Bernard-Louis Roques: General policy on IT
The latest data from the Truffle 100 show European IT, and
particularly the software industry, is lagging way behind its
US counterpart, and shows no tangible sign of catching
up.While US software vendors are recovering form the
global crisis and have the financial strength to become
predators again, it is getting more and more difficult for their
European counterparts to keep up with the challenges.
Software vendors are not considered a priority industry, which is all
the more so regrettable that they are one of the most efficient,
profitable and powerful engine for qualified job creation.
As the new European IT Commissioner, do you have a plan to curb
the trend and promote European software vendors? Any short
term plans to channel more resources into European IT research
Neelie Kroes - EU Commissioner for Information Society & Media
Yes! I am pushing very hard for a
significant, but affordable, increase
in the European Commission ICT R&D
spend. Now is not the time to cut back
on these sorts of very efficient investments.
Why? Because investing in ICT research
is one of the most fundamental ways we
can continue to increase our standard of
living and keep the economy in good
health. ICT innovation boosts productivity
in all sectors.
But the answers are not always about more
money. And the money we do spend need
shouldn’t necessarily come from government, especially not the kind of money that leads
to subsidy dependency.We have seen the
effects of that in some other industries. I
believe that the European software sector
is better off on a different path.
What we do need is more partnerships to
share risk. We do need better and more
innovation-friendly public procurement
to boost fledgling markets. We do need
the EU to help make collaboration easier
and to ensure SME can participate in our
programmes without going through
In other words - people can't expect the EU
to do everything, we are never going to match
either at national or EU level the sorts of
money the US puts into defence research.
But we can be smarter, by pooling our resources
with Member States and by procuring research
in new, more competitive ways.
Bernard-Louis Roques: R&D Programs
The Truffle 100 is highly representative of the European software industry. All but 3 top 100 vendors have revenues below
€1bn. 80% of the Truffle 100 have revenues below €250m. This is an industry of SMEs, that are creating value and thousands
of qualified jobs year after. They invest massively in R&D, mostly in their home markets
R&D Programs are considered to be one of the key drivers for growth. Increases in commitments to ICT under FP7 have been
announced (from €1.1 billion in 2010 to €1.7 billion in 2013).
What is your program in this regard and what actions do you intend to take? Can you give a few figures?
Neelie Kroes: We have to take concrete action that
is what I am pushing for, and
the standard I should be held accountable
to. As someone who has been involved in
small businesses my entire life - either
working or teaching or regulating in the
field - this is something I take very seriously.
Our first concrete action is to pilot a new
“light and fast” access scheme for SMEs
in the 2011 FP7 funding call, totalling
some 780 million euros. And we will be
investing hundreds of millions in the next
generation network and service
infrastructures, in robotic systems to help with ageing, in electronic and photonic
components, and in digital content
technologies. There is funding for pressing
socio-economic challenges too.
In the longer term our actions must be
about supporting a better ecosystem for
ICT entrepreneurship. Our first piece of work
must be in improving the attractiveness
for venture capitalists to invest in European
SMEs. Our SMEs can do brilliantly - 7 of
the 25 firms that went public or were
acquired for over US$1bn since 2004 are
European. They also tend to be more
efficient in using the capital they do
attract. But not enough capital is on offer
and sometimes it is not available at the
most important stages. The guys at Skype
went to 26 different European VC firms
and couldn't even get €1.5m. So we can't
pretend this isn't a known problem.
Second, we need to build new linkages
between finance and SMEs. Those offering
grants, Business Angel / Venture Capital
support, loans and public procurers need
to communicate better. Without more
coherent support we won't get enough
SMEs going global. They will die or hit
Bernard-Louis Roques: Simplification of processes
Unlike their US counterparts, the vast majority of SMEs find it too difficult and complicated to access the European R&D
programs. They have very limited resources to dedicate. They are reluctant to get involved in the process because they think
the administrative workload is too heavy. The process is considered too lengthy, while the chances of getting through are
extremely low. There has been very little increase in the participation of the SMEs until now.
