Europe's IT industry gets wake-up call

Europe must build up its own IT industry and reduce its dependence on that of the US if it is to stay competitive, said SAP chairman and chief executive Henning Kagermann, in a keynote speech opening the CeBIT trade show in Hannover, Germany, on Wednesday evening.

The IT industry has the most potential to innovate, the fewest restrictions and the most impact on other industries, but the sector is dominated by the US and accounts for only 1.5 percent of Germany's gross national product, Kagermann said.

"For each Euro in the EU invested in major IT projects, some 75 cents flows into a market outside Germany today. This cannot be the way ahead for Europe," he warned.

The dynamics of the global economy also disproportionately benefit the US, he said. He cited a study from management consultancy firm McKinsey which found that when one dollar of value creation moves out of the US, $1.13 of new gross domestic product are created in its place; in Germany, when a euro of value creation moves abroad, only 79 cents of new GDP are created. "In the United States, jobs with little added value are quickly replaced by more productive ones," he said.

To push Europe ahead, the EU needs a focused programme of IT industry investment, concentrating on next-generation business IT, and on embedded systems, Kagermann argued.

Businesses are relying increasingly on innovation in their business processes, rather than their end products, to compete, he said, and new service-oriented software architectures are ideally suited to deliver this kind of innovation. "Very much like the automotive industry, we will have platforms that are the basis for many models. But our models will be so flexible that owners will be able to turn their convertibles into pickups themselves — depending on their current needs," he said.

As for embedded systems, these are now so pervasive that they're absolutely essential, yet have become practically invisible, Kagermann said. "We all benefit from the latest opportunities offered by information and communication technology, but we no longer notice it."

In the future 80 percent of the automotive industry's innovations will be due to IT, mostly enabled by embedded software, Kagermann said, quoting from a Spiegel Magazine survey of heads of research at large automotive companies. He added that Europeans and particularly Germans are well positioned to take the lead in embedded systems because they are used to dealing with the complexity of such systems.

"It's all about interdisciplinary thinking and development... These types of projects are complex by nature, but we have learned to handle complexity — and it is our strength," he said.

A PDF transcript of the speech is available from SAP's Web site.

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