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7/31/2019 Software Industry Survey
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Software Industry Survey 2012 www.softwareindustrysurvey.fi
Software Industry Survey 2012
Mikko Rnkk
Juhana Peltonen
Aalto University
7/31/2019 Software Industry Survey
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Software Industry Survey 2012 www.softwareindustrysurvey.fi
Contents
Brief overview of the study Overview of the Finnish Software and IT Services Sector General Results of the Software Industry Survey 2012
Nokias situation and the cushioning role of softwareSMEs
Platforms used in software development: Current stateand trends
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Software Industry Survey
Run in Finland since 1997 2012 marks the 15th survey The longest running software
industry survey in the world Provides annual overview of the
industry
Changing research themes
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Survey in the 2012
Data collection in spring andearly summer
Covers the whole softwareindustry
Product and services firms In 2012, 421 responding
companies
Cooperating universities TU Darmstadt currently running
a similar study in Gemany
(softwareindustrysurvey.de)
Fraunhofer Institute, survey inAustria in Autumn 2012
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Special thanks
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Overview of the Finnish Software and IT
Services Sector
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The Finnish Software and IT services
grew 8% in 2011 Eurostat estimates that the
Finnish software and IT
services sector grew 8% in
2011, up form 5% in 2010
There have been discussionabout entrepreneurship boom,
but this is not visible in
founding ratesTable 1.2: Official statistics on industry dynamics
Firms Starting Closed Exit Number ofYear started rate down rate companies Change
2007 929 13.4% 592 8.6% 69092008 1050 14.3% 753 10.3% 7345 6.3%2009 969 12.8% 664 8.8% 7559 2.9%2010 1009 12.8% 515 6.5% 7903 4.6%2011 993
Source: Statistics Finland. Industry code 62.
2.95.7
9.07.4
9.8
10.8-3.4
4.9
8.2
1
2
3
4
5
6
Index
2002 2004 2006 2008 2010 2012
Revenue
Source: Eurostat. Industry code 62
Growth of Finnish software and IT services industry
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IT companies in Helsinki Stock Exchangehad a challenging year with varying results
Two companies are being delisted Tekla was acquired by Trimble Aldata was acquired by Symphony Technology Group
Three companies are downsizing because of lostbusiness from Nokia Digia, Ixonos, Tieto
About half firms had a challenging year 2011 E.g. Basware, Comptel, Electrobit, Solteq, Tecnotree, Tectia,
Trainers house
Some firms reported positive results Affecto, F-Secure, Innofactor, Stonesoft, QPR
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Finland has one of the largest software
and IT services sector in Europe
Sweden
United Kingdom
Denmark
Netherlands
Belgium
Czech Republic
Finland
Germany
Hungary
Slovenia
Estonia
Bulgaria
Norway
Spain
Slovakia
Italy
Portugal
Austria
Poland
Romania
Croatia
Latvia
Cyprus
Lithuania
1% 2% 3% 4%
Revenue / GDP
Sweden
Netherlands
United Kingdom
Finland
Denmark
Norway
Belgium
Hungary
Germany
Czech Republic
Slovenia
Estonia
Italy
Spain
Austria
Bulgaria
Portugal
Slovakia
Croatia
Latvia
Poland
Lithuania
Romania
Cyprus
1% 2%
Employed / Workforce
Source: EuroStat. Industry code 62 in 2010
Source: EuroStat
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In the 2000s the growth of the Finnish
ICT markets has been steady
Austria
Turkey
Greece
Latvia
Norway
Estonia
Slovakia
RomaniaLithuania
Netherlands
FranceSpain
Belgium
Malta
Poland
Slovenia
Czech Republic
Hungary
Sweden
Cyprus
United Kingdom
Bulgaria
Finland
Germany
Luxembourg
Italy
Ireland
Portugal
50
75
100
125
150
200
300
400
2002 2004 2006 2008 2010 2012
Source: EuroStat. Industry code 62. 2011 are estimates. Y axis on log scale
Source: EuroStat
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Conclusions
Overall, the Finnish software and IT services industrygrew 8% in 2011
The public listed companies had a challenging year Lost business from Nokia Tekla and Aldata are being delisted Only about one in four companies reported mostly positive
results
Finland places well on the European benchmarks Software and IT industry 4th in employment and 7th in revenue The industry is growing at the same speed as the comparison
markets
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General Results of the Software
