Europe Shows Growth In R&D Investment

European software companies are investing in research and development despite the economic downturn, but they want more government funding to drive industry growth and create more jobs – a call echoed by Neelie Kroes, European Commissioner for the Digital Agenda.

ICT research is central to the EC’s drive to create a sustainable economy, said Kroes, at the launch of ‘ICT 2010 – Digitally Driven’ in Brussels yesterday, an event which also saw evidence of continued R&D investment from a ranking of European software companies published by private equity firm Truffle Capital.

Research and development

According to the fifth Truffle 100 report, the total turnover of European software firms grew by 8.4 percent to reach €27.1 billion in 2009, showing an early bounce back from the recession, (in 2008, the sector grew by only 3 percent).

Research and development, it seems, is getting back on track within software companies: their spend increased by 4.8 percent in 2009, compared with a 3 percent drop in R&D spend between 2007 and 2008. The number of jobs in R&D also increased from 52,020 to 54,180 in 2009.

“That the European software industry increased its R&D expenditure and job count by over 4 percent in the midst of a major economic crisis is a phenomenal performance”, commented Software AG CEO Karl-Heinz Streibich. “This dynamism in creating high-value employment must be promoted amongst today’s Masters and PhD students. The software industry must become the first choice for our most innovation-focused graduates.”

However, government funding is needed, said Bernard-Louis Roques, general partner and co-founder of Truffle Capital, who claimed that it is in the interests of European governments to increase their support. “Europe’s industrial future, economic growth and technological independence rely on its ability to develop a sustainable software industry,” said Roques.

Digitally Driven

Speaking at the ICT 2010 event, Kroes reiterated the need for public and private funding for research: “In times of nearly universal budget cuts, such discussions about the future of ICT research naturally have a strong economic focus. Taxpayers, ministers, and people in need have good reasons to expect that all public expenditure is duly justified,” she said.

“That does not make it impossible to increase public investments in ICT research,” she explained. “But it does mean we have to make the strongest possible case.”

ICT investments are particularly valuable because of their direct link to increased productivity, she said: “Greater productivity means we are able to do more with less. That is the key to dealing with public debt and the shrinking workforce as our population ages.”

“ICT will transform the way we consume resources, the way we cure and prevent diseases, the way we can live longer and remain independent and active, the way we build our social networks and so on. These impacts bring everyday benefits to every citizen and business,” she added. “That is a message the public and ministers need to hear loud and clear from the research community. In other words: Europe’s future depends on ICT innovations.”

Truffle 100

The Truffle 100 Europe 2010 report was drawn up with the support of Neelie Kroes and Syntec Informatique, in collaboration with analysts IDC and CXP, who performed the survey on which the ranking is based. It follows a gloomy report in 2009, in which Kroes warned that Europe was falling behind its main competitors in R&D spending, and that this was having an adverse effect on innovation.

The report ranks the top 100 European software companies based on their revenues from software activity. The top four firms in 2009 have not changed since the previous year, with SAP leading the pack, boasting revenues of €10.7 billion. SAGE was in second place with €1.6 billion, followed by Dassault Systems and Software AG.

The UK accounted for 22.3 percent of the total turnover, second only to Germany with 39.7 percent (three quarters of which was due to SAP).