Jean-Philippe Courtois, Senior Vice President and Chief Executive Officer, Microsoft Europe, Middle East and Africa (EMEA).
PARIS, April 27, 2004 — Poised to welcome 10 new member states into the fold, the European Union (EU) is striving to transform itself into a broadly based
“knowledge economy”
in which information and communication technology (ICT) proliferates. In March 2000, the European Commission (EC) laid out an ambitious plan — known as the Lisbon agenda — to create the conditions for a more vibrant and competitive economy in the EU, relying upon ICT as the mechanism for getting there.
Confoundingly, the largest, most developed economies in Europe still aren’t seeing productivity gains on par with the United States from their ICT investments. Although the Nordic countries — Norway, Sweden, Finland and Denmark — boast some of the highest rates of ICT adoption and use, and are seeing real productivity boosts from it, Germany, France and Italy are lagging.
These observations, which have been much reported and mulled over in the business press and by the EU itself, have spawned differing opinions about the most important triggers of ICT-led productivity. For policymakers and business leaders, the difficulty is this: on a macroeconomic scale, productivity gains from technology investment don’t seem to be predictable or automatic. Economists recognize a time lag between a country’s deployment of telecommunications and computing infrastructure and the onset of its productive use, but it is not well understood why some European countries have begun reaping the economic benefits while others have not.
New Report Adds to Understanding of ICT-Enabling Factors
Microsoft executives have a keen interest in understanding Europe’s collective ICT evolution more clearly. As a software-industry leader and an active participant in Europe’s business community, Microsoft Europe, Middle East and Africa (Microsoft EMEA) offered to fund an independent study by the Economist Intelligence Unit (EIU), the London-based business information arm of The Economist Group, investigating the relationship between ICT investment in Europe and economic growth.
This week, the EIU published its report, titled
“Reaping the Benefits of ICT: Europe’s Productivity Challenge.”
The research accomplishes two things. First, it confirms observations that a measurable link does, in fact, exist between ICT and economic growth, and that the link is less strong in Europe than in other economies represented by the Organization for Economic Cooperation and Development (OECD). Second, using both empirical research and qualitative analysis, the study identifies the essential environmental factors necessary for economies to adopt and use ICT productively.
“The research attempted to isolate ICT development — the penetration and quality of telecom and IT infrastructure — in 60 countries,”
says Denis McCauley, director of global technology research at the EIU and author of the report.
“We identified when the technology was deployed and, in the context of this analysis, we were able to identify a link between the level of ICT development and growth in GDP per capita.”
The researchers designed a model which links trends in GDP per capita growth and ICT development, as measured by empirical data such as broadband penetration, e-business infrastructure, the number of PCs and servers, the security infrastructure and the availability of support services. This analysis found that countries only begin to show measurable growth benefits from ICT once the overall level of development reaches a certain level.
According to McCauley, before countries reach the observed threshold, there appears to be no link between ICT and growth of GDP per capita. Once they reach that threshold, as seen with the United States and the Nordic countries, as well as Australia and Canada, increases in ICT development begin to have a positive and predictable effect on growth.
What governments need, then, is a clear indication of which policy areas — beyond direct investment in ICT infrastructure — are most effective for reaching the critical ICT development threshold. In addition to the analysis of macroeconomic data, the EIU conducted a survey of 100 executives and conducted interviews with 19 European business executives and policymakers. This primary research helped the researchers to identify the essential
“ICT enablers,”
and where Europe as a whole needs to improve.
“What’s new about this study is that the ICT development model provided a means to take the research further, and better understand the relationships between GDP growth, ICT deployment and use, and the specific environmental factors necessary for reaching the threshold,”
McCauley says.
“This is the first time we’ve combined the different approaches and established links between the quantitative and qualitative findings.”
The EIU concludes that six ICT enablers are essential: a culture of entrepreneurial risk-taking and innovation, enhanced ICT-related skills among business managers, unfettered competition, increased enterprise access to venture capital and the fruits of research and development, and security, standards and intellectual property protection.
“In our one-on-one discussions with the business and policy leaders,”
McCauley continues,
“it came out clearly that in these key enabling areas, the countries that seem to be ahead of the pack in our quantitative analysis are the countries that exhibit the most positive performance in these categories of enablers — in the Nordic countries and, to a somewhat lesser degree, the U.K. and Austria.”
Microsoft Supports Research, Innovation Culture in Europe
Microsoft’s initiatives in Europe — fundamental and applied research, product development, working with governments and academic institutions, supporting venture capital organizations, cultivating a broad partner community — align well with the EIU’s core list of ICT enablers, says Jean-Philippe Courtois, CEO of Microsoft’s EMEA (Europe, Middle East, Africa) region. In different ways, he notes, all of these efforts feed into the culture of innovation that the EC and regional governments are working to promote.
“Innovation is at the heart of our work at Microsoft,”
Courtois says.
“Employing the best scientists and engineers in our research facilities, working with universities and academics, engaging with the European Commission and national governments to help them attain their research goals — through all of these means, Microsoft is making investments that we hope contribute to an expansion of technology innovation in Europe.”
Microsoft has four locations in Europe that conduct product development as well as applied and fundamental research. The new European Microsoft Innovation Centre (EMIC) in Aachen, Germany, is initiating its first work on several public-sector projects, including research into Web services for e-health and e-learning. With an emphasis on applied research, the center provides a focal point for Microsoft to align with European research priorities and contribute to large-scale, multifaceted development projects — collaborative efforts with industry and academia — such as those co-funded by the European Commission. EMIC applied research falls into three areas — Web services, security and privacy technologies, and wireless technologies — focused on three platforms — enterprise computing, embedded devices and the extended home.
“Before EMIC, we were missing out on opportunities to collaborate with other industry players and participate in the European Commission’s R & D framework,”
Courtois says.
“EMIC is working in areas that European governments consider to be the most important, and Microsoft looks forward to supporting the region’s technology development objectives.”
Other Microsoft
facilities in Europe include Microsoft Research Cambridge (MSR Cambridge) in the United Kingdom; a software development center in Vedbaek, Denmark; and a development and localization facility in Dublin, Ireland.
Established in July 1997, MSR Cambridge
was the first Microsoft laboratory set up outside of the United States.
With the freedom to focus on
longer-term
fundamental research,
not constrained by short-term product roadmaps, the facility’s researchers seek to accelerate the next generation of fundamental software innovation by
uniting
Europe’s
top computer scientists. The Cambridge
Research Lab is now expanding its activities
by developing innovative collaborative partnerships with universities and research institutions across Europe, helping to create the building blocks for the next century of computing, as well as
exploring new
areas to apply current technologies.
The Vedbaek facility is Microsoft’s only product-development center outside of the United States. Employing over 300 developers, the facility is enhancing and creating new business applications and development tools, contributing to such products as Microsoft Visual Studio.NET. At the European Product Development Centre in Dublin, Ireland, Microsoft employees localize over 100 products in more than 27 languages.
“Microsoft has consistently built upon its innovation assets in Europe, for practical business reasons as well as regional, community-focused reasons,”
Courtois says.
“Our goal is to continue to develop this network because we believe it’s important to partner with the public sector, academia and industry to address issues pertinent to Europe, and to ensure our products integrate well with European technology standards, languages and customer expectations.”
