They camp out in the HP offices for three days, sleeping on the floor or sometimes working through the night, although it is not all work with plenty of beer and vodka and the obligatory sauna available.

The mobile e-services bazaar, a testing laboratory for mobile communications developers, is based in a science park just outside Helsinki, a fitting location for HP’s research and development into mobile e-services.

When the project was first launched Carly Fiorina, CEO of HP, called Finland the “Silicon valley of mobility”. Mr Vesterbacka who is the founder and leader of global strategy is young and energetic as he bounds around the plush, professional, state-of-the-art office explaining new applications for the humble mobile phone.

Finland, home of Nokia, has the highest mobile penetration in the world and as a result has created important critical mass and attracts substantial investment. The Finnish government has been funding the high-tech sector since the late 1980s therefore developing a high expertise cluster which, claims Invest in Finland, has not suffered drastically as a result of declines in the sector.

“The year 2000 was a record year for FDI in Finland. Last year the figures were smaller, but there was no dramatic crash and the figures seem to be growing again”, says Pirkko Karlsson, Invest in Finland’s director of communications. She adds that the share of information communications technology (ICT) related companies investing in Finland has remained steady at about 20% of all investment.

Sirrka Aura, chief executive of Invest in Finland, points to figures released by the International Data Corporation (IDC) which provides industry analysis and market data on the sector – it predicts a 10% growth in ICT in Finland over the coming years.

Finnish up

Nokia chairman and CEO, Jorma Ollila recently reinforced the positive mood when reporting the company’s third-quarter results. He is predicting significant growth at the end of the year when the new generation of handsets is available to the mass market. This will provide some relief for the telecoms sector which, according to Roel Spee, director of IBM Business Consulting Services-Plant Location International (IBM-PLI), has led the downturn in the whole ICT sector since spring 2001.

There have been extensive job losses in telecoms all over the world. Motorola, the second largest mobile phone producer in the world, has slashed its work force by a third since 2000. In July this year Christopher Galvin, CEO, announced a further 7000 jobs cuts. For an economy such as Ireland, which has based its economic growth on attracting hi-tech and telecoms investments, the impact has been serious. Ireland has seen the loss of many jobs from companies such as Lucent Technologies, Siebel Software and Alacatel. But things are on the up. In recent figures released by the Irish Development Agency almost 1500 jobs in the sector have been created since July, although mainly in high-tech rather than telecoms. All investments come from US companies and range from an MBNA operations centre to an internet security base for Symantec Corporation.

Therefore, despite the dotcom crash, September 11 and the economic downturn things are not all gloom and doom. A report by the Organisation for Economic Cooperation and Development (OECD) on the ICT sector released earlier this year showed signs of optimism.

Holding up

According to the report foreign investment in the ICT sector remains strong. “Through mergers and acquisitions and alliances, ICT-sector firms are likely to continue to seek ways to exploit emerging technologies [in internet protocol networking, radio and optical communications, broadband applications] and bring them rapidly to market.

“Despite the recent slowdown, the ICT sector’s underlying structure and dynamics will ensure it continues to play a leading role in industrial globalisation.”

Adam Breeze, director of TechLocate, agrees: “Since last January things are back on an even keel. They are not back to the same as they were in 1999-2000 but it is doubtful they ever will be. Inward investment particularly from US companies is much more cautious now, involving joint ventures and mergers and acquisitions”.

Most people who work in the sector appear to share this opinion. Employees still display enthusiasm and energy in high-tech companies when interviewed. At IBM’s office in Montpellier, France, workers do not appear to be concerned about the downturn. Super computers are built at this plant, which was first opened in the 1960s and is one of the biggest employers in the city.

IBM is currently working on a grid computing system that will help to harness the computers’ energy while they are not being used as an important step to “establishing a communications infrastructure”, according to Jean-Francois Pachot, products and solutions support centre manager at the centre.

This is one of IBM’s main southern European offices and has helped to establish an ICT cluster in Montpellier which now includes Dell and Palm Computing Europe. What originally started as a manufacturing base has moved to develop services such as data storage and grid networks.

The offices are also used as a base to train IBM employees from all over Europe. Five years ago 1500 employees out of 2000 were involved in the actual making of the machines at the site nowadays it is only 150.

According to the OECD report the focus of new international investment in ICT is shifting from manufacturing to services activities. This has led to the growth of new clusters particularly in Eastern Europe. In results provided by IBM-PLI, Europe is the only major location for ICT that did not experience a decline in FDI projects over the last five months.

US blues

The US, in contrast, has experienced the greatest decline in projects. In terms of inward and outward investment, the share of North American companies in ICT projects fell from 55% in May to 50% in September 2002.

