government plays much less of a direct role in UK business than in many other EU states. In most cases the UK has established “arms-length” organisations to regulate various industries such as ICT (see the section on Regulatory Bodies), rather than directly regulate on a political level. In addition there are three “devolved” governments in Scotland, Wales and Northern Ireland with varying powers. The responsibilities of the Scottish Government - http://home.scotland.gov.uk/home - include health, education, justice, rural affairs, housing and transport. It should be noted that the Scottish Government will be holding a referendum on independence in September 2014. The Welsh Government - http://wales.gov.uk - is responsible for: education; health; local government; transport; planning; economic development; social services; culture; Welsh language; environment; agriculture and rural affairs. In Northern Ireland http://www.northernireland.gov.uk/ - the Northern Ireland Executive has some devolved powers and a new Northern Ireland Bill was tabled in the House of Commons on 10th May 2013 making some changes to the Northern Ireland Assembly. Current devolved powers include: Agriculture and Rural Development; Culture, Arts & Leisure; Education; Employment and Learning; Enterprise, Trade and Investment; Environment; Finance & Personnel; Health, Social Services & Public Safety; Justice; Regional Development; Social Development.

The Government is in the process of reducing the large number of separate departmental web sites and is moving to a portal arrangement with all departments underneath – https://www.gov.uk . The following departments’ web presence may be found underneath this portal unless a separate web address is identified.

There are two primary Government departments with an oversight of the ICT industry: the Department of Business, Innovation & Skills (BIS) and the Department of Culture, Media & Sport (DCMS).

The Department of Business, Innovation & Skills is responsible for developing an industrial strategy, setting out a long-term government approach to supporting business. Key elements include: support for emerging technologies; improving access to finance for businesses; working with business to develop skills that businesses will need; and publishing government contracts to provide confidence to business investment.

The Department of Culture, Media & Sport, is the lead department in support of the UK creative industry, including video game developers, film and TV production. Through a political decision early in the current Government’s term, DCMS is also responsible for some areas of ICT previously the responsibility of BIS, including the development of broadband and spectrum matters. However, a number of press reports in the summer of 2013 suggested that the department might be closed down and its remit transferred to BIS in an Autumn 2013 Ministerial reshuffle.

Apart from BIS and DCMS, other Government departments whose work impinges upon the ICT industry include: the Department of Health, the Home Office and the Cabinet Office.

The Department of Health is responsible for managing the Government’s largest budget item, the National Health Service (NHS) and has devolved day-to-day operational management to a number of organisations, including NHS England - www.england.nhs.uk - and Clinical Commissioning Groups (CCGs), the latter created in April 2013.

The Home Office is the department responsible for immigration and passports, drugs policy, crime policy and counter-terrorism. It is a partner with other departments and agencies in the Office of Cyber Security & Information Assurance (OCSIA) which supports the minister for the Cabinet Office and the National Security Council in determining priorities in relation to securing cyberspace. The unit provides strategic

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direction and coordinates the cyber security programme for the government, enhancing cyber security and information assurance in the UK. The OCSIA works with other lead government departments and agencies such as the Ministry of Defence (MOD), Government Communications Headquarters (GCHQ) – www.gchq.gov.uk , the Communications-Electronics Security Department (CESG) - www.cesg.gov.uk , the Centre for the Protection of National Infrastructure (CPNI) - www.cpni.gov.uk , the Foreign & Commonwealth Office (FCO) and the Department for Business, Innovation & Skills (BIS).

The Defence Science & Technology Laboratory (DSTL) - https://www.dstl.gov.uk - purpose is to maximise the impact of science and technology for the defence and security of the UK. Their role includes supplying sensitive and specialist science and technology services for the Ministry of Defence (MOD) and wider government. DSTL works closely with The Centre for Defence Enterprise (CDE) www.science.mod.uk/engagement/enterprise.aspx - which is the first point of contact for anyone with a disruptive technology, new process or innovation that has a potential defence application. CDE funds research into novel high-risk, high-potential-benefit innovations sourced from the broadest possible range of science and technology providers, including academia and small companies, to enable development of cost-effective capability advantage for UK Armed Forces. CDE is aligned with the Government’s Small Business Research Initiative (SBRI – see IT Security/Cyber Security) managed by the Technology Strategy Board and ran an SBRI competition in 2013 to identify methods of securing commercial-off-the-shelf (COTS) equipment.

