Reuters Posted online: Thursday, May 26, 2005 at 1320 hours IST Updated: Thursday, May 26, 2005 at 1349 hours IST
Paris, May 26: The European technology sector is under pressure from strict labour laws and a lack of start-up firms, and needs a major push if it wants to create another Nokia or SAP, executives said on Wednesday.
Venture capitalists pump only one-fifth as much into start-up companies in Europe they do in the United States, and the founder and chief executive of unlisted, Luxembourg-based Skype said the reason for slow activity was tough conditions.
"We want our vacations and our social luxuries. This is not the best environment to start a company. It is much more difficult here than in the United States or China," said Niklas Zennstrom at the Reuters Telecoms, Media and Technology Summit.
Skype, which has found 39 million users for its free software for Internet voice calls, sees itself as an exception in the relatively empty European technology landscape.
Other executives say that appetite for innovation and technology is also modest.
Capgemini Chief Executive Paul Hermelin said his company, Europe's biggest computer consultancy, sees a lot more interest from the United States than from Europe in SAP's latest software system, NetWeaver.
"In old Europe, there's less appetite for innovation," he said at the summit.
"In Europe, for a long time, IT was mostly about cost cutting and productivity," he said. "To associate IT with new markets, new products, that is more the United States than European thinking."
He said that fast-growing areas of information-technology services, such as outsourcing, were able to take off earlier in the United States, because firms there did not have to worry about labour unrest.
"In Europe, people were thinking: I have seven problems with the unions. Why add another?
"In the U.S. there's more appetite to use IT as a growth leader," he added.
COST SAVER? OR GROWTH ENGINE?
"(French car makers) Renault and Peugeot are proud they spend the lowest percentage of sales on IT. That's the European approach. I'm not sure that's what Toyota would say," he said.
Ironically, the car industry is one of Europe's few technology-intensive sectors that is leading in the world.
It increasingly uses semiconductor chips and other advanced technology to make cars safer and more pleasant for drivers and passengers, said Wolfgang Ziebart, chief executive of German chipmaker Infineon.
"(But) other lead markets are generally in Asia," he added. "What is required here in Europe are more lead markets. Politicians can do a lot to help create lead markets, like they have done with GSM (the European-made mobile phone standard)."
It's not all doom and gloom, though. Europe has a solid infrastructure of roads and telecoms networks, Zennstrom said.
Also, several European IT services companies are not throwing in the towel.
Atos Origin feels it is better equipped to compete on its home turf, despite the dominance of U.S.-based IT services rivals like IBM.
"The top companies in Europe are American. There is an opportunity to build up a company that is European that can compete," Atos Origin Chief Executive Bernard Bourigeaud said.
European IT services companies have their decision-makers close by and, inevitably, say they understand the intricacies of European culture better.
"I lived in Amsterdam for three years, and I got adapted to eating sandwiches and drinking milk every day. I believe it's a competitive advantage to be able to do that, because Europe is so diverse," Bourigeaud said.
