ictpioneers.web-log.nl

Welcome to the ICT pioneers ZONE!
Welcome to the world of ICT!

This weblog is published for the course 0EE30, Technology Policy, given provided for the master Technology and Policy at the Technical University of Eindhoven. It will describe the ICT sector in the Netherlands and especially focused on the software market.
During this research we proposed a specific research question:
"Which position does the Dutch government held in the EU debate on Patent Software Regulation with respect to the small and medium sized Software firms?"

The web-log will be up dated twice a week.

Team members are:
Dave de Lang
Pablo Stefanni

"The Dutch and Italian pioneers"

Thank you for visiting our web-log!

references

References related to the patent activities in software market :

References that can be useful in order to know in deep the argument on pro and cons Software Patent Activity. Special thanks to Robert Hart (Independent Consultant), Peter Holmes School of European Studies, University of Sussex and John Reid IP Institute on behalf of Intellectual Property Institute Suite 15-17, 2nd Floor Outer Temple 222-225 Strand London WC2R 1BA.

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group assignment 4

Characterising of available strategies in technology policy

In summary, when addressing the issue of software protection, the following points should be considered:
1. As in other areas, patent offices should ensure the quality of software-related patents. Patents with extremely broad, abstract claims have sometimes been granted, notably in the field of Internet-related business methods. Not only should patented inventions be novel and not excessively broad, but patent documents should also disclose all the information necessary for a person skilled in the art to be able to replicate the invention in a reasonable period of time. The information disclosure requirement should be subject to the same standards prevalent in other fields of technology, which stress the importance of publicizing patented source code for software-related inventions.
2. The interaction of patents and copyright may be an obstacle to the diffusion of technology in this area, and thus further innovation, as patents protect the invention whereas copyright forbids the publicity of the way in which the invention is implemented by forbidding reverse engineering (Graham and Somaya, 2003). In addition, as copyright forbids reverse engineering (closed source code is protected as such), and as software patents do not have to reveal their source code, disclosure of software knowledge is clearly hampered in the current IPR setting. This calls for government attention focusing particularly on the cross effects of copyright and patent, and on insufficient disclosure requirements in software patents.
3. Software is pervasive. Less than 10% of software patents in the US are granted to software companies. Actually, according to survey data, between 25 and 40% of business expenditure R&D in all industry has a software-like outcome, reflecting the fact that many operations which used to be monitored by mechanical means are now mediated by software. Hence, a 26 special treatment of software in general regarding IP might affect patterns of innovation beyond the software industry, and create unintended effects on the R&D industry-wide.
4. Important segments of the software market are moving towards an open-source approach, which clearly helps disclosure and follow-on innovation, but the viability of the economic model for open source software is uncertain. In current open source approaches, attracting financing for innovation is not as straightforward as with proprietary, closed source software that is sold in the marketplace. To date, rewards to open source innovation have been essentially non-monetary (e.g. reputation) or based on the provision of complementary services (e.g. customization, support). It would be worth exploring whether patent protection could be useful to open source software developers in creating sustainable business models and markets for technology, while guaranteeing the disclosure of source code. One aspect of this question is that patents might provide, as in other fields, the protection that inventors require to fully disclose their inventions - a necessary condition for an open source approach.
5. Dutch Government orientation and general information: The software market, estimated at about USD 5.4 billion in 2003, was still the fastest growing segment within the Information Technology sector although reported growth figures dropped to single digit percentages. Approximately 65-70 percent of software products available in the Netherlands are imported. The United States is by far the largest supplier (e.g. Microsoft and other multinational software producers) followed by European software producers in Germany, the United Kingdom and France. Windows is the standard in the business market, although government and business are starting to use Linux as well. While UNIX is still the most commonly used operating system for servers, Linux' market share is estimated at 15-20 percent and has now started to grow in importance. The Dutch government announced a special program to promote the use of Open Standards and Open Source Software within the government. The government and financial sectors traditionally have been major end-users of all types of software products. The business market, with an increasing need to streamline business processes, has also been a significant user. More recently the SME market has begun to emerge as an attractive new market for ICT suppliers, while the consumer market has also grown rapidly in recent years due to increasing use of the Internet, games and online gaming.
The analysis can be completed looking at the experiences that Japan and US SMEs have had (and have now) with pro software patents policies. It's necessary remark that in those countries, there are different cultures and laws but they are Industrial World Leader and something is possible learn.