What set of actions could you take so as to redirect more of the R&D to the small vendors who need it the most and who
represent the most efficient use of funds? Any short term plans measures for simplifying the implementation of the EU R&D
Neelie Kroes: I agree that the EU paperwork is currently
too much. We want the paperwork to
be lighter and that is starting as of 2011.
But in trying to improve we also have
to remember recent progress.We already
have set amounts of the money reserved
for SMEs. In FP7 SMEs can claim 75% of
costs for a given project, up from 50%.
And in state aids provided by national
governments, there are now dozens of categories of aid that do not require
pre-approval from the Commission. These
range from consultancies to participation
in fairs, from industrial property rights
costs to costs of adapting to environmental
standards and support for start-ups run
by female entrepreneurs.
In trying to change the system to better
exploit our ICT potential, we need close cooperation with the research community.
There must be an understanding
that in the current economic climate
all public investments will continue to
require clear justification. Essentially,
I am arguing for increases in spending
at a time when most other budgets are
being cut. We won't win that funding
without a strong case, and no-one should
Bernard-Louis Roques: Small Business Act
Year after year the Truffle 100 reveals that the vendors view the Small Business Act ('SBA') as the 1st set of public measures
that could stimulate the software industry. The competition with US vendors is unfair because they have been boosted by
a very efficient SBA framework for 60 years. Until now the role of the Commission has been limited to inviting Member States
to consider local legislation, or issuing a Communication on the pre-commercial procurements.
What are your views on the matter, and what are your intentions and plans?
Neelie Kroes: It is absolutely true that many of the
actions most helpful to SMEs are in the
hands of the Member States. I don’t have
the powers to change labour or tax laws,
for example. I can only flag the issues,
which - I have to admit - can be frustrating.
But what I have always done - when at
DG Competition and now with the Digital
Agenda - is try to make access to state
aids and other public funding as flexible
and open to SMEs as possible. I also acknowledge that software is one of
Europe's relative weaknesses and I
have observed that administrative
burdens and differences in legal systems
can contribute to holding European SMEs
back. This means that the public sector
carries a clear responsibility for making
the changes required to allow the EU
software industry to breathe and grow.
It is important to the bear in mind the
“virtuous circle” I am trying to stimulate across all digital markets, and not just
software. Better networks drive demand
and create new opportunities for
software use. A real digital single
market opens new doors for the software
industry. New content and new services,
such as software, drive the other forces.
And the field of software is expanding
well beyond the traditional packages -
the world of apps is fascinating and exciting
and I hope entrepreneurs use their initiative
to lead those trends.
Bernard-Louis Roques: Venture Capital
Most European vendors are too small also because they are undercapitalized. They need more Venture Capital and bank
financing. This is an area where today's dominant world leaders,mostly American, were start-ups financed by Venture Capital
less than a generation ago.
In the past the commission has developed specific “financial instruments” under the CIP to support equity investment. The
2007-13 CIP has several schemes and a budget of over €1billion to facilitate access to loans and equity finance for SMEs
Are there any plans to bolster Venture Capital?
Neelie Kroes: As you say, the Commission is working
hard to develop innovative financing
solutions including ways to support
venture capital. I must stress that the
process of improving the venture capital
environment is a long one. It's a cultural
issue as well as a policy issue, and here
as well we find fragmentation and an
absence of a true internal market. The VC
industry itself may also need to develop
more specific expertise in the ICT markets.
I recently spoke to SMEs and start ups in the area of healthcare, eHealth and
Ambient Assisted Living. They complained
of the difficulty to get funding and the
shortage of specific knowledge of their
market among VC firms. I hope this is
not a widespread problem, but I suspect
it might be.
We can't go on with our firms getting less
than 1/3 of the funding that similar firms
in the in US, but we also need to find ways
to ensure European firms remain more
efficient that US and other firms in using
the capital they do get offered. We are
more efficient now, and that is an
advantage we can't afford to lose. And
we also need European firms to think
bigger - they should have global ambitions.
If we scale up the vision and offer those
visionaries more cultural support, the
pitch becomes more attractive to