Europe in 2017: A decisive year in politics distracts from tech

Europe has made strides in recent years, building technology hubs in London, Berlin, Paris and too many other cities to name. If there’s still a shortage of banner-name success stories that could be seen as equivalents to a Facebook or an Uber then the sheer volume of successful startups and the sure knowledge of a growing, supportive infrastructure that will foster innovation for years to come is some compensation.

A recent report by venture capital firm Atomico suggests funds have invested $2.3bn in Europe’s “deep tech” firms since 2015 versus $1.7bn between 2011 and 2014. The trend is clearly up but, as Atomico noted, Europe remains better at getting firms going than it is at making them emerging giants. Late-stage capital remains relatively elusive and that partly explains the exits of some European stars into foreign hands. Think of Sweden’s Skype (now part of Microsoft), Finland’s Supercell (China’s Tencent), the UK’s ARM (Japan’s Softbank): Europe has a history of getting companies so far along but when they need that extra scale to be global superpowers they tend to jump ship and leave the continent.

Europe has real home-ground advantages: financial services hubs, world-class computer science research universities, big media/creative centres, multilingual speakers, manufacturing muscle and more, and it is strong in large and growing sectors such as fintech or games development. It also has prestigious events including Web Summit, previously in Dublin but now ensconced in Lisbon and the general move to web-centric startups has allowed tech hubs to flourish in some less likely areas.

But it would be encouraging to see a growing company like an Anaplan or Deliveroo from the UK, a WeTransfer or Mendix from the Netherlands or an OutSystems from Portugal win big all over the world in the way that so many US software and internet superpowers have managed. Mature, home-grown companies like Germany’s SAP and the UK’s Sage remain the exception; both remain powerhouses that own their respective spaces.


GDPR looms   

As for European CIOs, it’s likely that the build-up to the EU’s General Data Protection Regulations (GDPR) will be occupying more and more of their time as they seek to help their organisations deal with the data protection and privacy implications of the rules that take effect early in 2018. GDPR is scary in multiple ways. There are stringent penalties threatened, implementing the “right to be forgotten” not always easy, and breach notification is a relative novelty to most countries. This will be a challenging transition, and perhaps a traumatic one for some, but it’s also a recalibration that is long overdue.

As Michael Kende, an economist who works for the not-for-profit Internet Society, told me recently: “I think it’s going to be interesting when European breaches happen. That could send some waves through the internet. Right now if you’re subject to a data breach it’s hard to know what caused that or to recover anything from the organisation.”


Leaving the worst to last…

And of course, just as in the US with its incoming President there are political changes aplenty to distract Europeans. The ongoing saga of Brexit, the rejection of reforms in Italy and the prospect of a new regime in France that might constitute a wide swing away from Government As Usual... all these mean uncertainty will rule for the foreseeable future. (There are also elections due in Germany, the Czech Republic, the Netherlands and elsewhere in 2017.)

Some complain that the media covering business and technology should not get involved in politics but the tech sector cannot be insulated from political fallout when the changes are so significant. The fabric that binds Europe and the sense of being part of a trading and cultural bloc is in danger of irreparable damage. It would be naive to think that those changes will not see a certain amount of caution prevailing in ICT spending nor that some of the great advantages of the web and cloud computing will be risked as data residency and sovereignty once more come under the arc lights. On the other hand, you might more convincingly argue that uncertainty and the lack of willingness to invest in capex will give cloud services another short-term boost. It’s complicated…

Forrester has already warned of flat European spending on technology and immediately marked down UK spending projections in the wake of the Brexit vote. In the current uncertain environment and with European currencies in the doldrums, that’s probably about right. Digital transformation projects should see some significant investment and the looming GDPR and other governance rules will need money to be injected. But in a Europe currently being rocked and shocked by serial changes, and with the world watching to see what happens to the European Union, 2017 is likely to be a year of watchfulness.


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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