Japan:
There is no evidence that Japanese independent software developers have been unduly affected by the patent positions of large companies or of others. We also understand from Japanese contacts and other sources a) that a major effort has been put into making industry, including SMEs and independent software developers, aware of developments in the law world-wide on the patentability of computer program related inventions; b) that Japanese independent software developers are using the patent system especially because patents help them bring their innovations to the market, world-wide; and c) that the Japanese authorities intend to harmonize Japanese patent law as close to US law as possible.

US:
There is a controversial situation:
1. On the one hand there is abounding evidence that the profitability and growth of independent and SME software developers in the States has often been to a significant extent dependent on possession of patent rights. Developers of open source software may find advantageous to file patents to obtain bargaining positions e.g. license money from owners of proprietary platforms. In any case the historical position of the open source community is compatible with recognition that a developer could in any case want to obtain patents on specific applications.
2. On the other hand, there is deep concern:
- That patents are being granted on trivial, indeed old, ideas and that consideration of such patents let alone attacking such patents is a major burden, particularly on SME and independent software developers;
- That patents may strengthen the market position of the big players; and
- That the computer program related industries are examples of industries where incremental innovation occurs and that there are serious concerns whether, in such industries, patents are welfare enhancing.

Consequences from the strategies mentioned The sensitive area in which we want address Technology Policy is the protection of the Dutch Small and Medium Enterprises from pro - software patent. Following the way undertaken from Dutch government on the development of open source software and analyzing several documents, scientific papers and news paper articles mentioned in the references seems reasonable argue that it's necessary to refuse ( as Dutch government has already done in 2005, but the debate in EU is still opened) each attempt addressed to allow software patent activity. In Software sector the innovations are typically of a cumulative nature building on previous generations(C, C+, C++), what is an incentive to a first generation innovator is a burden placed on the next generation. The creation of "patent - portfolio" is the main risk that can take place, and it would allow few Software MNCs to operate in monopoly regime with high risk for the development and survival of Dutch SMEs. The incentives must be furnished by protective law, or more easily, holding the current legislation and position on open sources software development. Open-source software is an important alternative to proprietary platforms. An example of the growing importance of open-source software is the support being given by IBM. (This involvement by IBM is, we believe, a straightforward response to customer needs.) A necessary feature of the propagation of open-source software is copyright and the cascade licensing of it e.g. through the GNU General Public License. The open-source community considers patents a threat to the development of open-source software and aims to ensure that patents do not affect such development. This is a consistent position. The GNU General Public License contains the statement "we have made it clear that any patent must be licensed for everyone's free use or not licensed at all". Friedman (1998) argued that "a single program incorporates many different algorithms, some invented by the programmer, some borrowed from general practice and some perhaps deliberately copied from a known originator. If algorithms are private property the costs of figuring out which of the ones you are using belong to whom and negotiating the necessary licenses may be high. So the argument against making algorithms private property is similar to the argument against making words private property". From the information gathered seems useless to furnish economic incentives for the Software Sector development because the entrance barriers are very low (one computer, one software engineer and one room) and, as mentioned before, is more vital for SMEs guarantee the public knowledge.