Ploughshare Innovations Ltd - www.ploughshareinnovations.com - was incorporated in 2005 as a wholly owned subsidiary of DSTL to licence technology originally developed by the Ministry of Defence (MoD). In addition to patents, other IP rights (software, trademarks, design rights and know-how) are all available for commercial licensing by Ploughshare.

The Cabinet Office, aside from its involvement in cyber-security matters, is the corporate headquarters for government and in partnership with HM Treasury, is taking the lead in certain critical policy areas. One of these areas is an oversight of Government IT procurement. The Government has stated that all future ICT projects will be designed from the outset with the presumption that they will have a total lifetime cost of less than GBP100m, unless a strong case can be made that this restriction increases the overall cost to the taxpayer, notably increases the risk of failure or increases the security threat to the public body or Government as a whole.

There is also a push for the use of more Open Source Software. Another initiative involves working with the Open Data Institute - http://www.theodi.org - to help businesses that want to use public sector data to create new products and services. The Cabinet Office is improving access to data by ensuring that data is released in anonymised, open formats to enable people to use the data and encourage the development of a market for services based on public-sector information for entrepreneurs and businesses – see www.data.gov.uk . There are over 9,000 datasets available, from all central government departments and a number of other public sector bodies and local authorities.

The Government Digital Service - http://digital.cabinetoffice.gov.uk - is a team within Cabinet Office tasked with transforming government digital services. It was established with a core purpose to ensure the Government offers world-class digital products that meet people’s needs.

UK Trade & Investment (UKTI) - www.ukti.gov.uk - is funded directly from HM Treasury as well as the Foreign & Commonwealth Office and the Department of Business, Innovation & Skills and is the UK Government organisation most comparable to Switzerland Global Enterprise. UKTI’s mandate is to encourage UK exports and attract inward investment. UKTI also has a co-ordination role across government to establish a more systematic approach to relationships with companies which are the most economically significant investors and exporters.

Technology Strategy Board (TSB) - https://www.innovateuk.org - is the UK's innovation agency and its role is to stimulate innovation, working with business and other partners, in order to accelerate economic growth. In May 2013 the Government increased TSB’s annual budget by GBP50m to GBP440m pa.

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Companies House – www.companies-house.gov.uk - The main functions of Companies House are to incorporate and dissolve limited companies, examine and store company information delivered under the Companies Act and related legislation and make this information available to the public.

The Information Commissioner’s Office (ICO) - www.ico.org.uk - mission is to uphold information rights in the public interest, promoting openness by public bodies and data privacy for individuals. ICO rules on eligible complaints, gives guidance to individuals and organisations, and takes appropriate action when the law is broken. The ICO is an independent authority established by parliament. (see also Data Protection and Privacy)

7.2. TRADE, MEMBERSHIP AND PROFESSIONAL ORGANISATIONS A|D|S - https://www.adsgroup.org.uk – is the trade association representing the interests of the UK Aerospace, Defence, Security & Space Industries. The rapidly growing cyber security and information assurance market accounts for over 14% of security members’ annual turnover.

British APCO (BAPCO) - www.bapco.org.uk - is an independent user-led, professional membership association formed to promote, influence and advance the use and development of communications and information management for public safety professionals.

British Interactive Multimedia Alliance (BIMA) – www.bima.co.uk - With offices in England, Scotland, Wales and with regional representatives spread across the country, BIMA exists to support and promote the British digital industry.

British Computer Society (BCS) – www.bcs.org - The Institute fosters links between experts from industry, academia and business to promote new thinking, education and knowledge sharing. In May 2013, the Institute for the Management of Information Systems (IMIS) ratified its decision to merge with BCS. The move will see the two organisations work jointly to further maintain standards and enhance the reputation of the profession so that it is recognised alongside the more traditional professions of law, engineering etc. The BCS is a registered charity.

Cambridge Network – www.cambridgenetwork.co.uk – is a multi-sector trade association covering the knowledge-based cluster in the Cambridge region.