Industry Survey 2012
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Firm level growth and growth
expectations back on normal levels
-10
0
10
20
30
Growthofrevenue,
%
2007 2008 2009 2010 2011 2012
Year
Realized growth
Revenue < 1Meur
Revenue 1-10Meur
Revenue >10Meur
Expected growth
Revenue < 1Meur
Revenue 1-10Meur
Revenue >10Meur
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Profitability is increasing and
approaching pre-recession levels
7.15
6.53
4.76
5.39
6.42
0.00
1.0
0
2.0
0
3.0
0
4.0
0
5.00
6.0
0
7.0
0
8.0
0
9.0
0
Medianprofita
bility(%)
2007 2008 2009 2010 2011
Year
N=5793 (247 extreme observations removed)
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Sources of revenue remain stable
3%14%
1%
7%
32%3%
10%
8%
9%
14% 3rd party software licenses
ASP and SaaS
Content and ads
Deployment project
Development project
Hardware
Maintenance
Not software related
Other software related
Own software licenses
Sources of revenue
N=414
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Increasing trend: Almost half of the
companies have international revenue
21%
25%
22%
27%
5%
Significant international revenueMinor international operations
Plans to internationalize
Not currently relevant
Have previously had
Internationaloperations
N=469
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011Year
Significant international revenue
Minor international operations
Plans to internationalizeNot currently relevant
Have previously had
N=2844
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Firms that do not see internationalization
as relevant are mainly service firms
2%11%1%8%
22%
6%11%5%
12%
22%5%
15%
1%7%
28%3%11%
12%
6%12%
2%20%
2%5%
29%3%8%
7%
8%
16% 2%10%1%8%
46%
1%9%
6%
12%6%
Significant international revenue Minor international operations
Plans to internationalize Not currently relevant
3rd party software licenses ASP and SaaS Content and ads Deployment project Development project
Hardware Maintenance Not software related Other software related Own software licenses
Sources of revenue
N=414
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East Asia has been rising as an export
market, East Europe also increasing
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Finance seeking is back to normal levels
35%
41%
32%
39% 39%
14%
19%
17%
0%
5%
10%
15%
20%
25
%
30%
35%
40%
45%
2007 2008 2009 2010 2011
Year
Seeking externalfinancing during thenext two years
Has had troubleobtaining externalfinancing
N=1204
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Ideal size in five years: Very few
companies predict rapid growth
5%
10%
25%
50%
75%
90%
95%
1,0
00
10,0
00
100,0
00
1
,000,0
00
10,0
00,0
00
2007 2008 2009 2010 2011
Targetedamounto
frevenue
YearN=2677 (136 extreme observations removed)
5%
10%
25%
50%
75%
90%95%
1,0
00
100
2007 2008 2009 2010 2011
Targetedamountof
personnel
YearN=2482 (98 extreme observations removed)
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Only a few companies are pursuing a
great opportunity
25%
52%
16%
7%
Not unique
Not unique, but differentiated
Unique in target market
Unique in the world
Product or service uniqueness
30%
51%
13%6%
Not novel
Not novel, but something new
The first to target particularly this customer segment
Entirely new for this customer segment
Novelty for main customer segment
5%
29%
27%
39%
None
1-3
4-9
10 or more
Number of competitors
9%
47%25%
20%
Local
Whole Finland
International
Global
Geographical markets
8%
34%
38%
20%
Under 1 million euro
1-50 million euro
50 million-1 billion euro
Over 1 billion euro
Total size of the market
11%
33%
24%
31%
A small business
Profitable small business
Growth firm
Lucrative success story
Most likely outcome
N=420
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Conclusions
Year 2011 seems to have been a good year for Finnish softwareSMEs. Growth rates are up, returning to the pre-recession levels. Profitability levels are up and approaching the pre-recession levels. Most firm predict their growth in 2012 to exceed the 2011 growth.
Internationalization continues to be more and more relevant to alarger number of companies. The number of firms that have international revenue is steadily increasing. East Asia and Eastern Europe are increasingly common target markets
Firms pursuing fast international growth with unique products seemto be rare. More than half of the companies address only the domestic markets. Very few companies think that they can grow beyond 100 employees Very few firms say that they have a truly unique or novel product or service.