It's clear that the two main strategies to follow are pro or cons the Software Patent activity. Advantages and disadvantages can be quantifiable looking at the sector concentration that could take place in both cases. Can be useful, try to describe the back bone of the software development and look how this can be modified from pro and cons strategy. Software products tend to be "systems" constructed from many different pieces. Allowing patents on pieces of software creates an untenable need to secure or at least consider many different licenses in order to market any given product. The above need for multiple licenses will favor large firms that can amass patent portfolios and thereby bargain for cross-licensing. The genius of the software industry is in small firms that will be driven under. In order to work, distinct pieces of software need to interface with each other, to provide inter-operability. Standards are needed. Patents on elements of standards or interfaces can provide very broad monopoly power. Software changes so quickly that it will have changed by the time a patent is issued. Many of the patents being issued are for software ideas that have been around a long time.

Summary of Proposing strategy

In few words our recommendation will follow in this chapter.
The main subject the dutch software sectors in the Netherlands should take more care on is what we call the HSM procedure:
- How to handle their knowledge.
In the past the Netherlands showed that their are able to provide good technology. But they can do more. The government should support firms to use (non) public institutions and reward new innovations so firms will be stimulated to take care of innovations.
- Software market in The Netherlands should be more protected based on patents.
When new technolgy are developed, firms should be aware of patenting their new products. Immitating or revising of their products by other firms or countries goes very fast.
- More competition to the world market;
When the Netherlands are able to take care of the last two points, this last goal will be achieved easily.

References related to this article:

Websites:

http://www.freepatents.org
http://techdeals.findlaw.com/licence/index.html
http://lpf.ai.mit.edu/Patents/industry-at-risk.html
http://www.european-patent-office.org
http://www.ffii.or
http://www.aful.org
http://april.org
http://www.eff.org/pub/Intellectual;property/
http://www.gnu.org/philosophy/
http://www.opensource.org/
http://eu.conecta.it/
http://www.oreillynet.com/pub/a/patents/2000/03/09/stallman.html
http://www.amazon.com/exec/obidos/subst/misc/patents.html/103-9302967-7241443
http://www.e-c-i-s.org/aboutecis.html
http://www.techworld.com/opsys/features/index.cfm?featureID=2391
http://europa.eu.int/comm/internal_market/indprop/comp/study_en.htm
http://europa.eu.int/rapid/pressReleasesAction.do?reference=MEMO/02/32&format=HTML&aged=1&language=EN&guiLanguage=fr
http://download.microsoft.com/download/d/2/5/d2513e64-0dcd-4ef6-89c4-c99ee117936f/EUPolicyHandbook/IntellectualProperty.pdf
http://europa.eu.int/comm/internal_market/indprop/docs/comp/study_en.pdf
http://www.cio.com/summaries/program/open/
http://www.nosoftwarepatents.com/en/m/about/index.html
BEZOS, Jeff www.Amazon.com, 9 March 2000, Internet open letter on need to reform patent system on software inventions
www.pitt.edu/~business/faculty/spreadsheet.html.
www.nber.org/papers/w7280
www.sims.berkeley.edu
http://lpf.ai.mit.edu/Patents/patents.html
www.business.auc.dk/druid/
http://consultation.ffii.org/Background_Information
http://swpat.ffii.org/vreji/quotes/index.en.html
http://swpat.ffii.org/papers/europarl0309/cons0401/tab/index.en.html

Group assignment 3.4

What is the role of Technology Policy

Introduction
Overall the Netherlands counts a large number of software and services firms, ranging from very small, even includes serving niche markets to very large firms. Recently the Dutch Government has begun to stimulate and support entrepreneurs in starting up new businesses and developing innovative high technology products. New companies will assist in the fields of housing, funding and advice, this is also called "Twinning" concept.
Over 60 percent of software products in the Netherlands are imported. The United States is by far the largest supplier followed by European software producers in Germany, UK and France. U.S. companies have successfully opened the Dutch software market using agents and distributors. Companies choosing local representation should carefully select the appropriate partner. They can expect to benefit from their representative's knowledge of the local market, cultural and technological differences, existing customer base or dealer network, marketing and sales experience and support services. Upon appointment, it is important to maintain an ongoing contact with the local business partner and stay informed of market developments. In other cases software firms have established their own sales, marketing and support offices. In recent years a number of European headquarters offices and call centers were opened, using The Netherlands as a gateway into other parts of Europe. Local offices benefit from the professional, highly trained IT workforce, excellent transport system, telecommunication and distribution facilities in The Netherlands. [Carlanda L. Hassoldt, 1999]