Ms Aura admits Finland has had no problems attracting investment from its normal European sources – the UK, Sweden and Germany, but has noticed investment from US companies falling off slightly. Phillipe Cevetti, marketing director for the Cote d’Azur area in France, agrees: “There is a difficult economic situation at the moment, we are waiting to see what happens. Although this year we have had 45 new investment decisions and 1600 jobs created”.

He knows that in other French regions where large US companies such as Lucent, Nortel and Compaq have investments, there has been downsizing. He adds that Sofia-Antipolis, the high-tech park in the Cote d’Azur area, has not been that badly affected as it focuses mainly on research and development and it is manufacturing that has suffered mainly.

Mr Breeze emphasises that even though US companies coming into Europe are taking a more risk-adverse view towards investment decisions, the best locations are still in demand. He says: “Large ICT companies still have to be right at the heart of things so traditional locations such as the south east of England, the south of France and Scandinavia are still in demand.”

OECD predictions that new clusters are emerging in Eastern Europe is backed up by the IDC’s expectations that the IT services market in the Czech Republic will exceed $1bn by 2005. “The IT services market in the Czech Republic experienced double-digit growth in 2001 despite low spending levels for IT services globally.

Vladimir Kroa, programme manager for IT services at IDC Central and Eastern Europe-Middle East and Africa, says: “Several factors contributed to this phenomenon. First, central Europe became a safe haven in the time of political and economic uncertainty in other parts of the world. Second, the dotcom craze never really developed in the Czech Republic, and thus did not experience a crash. Third, Czech banks were transferred to foreign hands, resulting in increased IT investment,"

Outsourcing appeal

The Czech Republic is at the receiving end of an outsourcing trend, which sees users pass management of their IT infrastructure to professional companies in order to concentrate on their core business. According to Rene Samek, director of UK and Ireland operations for Czech Invest, the country is in competition with other European countries such as Portugal and Ireland as well as locations such as India. These locations offer technical expertise and increased business efficiency as services are available at reduced costs which must be the aim of every rationalising ICT company in the US and Western Europe in the current economic climate.

Estonia has also proved to be a good investment location for outsourcing with a highly skilled population, proximity to Scandinavia and access to the huge Russian market.

The IBM–PLI figures show that Asia has increased its market share of FDI projects over the last five months. India has led this by rapidly becoming one of the main destinations for outsourcing functions. Indian IT companies develop and control software for all types of systems in western countries. Infosys does work for the UK’s National Health Service while Tata Consultancy (TCS) added to its contracts by signing an agreement in September with AT&T Wireless to develop a Global Development Centre in Chennai, India.

TCS makes software for niche segments such as financial trading and clearing systems, internet banking, human resources, healthcare and insurance.

According to Girish Ramachandran, TCS’s regional manager for the Netherlands, 70% of all clearing transactions in the world pass through the systems of TCS. Offshore development centres were to some extent pioneered by the company which has developed these for 22 clients, including Merrill Lynch, Nortel and Ericsson.

These IT services include India’s massive contact centre and business processing operations which have attracted companies such as British financial services giant, Prudential which announced plans to move hundreds of contact centre jobs to Bombay last month. Although this sector on its own cannot help to pull millions of people out of poverty in India, it helps the country to be pictured differently in the world. India’s new image is as a high tech location to match those in the US and Europe.

This summer an HP mobile e-services camp was also held in Beijing. This transfer of knowledge is extremely important in the development of the sector in China. Under the guidance of Mr Vesterbacka, a whole generation of Chinese mobile services developers will add to the attractiveness of the country as an R&D base.

Chinese investment

Over the last decade there has been a move away from the traditional labour-intensive investments in China to more value-added projects.

According to the OECD report there are now more than 100 R&D centres established by companies including Lucent, Motorola, Nokia and IBM. Microsoft has invested $80m in a Chinese research institute and recently announced a further investment of $50m in a Microsoft Asian technology centre in Shanghai.

India and China represent emerging markets in which the sector is growing and shows how the prospects for ICT investment are opening up to a wider range of locations. For investors it means a lot more travelling to find the best place to invest but great opportunities for those who make the effort.

Berlin looks better

Berlin may not have previously conjured up images of creativity but it is now considered the new media capital of Germany. Companies invest in Berlin if they want to be at the cutting edge of the digital revolution. After five years of targeted promotion of its ICT sector, it has attracted hundreds of companies to relocate including Sony’s European headquarters.

Due to its history, Berlin has several advantages over other German cities. It is cheap to invest there with a surplus of property and people. The large student population provides skills and enables 250 research institutes to flourish, 85 of which are involved in software. According to Adam Breeze, director of Techlocate, the software developed rivals that of the south of France and the south east of England: “It is a great example of a city which has had to re-invent itself.”

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