This is a remarkable chart:
The title is a little unclear. It refers to the software and computer services indexes tracked by the Datastream database.
I've seen plenty of stories about the sad state of Europe's tech sector, but this chart sure brings it home. It might as well not exist for all the impact it has.
Ain't nothing wrong with their tech sector, as opposed to "software and computer services." They make lots of excellent technology-heavy products, competitive to the best we have here. Yeah, they may lag in high-priced IT consultants providing low-value services, and good for them.
It would be good to have a better definition of "software and computer services".
I know that Heidenhain and Siemens presently dominate the machine-tool controller market (along with Fanuc), but that's because Germany specializes in the export of machine tools (with a large percentage of them going to Russia).
But the software that runs those controllers was first developed in the US by the US government and given away free. The Germans merely wrapped metal around the software, but in doing so and focusing on that, they came to dominate the controller market.
It IS a puzzle to me as to why Europe is so light on software development.
Ok, as many of you might be aware, I am a creature of Silicon Valley. I propose that the answer is more specific than the US. In fact, most of this dominance traces back to the 30's and 40's and the formation of Hewlett-Packard and other labs here in Santa Clara and San Mateo counties.
It is a very specific culture. It requires engineers, managers, marketeers, and very importantly, bankers who understand how to make this work. There are attitudes here that can't be found elsewhere, unless somebody from here has decided to export them.
I don't expect you all to buy this, because mostly the rest of the world has looked here and not really believed, gone about their business - which has been successful, in many ways.
It's about failure, and having a very high tolerance for it. VC's lose their investment in 4 out of 5 instances. Investors elsewhere do not have the stamina for that. This is "move fast and break things" as an engineering credo. Yes, much of the world mocks this. I'm pretty sure many of you have mocked it. And we have the chart above.
If Steve Jobs had been born somewhere else, he might still have been very successful at business and marketing. But we also might never have heard of him. Apple Computer could not have been created anywhere else. It doesn't even make sense. But in the Valley that Bill (Hewlett) and Dave (Packard) built, it did make sense.
Doc, I like your explanation. And I would guess that the seeds of technology entrepreneurship and speculation, having germinated and thrived in The Valley, were then wafted on the prevailing westerly winds to faraway places in the USA--Central Texas, Massachusetts, and recently, Virginia. Perhaps others I've overlooked.
There's still some of that old "Pioneer spirit" left in the USA.
I can believe it. There tends to be stronger stigma against business failure in Europe, less capital investment for them to run losses, and much less favorable bankruptcy/liquidation laws to start over and try again.
I don't know. This sounds like the story Silicon Valley likes to tell itself and sure there's more than a grain of truth but it's also way overblown. First of all, before there was Silicon Valley "America's Technology Highway" in the 50's and into the 60's and beyond was Route 128 around Boston . Second, I know to you Californians this comes as a shock but the IBM Mainframe that was born in 1964 was developed in New York and dominated business computing for a generation and is still a necessity in most of the Fortune 500 companies. So, please get over yourself just a little bit ..And while we're at it can we get over the cult of Steve Jobs. Yes he was a remarkable entrepreneur. I got it. Now give it a rest.
Last, I am very leery of this chart of Kevin's. I think there's a lot more tech going on in Europe than this chart represents. I don't really know exactly what it is being measured and I can't find where this chart is coming from.
Cheers from the East Coast.
It was IBM that jump started Gates and Microsoft. We'd be singing a different tune if the folks at Dr. Dos were in when IBM came a'calling.
Oh yeah? Well we have better surfing!-)
Speaking of Silicon Valley, I don't think it becomes what it is without Stanford and UC Berkeley.
Stanford has students from all 50 United States, with 36% of students coming from California, and 50% from the other states—students from all 50 states are found on campus. The remaining 14% of students are international, representing over 70 home countries.
A plus one if for no other reason than correctly spelling Hewlett-Packard, with the hyphen!-)
Ah the times I’ve wished to apply an HP P/N 19511-80014 to the craniums of those getting that wrong 🙂
I think that this leaves out the biggest cultural trait that allows Silicon Valley to be what it is, namely:
Willingness-- on behalf of the funders-- to let techies get really, really rich.
Say you are a brilliant 25 year old techie. You think you are smart enough to rock the world and the drive to try it. Where do you want to be?
The Netherlands is nice and ASML is a great company. But no techie gets Bezos/Brin/Jobs/Ellison/Packard/Musk rich by working for ASML.
Indeed, no western European country will let that brilliant 25 year old techie get that rich. They'll put the techie under the umbrella of an established company like ASML or Siemens or Zeiss. The company will be run by a business person. The profits from the techie's labor will flow to the shareholders.
You can't have the engineers running things. It would upset the social order.