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Nokias situation and the cushioning
role of software SMEs
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Background
While large software firms have had a modest yearat best, and foreign firms enter slowly, attentionturns to the hiring capacity of Finnish SMEs
I.e. firms with
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Differences in perceptions: 2011 vs. 2012
Firms that consideredto be unharmed byNokias situation aremore sure about it
Some 5% of firmsexperienced
unexpected negativeconsequences, whichapparently are notbusiness-threatening
Firms also perceivefewer new businessopportunities arising
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Differences in perceptions: 2011 vs. 2012
Small, stat.insignificant decrease
in willingness to hire
former Nokia/subcon.
employees (20% vs.
23%)
A moderate and stat.significant drop inperceived value of ex-
Nokia skills.
Firms divided betweenwhat Nokias situation
will bring to the Finnishsoftware industry
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0
.1
.2
.3
.4
Shareoffirms
0 2 4 6 8 10 12 14 16 18 20
Number of former Nokia/subcontractor employees hiredN=60
Distribution of hiring counts among firms thathired former Nokia/subcontractor employees
Recruitment from Nokia and its
subcontractors We estimate that Finnishsoftware SMEs have
hired 650-850 laid offNokia/subcontractoremployees* recently
These people seem tobe mixing quite evenly
into the workforce: Evenly per age class Bigger hire more, but about
0,043 hires per existingemployee across differentsize classes
19% of responding firmsreport hiring at least oneformer Nokia/subcon.Employee.
*) This number divides about evenly between former Nokia employees and former Nokiasubcontractor employees
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Conclusions
Changes in software SMEs perceptions about the impact of Nokiassituation were minor. The slight decreases in interest toward former Nokia/subcon. employees
can also be taken as a sign of demand-size robustness 43% of firms that planned to hire former Nokia/subcon. employees in 2011 report
to have realized these plans.
650-850 software jobs is very positive news Recruiting will probably continue, but at a slower pace
However, it does not alone address the job need for about 3.400 formerNokia/subcontractor employees, plus the recent 500 job cutsannounced by Tieto.
More research is needed on the absorbing role of entrepreneurshipand software work outside the software industry (e.g. mechanicalengineering, financial services etc.) to understand the broader jobmarket dynamics.
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Platforms used in software
development: Current state and
forecasts
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Platforms for which companies developedsoftware for in 2011 and plans for 2013
Server and desktopplatforms have a
steady lead
Mobile and cloudexpected to continue
growth Mobile to catch up to
desktop platformdevelopment after
2013?Game consoles
Social media platforms
Embedded platforms
Cloud platforms
Mobile platforms
Desktop platforms
Server platforms
0.9%
8.7%
12.7%
26.5%
34.5%
59.9%
66.6%
2.0%
11.1%
14.9%
37.6%
52.3%
60.8%
67.9%
50% 25% 0% 25% 50%
Platforms used in 2011 Platforms to be used in 2013
N=449
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Platforms for which companies
developed software for in 2010 and 2011
Android narrowlyovertakes iOS, butthe platforms arevirtually tied (16.5%vs. 15.5%)
Windows Phoneovertakes Symbian
iPad developmentreaching iPhonedevelopment
Symbian / Meegoshowing resilience
Meego
Symbian
Windows Mobile/Phone
iOS (iPad)
iOS (iPhone)
Android
3.7%
7.7%
4.1%
4.5%
8.2%
6.7%
5.1%
6.9%
10.5%
10.7%
12.2%
16.5
10% 5% 0% 5% 10%
Platforms used in 2010 Platforms used in 2011N(2010)=534, N(2011)=449
Realized Mobile Platform Use
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Platforms for which plan to develop
software for in 2012 and 2013*
Plans to use WP goingeven higher
Though WP is growingfast, there may be a
Finnish peer pressureeffect to report WP
plans
Symbian / Meego set toreduce rapidly
Symbian
Meego
iOS (iPhone)
iOS (iPad)
Android
Windows Mobile/Phone
4.7%
5.4%
16.3%
13.9%
23.6%
23.8%
2.2%
2.2%
24.3%
26.3%
33.4%
34.1
30% 20% 10% 0% 10% 20% 30%
Planned use in 2012 Planned use in 2013
N(2012)=534, N(2013)=449
Planned Mobile Platform Use