Cambridge Wireless – www.cambridgewireless.co.uk – is the leading UK association concerned with all aspects of the wireless industry, including hardware, software, applications and operators. It has around 370 members from across the UK and abroad and runs a regular programme of events through its “Special Interest Groups”, including an annual conference in July (see trade events).

CompTia UK Channel Community - www.comptia.org/global/en-GB/channel-community.aspx - CompTia is a global organisation and the UK Channel Community provides a platform for thought leaders from across the UK IT channel (including resellers, solution providers, distributors, vendors and channel associates) to network, share ideas and develop best practices. The Community aims to be a valuable source of business education and resources for companies engaged in the delivery of IT services in the UK. Electronic Systems – Challenges and Opportunities (ESCO) – www.esco.org.uk - is an initiative that arose from a series of meetings between senior industry executives, trade associations, academic institutions, skills bodies and Government against a backdrop of profound economic change. ESCO published a major report on the future for the UK’s electronic systems sector in June 2013 and the Electronic Systems Leadership Forum (ESLF) has been created to take forward the goals set out in this report.

GAMBICA - www.gambica.org.uk - is the national organisation representing the interests of companies in the instrumentation, control, automation and laboratory technology industry in the UK. The diverse nature of the industry is reflected in the five industry sectors represented by the Association: Industrial Automation, Process Control & Instrumentation, Environmental Systems, Test & Measurement and Laboratory Technology.

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GS1 UK - www.gs1uk.org - an independent, not-for-profit organisation working to make UK organisations more efficient by developing and promoting a range of solutions and standards that enable you to identify, capture and share information with your trading partners and customers.

HANDI (The Healthcare App Network for Development and Innovation) - http://handihealth.org is a not-for-profit venture founded by a group of clinicians, developers, health informaticians and others who believe that lightweight healthcare apps for patients, carers and health and care professionals provide the key to enabling IT to transform of health and care.

Interactive Media in Retail Group (IMRG) – www.imrg.org - is the membership community for the online retail industry, whose vision is to maximise the commercial potential of online shopping through the promotion of best practice.

Intellect – www.intellectuk.org is the UK’s national association for the IT industry covering all sectors from defence to software and services. It has around 800 members and organises regular events for its members and others.

Information Systems Security Association (ISSA-UK)- www.issa-uk.org/ is the UK Chapter of the Information Systems Security Association (ISSA), which is the largest international, not-for-profit association specifically for information security professionals. With over 1,800 members since it was formed in 2003, the ISSA-UK Chapter is the world's largest Chapter.

Knowledge Transfer Networks (KTN) - https://connect.innovateuk.org – operate across the whole of the ICT sector and beyond. They are membership organisations which hold events and provide an online collaboration platform supported by the Technology Strategy Board (TSB). The TSB is the UK's innovation agency and its role is to stimulate innovation, working with business and other partners, in order to accelerate economic growth. In May 2013 the Government increased TSB’s annual budget by GBP50m to GBP440m pa.

Malvern Cyber Security Cluster - www.malvern-cybersecurity.com – is a group of more than 40 small cyber security companies centered around Malvern in Worcestershire. They cooperate on a range of initiatives to grow their cyber security businesses, improve the cyber security of local enterprises, and also raise awareness of cyber security amongst young people.

Manchester Digital - www.manchesterdigital.com/ - is the independent trade association for the thriving digital sector in the North West of England.

Momentum - www.momentumni.org - is the trade association for the ICT industry in Northern Ireland and draws its membership from the majority of ICT businesses there.

NMI - www.nmi.org.uk - is the trade association representing the UK Electronic Systems, Microelectronics and Semiconductor Communities.

Rewired State - http://rewiredstate.org - designs and creates hack events that bring creative developers and industry experts together to solve real-world problems. Their clients include government bodies, industry giants, conferences and charities. Their first hack was in March 2009, when more than 100 developers collaborated for the National Hack the Government Day. The event was the catalyst for the landmark site www.data.gov.uk and is widely acknowledged as the inspiration behind the UK government’s open data efforts.

Scottish Centre for Telehealth and Telecare (SCTT) - www.sctt.scot.nhs.uk/ - was established to support and guide the development of telehealth and telecare throughout Scotland.