I don't know if it's typical, but I was involved in a project a couple of years ago where we had to use a SAP platform. I think they actually had fugitive Nazi doctors design it, because I have never used a piece of technology so completely user-unfriendly, clunky, and counterintuitive that I came to suspect I was part of some kind of psychological torture experiment.
Yeah, German software is a trip. I've wrestled with software products from Univention. I found it to be totally counter-intuitive.
OMG, SAP is insanely bad. I'm not saying BPCS is great, but it is masterful software compared to SAP. Yet everywhere SAP is taking over.
When my former employer adopted it, I checked into the reasons given by management. Everyone of them was a lie. Then using it, I felt like tearing my hair.
It is old, old software that has been hacked to make it sort of work some of the time. I suspect that its success is due to kickbacks, gifts, and bribes...no way to prove that of course.
I use a very nice extension package with Xojo, a cross platform BASIC variant. It was developed and supported by a German firm. I think it's largely a one man operation, but it covers a lot of ground.
Good for Europe.
The tech sector is a cancer and it's bros are gonna kill a lot of us if we let them.
Not surprising. The tech sector has been one defined by capital-heavy startups and a high rate of failure that's offset by the huge successes, and most European countries have poor legal and financial conditions for that:
1. Unfavorable legal regimes that tend to disproportionately weigh on new companies trying to get big, and also make quick bankruptcy dissolution difficult in case of a business failure
2. Weaker stock markets limiting equity-style investment
3. Overall smaller markets. The EU is a fragmented mess of a market compared to the US domestic market, which is so large that it allows companies to become internationally competitive before they even need to strike out in international markets. It's telling that the other source of big tech companies is China, which has the same giant market plus their own kind of protectionism.
The irony is that they're not actually trying to destroy their own software sector - what European tech startups there are tend to be implicitly or explicitly exempted from the rules the European Commission keeps trying to slam down on US tech firms. They're just creating very unfavorable conditions, and what tech startups start there tend to recognize what that means and depart for the US as soon as they start scaling up.
I just have to say that this is a pretty terrible chart in terms of clarity.
I mean, if I look at it one way, it suggests that "Europe excluding Eurozone" consistently has had a slightly higher value than the U.S. which is obviously not the case, maybe sandwiching levels on top of each other is a poor way to visualize their comparison.
Yeah this chart is horrible. So Europe's amount is whatever the width of that line is?
Europe does fine in certain aspects of tech, certainly the low level hardware stuff (ASML, Zeiss) or CPU design (ARM).
Where they (and the rest of the world) fall apart is in consumer-facing software, most obviously "platforms" and the tier-one apps that runs on them.
Anyway can throw out theories for why the US dominated these; and I'm not sure how one might test them. The 70s was a time of many OS's around the world, and it's unclear why it was Apple and MS that won. The 80s had multiple workstation OS's, and an alternative world could perhaps have had one of those move downmarket (as, in a sense, NeXT did...) The 90s and early 2000s had multiple phone OS's, and again one of those in theory could have take off (as one of them in fact did – once they saw, in iOS the target they were aiming for).
There were European (and Japanese, and even Canadian) possibilities. But every one of them seems to have come with fatal flaws.
I suspect the most interesting way to look at this right now is to examine the failures (and walking dead) of Asia: Tizen and suchlike that supposedly (still?) are one day going to take over non-Apple watches, or the various Chinese non-Google Androids, or even WeChat, the OS that doesn't call itself an OS. Why did they fail (or not fail)?
Well WeChat because the government wanted a homegrown app they could control so out come the subsidies and bans.
More Reaganite jingoism from Kevin.
There would be no semiconductor industry without the Dutch company ASML. It produces the photolithography machines used in the production of computer chips. It is the sole supplier of extreme ultraviolet (EUV) lithography machines needed to produce the most advanced chips.
Yup. Their regs are 1/2 "we need to regulate" and 1/2 "we can't stand American dominance."
Nokia is huge in...oh, nevermind....
That chart is impressive--now do it without Apple, Alphabet and Microsoft....
I suspect it's a clustering effect coupled with immigration policy. All the top tech companies are in the United States. It is relatively easy for highly skilled Europeans to move to the United States. Therefore, Europeans who want to work in tech and have the skills come here instead of building tech in Europe.
Two of the biggest tech companies in the US are Google and Facebook/Meta, and they're basically advertising and media companies like the old networks, ABC, NBC and CBS. Netflix is simply a media company, a distributor and producer. Amazon is primarily retail, but it makes a huge pile advertising on its marketplace. It's real strength is as a logistics company and its online retail monopoly.
Microsoft and Apple are the two closest to being actual tech companies. Granted, Apple gets $21B a year from Google to support Google's advertising which accounts for a lot of its profit.
The US has a pretty big tech sector, but it isn't as much about technology as they'd have you believe. The big bucks are in the advertising market, but the European advertising market is more fragmented and less consumerist.
DARPA