European Software Lacks Innovation – Especially SAP

European software companies need to invest more in research and development, according to the European IT commissioner Viviane Reding. The leader of the sector, SAP, does not deliver innovation its customers require, despite coming top of a league of European software companies.

SAP has not got any major new products scheduled until 2014 and has delayed product delivery, despite investing a significant proportion of its income in research and development, analyst Ray Wang of Altimeter told the UK and Ireland SAP User Group conference in Manchester this week.

“End users are spending so much time maintaining their existing environment with budget cuts and limited resources that they don’t have time to think about necessary innovations. SAP needs to start sharing innovation information with its customers,” Wang said at the event, according to Computing.

Much of SAP’s innovation does not get enough market exposure, Wang said, warning that if the company does not step up to changes in business practices, it will fall behind competitors.

Despite this, SAP is still a dominating force in the European software market, topping the fourth edition of the Truffle 100 Europe ranking of Europe’s top 100 software companies and pulling in a collosal 37 percent of the total revenue of companies on the list. This is the second year running that SAP has topped the list, followed by Sage, Dassault Systems and Software AG.

Overall, European software is healthy, with the number of qualified staff in the sector rising to 211,985 in 2008, up from 194,000 in 2007, according to the list, which Truffle Capital produces as a reference for industry observers and public authorities.

Total turnover for 2008 was 25 billion euros (£22.6bn), compared with 24.4 billion euros (£22.1bn) in 2007, with 70 percent of this figure having been generated by the top 25 companies in the ranking. Profits also rose to 3.6 billion euros (£3.3bn), a year-on-year increase of 11 percent.

However, while the number of research and development jobs rose by 25 percent, investment in this area decreased by 3 percent, from 3.73 billion euros (£3.37bn) in 2007 to 3.64 billion euros (£3.29bn) in 2008.

“Europe is behind our main competitors in R&D spending,” said European IT Commissioner Viviane Reding in an interview with Bernard-Louis Roques, general partner and co-founder at Truffle Capital. “To step up investments, actions are needed both on the public and the private side: on our side, annual commitments to ICT R&D under FP7 will increase from 1.1 billion euros (£994m) in 2010 to 1.7 billion euros (£1.5bn) in 2013.

“We have also established Joint Technology Initiatives under FP7 to speed up innovation… In the near term it is our intention to establish a public private partnership in the field of Future Internet. An essential characteristic of such a partnership should be to develop open, standardised, cross-sector service platforms, leveraging the internet infrastructure for building networked applications.”

Reding added that in 2010, the European Commission plans to issue a communication on possibilities for simplifying the implementation of the EU R&D framework programmes.

Viviane Reding also spoke today about the launch of the EU telecoms package, promising that the creation of the new EU-wide telecoms regulator would help to tackle some of the blockages to cross-border e-commerce and communications which the EC has committed to combat.