SOCITM – www.socitm.net - is the membership association for all ICT professionals working in Local Authorities and the Public and Third Sectors and suppliers to those sectors.

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ScotlandIS - www.scotlandis.com – is the trade body for the ICT industry in Scotland and represents around 200 software, telecomms, IT and creative technologies businesses throughout Scotland.

Silicon South West - http://siliconsouthwest.co.uk - is the organisation that provides regular networking events, news and national and international promotion for the south-west of England’s microelectronics cluster.

Software Alliance Wales - www.softwarealliancewales.com - supports innovation and growth amongst the ICT and Software Sector within Wales. It creates a platform for developers across the region to network and share best practice, and to promote Wales as a key driving force in Software Development.

South East Health Technologies Alliance - www.sehta.co.uk - is now one of the biggest health technology networking organisations in the UK with 1300 members from 20 different countries.

Telecare Services Association (TSA) - www.telecare.org.uk - is the industry body for telecare and telehealth, and the largest industry specific network in Europe. It is a not-for-profit membership based organisation, with a current membership of over 340 organisations. The membership is mainly from within the UK, although they do have, and welcome, members from overseas.

Telehealth Forum - www.telehealthforum.org/ -the Forum’s purpose is to develop information and educational materials that are shaped from the bottom up by patients and their carers, in collaboration with the doctors and nurses responsible for their overall care and, in due course, for commissioning services for people living with long term conditions.

The Association for Interactive Entertainment (UKIE) - www.ukie.info - is the only trade body for the UK’s wider interactive entertainment industry. It exists to champion the interests, needs and positive image of the videogames and interactive entertainment industry whose companies make up its membership.

The Big Data Insight Group - www.thebigdatainsightgroup.com/site/ - the aim of the Big Data Insight Group is to provide a forum for their members, from across the business and IT spectrum, to come together and exchange ideas, expertise and best practice on big data.

The British Security Industry Association (BSIA) – www.bsia.co.uk - is the trade association for the private security industry in the UK and whose members provide over 70% of UK security products and services.

The Cloud Circle - www.thecloudcircle.com is the UK’s first independent Business and IT focused Cloud Computing Community which runs regular briefing sessions, the Cloud Circle Forum.

The Cyber Security Skills Alliance - www.theiet.org/policy/media/press-releases/20130607.cfm - is led by the Institution of Engineering and Technology (IET) and includes the BCS - The Chartered Institute for IT, The Institute of Information Security Professionals (IISP), e-skills UK and the Information Assurance Advisory Council (IAAC). The alliance of these IT industry organisations has set up a sponsorship scheme to encourage people to acquire the cyber security skills to protect UK business and infrastructure.

The Digital Policy Alliance (EURIM) - http://dpalliance.org.uk - is the politically neutral, cross-party policy voice of the internet and technology sector.

The Direct Marketing Association (DMA) – www.dma.org.uk - has been leading the way in direct marketing and helping the industry do better business since 1992. There are more than 1,000 DMA members across the UK, including agencies, list brokers and mailing houses, as well as blue-chip corporations such as BT, Sainsbury's and Lloyds TSB. The Electronic and Software Technologies Network for Wales (ESTnet) – www.estnet.uk.net - was created in 2011 and is a network of technology organisations in Wales whose members design, develop,

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manufacture or integrate electronic and software technologies and whose associated members include supply chains and the professional services which support it.

The Independent Games Association (TIGA) - www.tiga.org - is the non-profit trade association representing the UK's games industry. Members include independent games developers, in-house publisherowned developers, outsourcing companies, technology businesses and universities.

The Internet Advertising Bureau (IAB) - www.iabuk.net - is the trade association for online and mobile advertising. It promotes growth and best practice for advertisers, agencies and media owners.

The Institute of Information Security Professionals (IISP) - https://www.iisp.org - the principal objective of the Institute is to advance the professionalism of information security practitioners and thereby the professionalism of the industry as a whole. The Institute aims to provide a universally-accepted focal point for the information security profession.

The Institution of Engineering and Technology (IET) – www.theiet.org – the IET aims to build an open, flexible and global knowledge network supported by individuals, companies and institutions and facilitated by the IET and its members. The IET runs a number of prestigious events across its areas of interest.

