Lack of ambition is a problem in the Norwegian software sector

TBK Consult has published a series of articles about how the German software industry underperforms versus its global peers. This article takes this theme to the richest country in the world: Norway.

A country abundant with natural resources, the Norwegian ITC sector actually ranks as the third largest sector behind oil and shipping. Moreover, IT, and especially software, is integral to innovation of new products and services in the two largest sectors; in other words software is also eating the world up north.

The software industry is one of the fastest growing industries in the world and an important indicator of how a country will be able to maintain its position in the global value chain. Compared to other sectors, software businesses are the easiest to globalize – launching it in a new market requires little investment compared with other industries. Software companies do not need factories and logistic infrastructures like most other industries. Yet I find that many Norwegian software executives lack the will to exploit this opportunity. While it’s true that the local Norwegian market has served them well with consecutive years of growth, demand for IT services has been strong for a decade and growth is touching double digits this year. Yet everybody knows the local market is small, that a large part of growth is a windfall from the oil industry (representing 40% of growth since 1995) and like oil prices, economic cycles come and go.

There is a lack of long term vision in the Norwegian software community

The Norwegian economy represents 0.7% of the global demand for IT; Scandinavia a meagre 1.8%, so why settle for this tiny slice? All technology innovation and adoption indices point in favour of Norwegian software companies; local adoption of new technology is among the highest in the world and things like mobile web services and ecommerce have the highest per capita spend in the world. This means that the products and services coming out of this market are mature and “future proof” versus other markets and that they should be coming out and exporting them in hordes! Yet this is not the case.

Table 1: Sizing of the Danish and Norwegian IT sector

Data from 2010, latest available data from IKT Norge, ITB Danmark, Nasjonal strategi IKT-forskning. DKK converted to NOK.

Compare the Norwegian IT sector with their Danish cousin across the Skagerrak Sea; the countries are nearly identical in size (table 1) but Danish companies export 6 times more! This does not look good for the future earnings of Norwegian IT companies.

Why this gap? Be it history, competence, or the economy, none of it is any excuse. Software companies cannot endure as local service providers in the long run; over time their business will be commoditised and revenue sources disappear. The only option for technology companies is to think global. I think the reason is, like our German peers we are underperforming, but unlike in Germany it is not an insular mindset but rather just lack of ambition.

What do you think?