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Interim results for the 2014 survey

Based on Statistics Finland, the Finnish software and IT services sector grew over 11 percent in 2013. According to survey, this growth was thanks to small and medium sized firms, and especially the firms in the games industry. The turnover of biggest firms was mainly decreasing, but at the same time they were able to react to changes in the industry.

Before July 2014, a total of 323 companies provided a complete response to the survey and 117 firms completed the survey partially. The interim results were presented in a press event on June 26th, and they're available at http://softwareindustrysurvey.fi/SlidesFinland2014.pdf

The Finnish industry has reacted on global trends

The global software markets are growing about +5% per year, led by three trends: Cloud computing and software-as-a-service (SaaS), collaborative and content applications, and data management and analytics software. We find that the Finnish software firms have been able to take advantage the first two of the trends. Especially in the segment of content applications, Finnish games companies had a phenomenally good year. Neogames association estimates that the Finnish games industry was growing rapidly with 550 MEur increase in turnover from the last year; more than threefold revenue compared to 2012. This demonstrates the possibilities of internet delivery of applications, but also highlights the need for new type of competence in software business. Overall, the Finnish software SMEs matched the growth of the global industry.

Large number of companies is capable of attaining international revenue, but the growth has stabilized. Nordic countries and Western Europe remain important areas for exports, followed by North America, Eastern Europe, and Russia. We speculate that the decelaration of growth in international revenue could be due to a natural balance. Some software firms remain local to serve the the domestic market, while those born-global firms have already gone international.

The combined revenues of the public listed IT services companies in Helsinki Stock Exchange decreased -4.6% from 2012. Many have reported changes of customer demand due to economic cycles, but also reacting on changes in demand and trends by offering continuous services, product business, or software rental services. These follow the global trajectory of the software industry. They also require up-front investments, which would explain some of the reductions in revenue. Some of the large firms who have reacted early on put out positive results with increase in revenues.

Cloud Platforms passed the mobile platforms in software development

Finnish software firms have adopted cloud computing platforms quickly, as half (50.3%) of the firms report employing the platforms in their software development. Cloud computing is used for cost efficiency by enhancing the IT services provisioning and for new business opportunities.

In mobile application development, we find a close race of three major platforms. Android, iOS, and Windows Phone all grew in popularity among software developers compared to previous year. Former Nokia platforms Symbian and Meego are now discontinued, but Qt platform currently developed by Digia is still live and well.

Also, more than one third (38%) of respondents offer platform or interface to other software firms for development. This progress can be seen as positive, because these firms report more flexibility than companies on average.

Focus on software firms’ flexibility

A major theme in this year’s survey is flexibility, which is understood as the firm’s capability to quickly react to changes in the industry, and to create new products or services to new customer segments. We choose this theme since research has demonstrated positive impact of flexibility to company performance under economic cycles. Also, wildly successful firms like Apple and Amazon have been able to enter adjacent market or create new markets. Applying existing resources to new purposes and organizing to new activities requires flexibility.

Our early analysis, with 253 responses indicate that the Finnish software companies assess themselves as flexible in resources and adaptability. Close to 75% of respondents report that their products and services are easily modifiable to new markets and that they can organise into new activities quickly.
Based on our data, this flexibility is strongly associated with providing platforms or interface to others and experimenting with different business models. Also customer orientation (i.e. collecting information from customers regularly) and use of cloud computing are related to improved flexibility. Needless to say, younger firms are more flexible in their moves compared to the more established firms.

We will continue analyzing the data and publish detailed results on on the theme of software firms’ flexibility. Stay tuned for more!