The Mobile Data Association (MDA) – www.themda.org - is the not-for-profit industry association dedicated to represent and promote all mobile data centric businesses. Their members include: mobile network operators, mobile content aggregators, mobile phone manufacturers, mobile / mobility application developers, mobile content and information developers, mobile marketing and mobile entertainment providers.

The Open Data Institute - www.theodi.org/ - Founded by Sir Tim Berners-Lee and Professor Nigel Shadbolt, the ODI is an independent, non-profit, non-partisan, limited by guarantee company. The Open Data Institute is catalysing the evolution of open data culture to create economic, environmental, and social value. It helps unlock supply, generates demand, creates and disseminates knowledge to address local and global issues.

The Telecare Learning and Improvement Network - www.telecarelin.org.uk - is the national network supporting local service redesign through the application of telecare and telehealth to aid the delivery of housing, health, social care and support services for older and vulnerable people. This network is supported by the HealthTech and Medicines Knowledge Transfer Network (https://connect.innovateuk.org).

The UK Electronic Alliance (UKEA) - www.ukelectronicsalliance.org.uk - was formed in response to the Electronics Innovation and Growth Team (EIGT) Report, which was published in 2005. The UKEA pulls together the diverse group of trade associations within the electronics sector, providing an opportunity for the UK electronics sector to speak with a co–ordinated voice.

UK Security and Resilience Industry Suppliers' Community (RISC) - www.riscuk.org - is an alliance of companies, trade associations and think tanks to support the Government in creating a more secure and safe environment for UK citizens. Membership of RISC is through the family of trade associations and think tanks that support it: The British Security Industry Association (BSIA), the A|D|S and Intellect.

Vendorcom - www.vendorcom.com - is a membership organisation which represents key stakeholders in the cards and payments industry in Europe. Its primary aims are to promote innovation, create a platform for thought leadership, provide a forum for knowledge sharing and issues resolution for its members and encourage capability development across the cards & payments industry.

Wired Sussex - www.wiredsussex.com - is a Brighton-based membership organisation for companies and freelancers operating in the digital, media and technology sector in Sussex, South-East England.

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7.3. REGULATORY BODIES The UK, as with other European states, operates within the framework of regulations largely determined by the EU and there are a number of UK regulatory bodies which interpret and regulate EU Directives (see also the Regulatory issues section). The principal regulatory body for the ICT sector is Ofcom – www.ofcom.org.uk the Office of Communications, an independent regulator and competition authority for the UK communications industries. Ofcom provides both a technical and competitiveness oversight of the industry. One of its major activities relates to regulating and managing the increasingly crowded spectrum as demands for mobile services grow exponentially.

The Communications-Electronics Security Department (CESG) - http://www.cesg.gov.uk - provides policy and assistance on the security of communications and electronic data, working in partnership with industry and academia and is the UK Government's National Technical Authority for Information Assurance (IA). Any company wishing to sell ICT into Government needs to be aware of any relevant CESG requirements for their product or service.

Other regulatory bodies relevant to the sector include the Information Commissioner’s Office (ICO) – www.ico.org.uk – an independent authority set up to uphold information rights in the public interest, promoting openness by public bodies and data privacy for individuals.

In the health informatics sector, the NHS has various standards depending on the nature of the product - see http://www.isb.nhs.uk/setting/approval. One of the key regulatory agencies for companies offering e-health products and services is the Medicines & Healthcare products Regulatory Agency (MHRA) http://www.mhra.gov.uk/.