Function of Technology policy for Software firms

Technology policy has the objective to generate a succefull "match" between the emerging technological paradigm and the existing institutional structure.
The software sector emerged from a major technology paradigm, the Information and
Communication Technology. The evolution of such a new industry is characterized by a mismatch between the demands of the new firms and the existing regional conditions (Boschma 1997). To develop new technology, firms require new skills and knowledge, while the existing regional conditions are still directed towards previous technologies. A structural adjustment process is necessary in which the institutional structure and regional conditions are adapted to the demands of the new technology (Freeman et al 1982).

It has the function in coordinating different public, non-public and private institutions involved in facilitating the growth of new technologies at national, regional or industry level.
By using institutions dutch firms are able to gain more knowledge and become more innovative. This can result in more patents for those firms. Since The Netherlands do have knowledge but not able or not know how to use it, technology policy could help. Beside helping to use knowledge, it can also help companies by spinning of new firms, or handle with spill overs.

TP provides for dynamic welfare gains, i.e. the generation and diffusion of new technologies and development of new demand structures.
Sometimes it seems to take a long period of time for new technologies to be adopted by those who seem most likely to benefit from their use. This procedure is called diffusion of technology. Software firms are dependend on the time period it takes before their products are adopted.
[Geroski, "Models of technology diffusion", elsevier, 2000]

Technology policy is aimed at facilitating the growth of new technologies by software firms. This can be done by supporting the process of maturating software technology.
[source: Riddle, "SOFTWARE TECHNOLOGY MATURATION", colorado]

Technology policy can promote technological innovation, this by influencing the decisions to innovate within a companie in two ways: by either applying more or less innovative efforts or by improving the productivity of an innovation.
[source: Sadowski, Technology Policy, sylabus, 2005-2006]

Government

Recent Objectives by the Dutch Government:

"Staying strong together" - Strengthen of connections between research, development and applications between demand and supply of research. This because of the stimulation of connections between the ICT- innovation systems.
"More Strategy" - Composing and focusing on research policy. (strategic ICT-research- and -innovation agenda with main points), over the whole "knowledge-chain" of fundamental till the applied research and valorization.
"Becoming stronger" - Structural reinforcing of ICT research (quality, focus and quantity), especially by ending small (knowledge) basis of the (public) ICT- research.
[Source: Ministerie of economische zaken]

Group assignment 3.3

Strategies by the competing firms

This chapter describes the strategies of the competing firms. For comparing strategies of both leading and lagging firms, this chapter will discuss the most leading and most lagging firm. The information described below are from their year annuals.

Strategy of a leading firm: Exact
Exact's objective is to help customers to become more efficient and more successful by using a single and integrated software solution. Exact is a multinational company which is divided in three parts, respectively: The Netherlands, North America and what they call "International".
In the Netherlands, Exact is focused on servicing SMB (small to medium-sized business) market with innovative back-office solutions, nowadays this is changing towards more integrated back- and front-office solutions. In North America, the strategy is focused on the distinct customer need in manufacturing and distribution sector. (with success)
The International group is mainly focusing on subsidiaries of multinationals. Currently Exact International has 42 subsidiaries covering Europe, Middle East, Africa, Asia and whole America. Exact is mainly focused on two products: Exact Globe, an ERP software, which provides a good foundation for making transition to a more processed oriented enterprise. And Exact e-Synergy, this is a Web-based front-office product.