*) 2012 plans are from the 2011 survey, and 2013 plans are from the 2012 survey
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Platforms for which plan to develop
software for in 2012 and 2013*
Plans to use WP goingeven higher
Though WP is growingfast, there may be a
Finnish peer pressureeffect to report WP
plans
Symbian / Meego set toreduce rapidly
Symbian
Meego
iOS (iPhone)
iOS (iPad)
Android
Windows Mobile/Phone
4.7%
5.4%
16.3%
13.9%
23.6%
23.8%
2.2%
2.2%
24.3%
26.3%
33.4%
34.1
30% 20% 10% 0% 10% 20% 30%
Planned use in 2012 Planned use in 2013
N(2012)=534, N(2013)=449
Planned Mobile Platform Use
*) 2012 plans are from the 2011 survey, and 2013 plans are from the 2012 survey
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Implications of Nokias situation in 2012
WP, iOS, and Androiddeveloping firms seebenefits most often
from Nokias situation
MS server developers(e.g. Sharepoint) have
most upside
compared todownside
Unsurprisingly,Symbian and Meego
developers had most
downside compared
to upside
The firm develops for Windows (desktop)
Average firm
The firm develops for Meego
The firm develops for Symbian
The firm develops for Microsoft server products
The firm develops for Android
The firm develops for iOS
The firm develops for Windows Phone/Mobile
13.3%
14.1%
14.3%
20.0%
22.5%
27.7%
28.6%
30.0%
10.1%
9.4%
50.0%
45.0%
7.5%
14.9%
17.1%
13.3%
50% 25% 0% 25% 50%
Grasped new business opportunities Lost sales
N=298
Perceived impact of Nokia's new strategyon firms developing for different
software platforms
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Platform use per category of main product
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
Game or entertainment
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
Consumer application
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
Business application
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
Portal or web service
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
Other type of product
Android
MeeGo
Symbian
Windows
iOS
iOS (iPad)
50% 30% 10% 10% 30% 50%
No products
N=435
Used in 2011 Plans to use in 2013
Game, consumerapplication andbusiness application
developers already do
lots of development
on mobile, and set to
increase
Game companiesseem to finally
embrace WP
Surprising presence ofSymbian/Meego in
consumer apps.
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Development for mobile and businessopportunities
Firms that develop for mobile are typically grasping broader and more lucrative markets,and consider themselves better differentiated
36% of these firms also see that if everything goes according to plan, they will create awell-known success story (compared to 29% in non-mobile firms) 40% of non-mobile firms would settle for creating a small profitable business compared to
25% developing for mobile.
10%
51%
24%
15%7%
40%
25%
27%
No mobile development Develops for mobile
Local Whole Finland
Internat ional Global
Geographical markets
N=429
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Conclusions
Mobile platform development growing andcatching up to desktop development.
Android most popular mobile platform, butvirtually tied with iOS.
Windows Phone making strong gains at number3, but some future expectations in adoption maybe overstatements.
Firms clearly see opportunities in mobile, andmissing out may divide firms into more and less
successful ones.
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Contact information
http://www.softwareindustrysurvey.fi Mikko Rnkk, Research Manager
Email: [email protected]
Tel.: +358 50 387 8155
Juhana Peltonen, ResearcherEmail: [email protected].: +358 40 508 4020
www.softwareindustrysurvey.org
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Appendix: (Partial) extrapolation
procedure on recruitment
Recruited personnel
Total personnel From Nokia From subcontractors
Size All firms, Resp. Sample Resp. All firms, Resp. All firms, Estim.class estim. firms coverage firms estim. firms estim. total
... 4 3293 324 9.8% 12 122 4 41 163
5... 9 1953 374 19.1% 8 42 7 37 7810... 19 2641 526 19.9% 16 80 22 110 19120... 49 3757 1151 30.6% 27 88 20 65 15350... 99 2281 821 36.0% 21 58 20 56 114100... 249 3720 515 13.8% 6 43 15 108 152
Total 17644 3711 90 434 88 417 851
Summary of calculations used to estimate the number of people laid off by Nokia and its subcontractors that were
recruited by software companies. More detailed calculations available from the authors.