8. Abbreviations used in this report ADSL – Asynchronous Digital Subscriber Line, a broadband service over regular telephone lines B2C – Business to Consumer BIS – Department of Business, Innovation & Skills BMI – Business Monitor International - www.businessmonitor.com BPO – Business Process Outsourcing BRIC – Brazil, Russia, India & China B2B – Business to Business CE - Conformité Européenne, a mark confirming compliance with EU legislation CISP - Cyber Security Information Sharing Partnership CPI – Consumer Price Index CRM – Customer Relationship Management DAB – Digital Audio Broadcasting DCPP - Defence Cyber Protection Partnership EMEA – Europe, Middle-East & Africa EITO – European Information Technology Observatory – www.eito.com ERP – Enterprise Resource Planning F2P – Free to play GBP – Great Britain Pounds or Sterling / £ GCHQ – Government Communications Headquarters HR – Human Resources IASME - Information Assurance for Small and Medium Enterprises UK ICT REPORT 51

ICT – Information & Communications Technology IDC – International Data Corporation – www.idc.com LLU – Local Loop Unbundling, a means of allowing competition in the final circuit from a telephone exchange to the subscriber M2M – Machine to Machine (sometimes called the “Internet of Things” or IoT) MoD – Ministry of Defence Nesta – National Endowment for Science, Technology & the Arts – www.nesta.org.uk NGA – Next Generation Access, a symmetrical broadband network offering speeds of at least 24Mb/sec NFC – Near Field Communication OCSIA - Office of Cyber Security and Information Assurance OECD – Organisation for Economic Co-operation and Development Ofcom – Office of Communications – www.ofcom.org.uk ONS – Office of National Statistics OTT – Over The Top (TV) PA – Per annum or annual PACS – Picture Archiving and Communications System PECR - Privacy and Electronic Communications Regulations PEGI – Pan European Game Information www.pegi.info RIS – Radiology Information System RRR - Risk/Reward Rating SBRI – Small Business Research Initiative SME – Small Medium Enterprise, defined105 by the EU as a company with less than 50 (Small) or 250 employees (Medium) SWOT – Strengths, Weaknesses, Opportunities & Threats TIGA – The Independent Games Association – www.tiga.org TSB – Technology Strategy Board UKTI – UK Trade & Investment, the UK government organisation closest to Switzerland Global Enterprise www.ukti.gov.uk UNCTAD – United Nations Conference on Trade & Development - http://unctad.org

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9. Profile of report author George Edwards established CanadaUK Partners Limited in February 2012 following over thirty-three years as a Trade Commissioner at the Canadian High Commission in London. The company provides accelerated market entry services to overseas companies coming to the UK. This involves working with companies from many different industries and government departments involved in trade from all over the world.

We are recognised as consultants by the Canadian High Commission (List of additional Service Providers), Queensland Government Office in London as well as Switzerland Global Enterprise. We also have strong contacts with Enterprise Europe for pan European enquiries.

For these organisations we work with individual companies, trade missions, and prepare webinars and seminars on the UK market and specific industry sectors which are delivered in person or via the internet.

Companies also contract with us directly to assist them in planning and executing their market entry.

During his time at the Canadian High Commission, George had responsibility for assisting Canadian companies to develop their business in the UK. He also worked with many UK companies looking to expand to North America via Canada. He has developed an extensive knowledge of both the Canadian and UK ICT industries.

He was regularly consulted by colleagues responsible for the development of new IT systems to support the Trade Commissioner Service. He was one of the first Trade Commissioners in Europe to trial the BlackBerry™.

During his last four years at the Canadian High Commission, George managed a Canadian Government European ICT Multi-Country Sector Team, developing strategy for trade, investment and innovation across the team’s ten member countries and the wider European market.

Over the years he has organised a number of high profile conferences featuring Canadian speakers such as Don Tapscott and Leonard Brody, as well as leading Canadian promotional efforts on such major events as Cambridge Enterprise Conference, Cambridge Wireless Conference and pan-European events including Mobile World Congress in Barcelona and the International Broadcasting Convention in Amsterdam.

In recognition of his services to the Canadian Government and its clients, he was awarded the Deputy Minister's Award for Locally-Engaged Staff in 1995.

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ExportHelp www.switzerland-ge.com/exporthelp exporthelp@switzerland-ge.com T 0844 811 812

Switzerland Global Enterprise Stampfenbachstrasse 85 CH-8006 Zürich T +41 44 365 51 51 Switzerland Global Enterprise Corso Elvezia 16 – CP 5399 CH-6901 Lugano T +41 91 911 51 35 Switzerland Global Enterprise Avenue d’Ouchy 47 – CP 315 CH-1001 Lausanne T +41 21 613 35 70 www.switzerland-ge.com