The traditional ERP mid market for standard business software, where Exact belongs to, remains sluggish and fragmented with increasing pricing pressure on products and services. However, the rise of popularity of using internet within businesses, customers increasingly
seek collaborative and web based solutions to seek supply chain cost efficiencies and
better organization of content within the enterprise. Exact is well positioned to respond
to this customer demand with its Exact e-Synergy product, as well as to service the
needs of bigger companies and organizations than Exact catered to traditionally.
Furthermore we expect that standard business applications can drive organizations
efficiencies by connecting to mobile devices that are increasingly in demand with new
generation users. These users demand better and faster access to accurate and useful
data.

Future expectation
Exact is going to focus on issues that are vital for the future of their company: the growing success of the product lines Exact Globe and Exact e-Synergy.
Becoming the best in Europe. Over the years the company has evolved and grown to become the European leader in publishing services. Key to achieving success in this activity has been having the right tools for the job. Exact software - specifically Exact Globe - has been chosen to help the organization face its new challenges and to help it execute its strategy.

Strategy of a lagging firm: Tele Atlas
Tele Atlas is a software company specialized in producing digital map data and dynamic content. Tele Atlas serves foundation for many of the world's most important geographic solutions, this includes: personal navigation, automotive navigation applications, and geographic applications in the enterprise and public sector market.
Additionally, TeleAtlas maps provides the core for many Internet and wireless location based services as well. Tele Atlas does not develop consumer-based applications. TeleAtlas is started to focus on mobile application and device partners, helping them build their businesses by delivering the most up-to-date geographic content available so their customers can quickly and easily find people, places, products and services.

The digital mapping industry continues to benefit from rapid and pervasive technological enhancements. GPS chips are more powerful nowadays, color displays are more functional and both are less expensive and require less power to operate than ever before. Wireless broadband continues to grow in speed and coverage. This has fueled a wave of innovation, allowing TeleAtlas' partners to deliver digital maps through a new class of mobile devices that include smart phones, personal digital assistants (PDAs), and dedicated personal navigation systems. Advancements in point of interest (POI) availability, Internet search, dynamic content, and speech enablement have resulted in digital maps that are richer and more useful.

Tele Atlas also works closely with organizations who are responsible for some of the world's most critical emergency, business fleet, and infrastructure service applications. These providers are enabled into the map data and dynamic content to help their users quickly deliver life-saving services, and to help their organizations maintain business-critical operations. Their partners are depended on Tele Atlas' digital map data, POIs, and dynamic content to deliver valuable products and services in a timely and cost-effective manner.

Future expectations
Even though, the Internet market represents a relatively small source of revenue for Tele Atlas, the rapid introduction of new mapping products among Internet companies let Tele Atlas believe that this segment will become increasingly important in the future. With partners like Google, Yahoo!, Mappy, ViaMichelin, Map24, MultiMap, A9 and MSN, Tele Atlas seems to have a strong position in this market.

Conclusion

Both strategies seems to be succesfull, but there are differences in market structures and cultures. The market of navigation software is very popular at this moment. Inside this market there is high competition. To have a strong position in the market, TeleAtlas should come with new products. Unfortunaltely TeleAtlas is not innovative enough as they should be.

Another difference between both firms is their attention to products. Exact is more concerned to services. If a firm takes care of service this will have an extra advantage for a consumer. They do not have to contact other firms. Beside that, Exact has more control over their product quality. Services seems to be more important nowadays. TeleAtlas does not mention services and so are not really focused on paying attention on this.

Introduction group ass 4.1

Technology Policy

Introduction
Ours pioneer job start to begin really interesting and charming. In order to gain deep knowledge in this sector we have decided to gather as much data and articles as possible. The work that follows represents an attempt to clarify the various actors that participate in this "Game". We have defined it game because it seems the eternal conflict between the good and the evil, the good one and the bad one, the giant and the ant, among "Patent Software" and "Not Patent Software." We have decided to do not choose a "Politics" position, but to individualize, basing on the analysis conducted previously on the ICT Software sector in The Netherlands, the best solution for it. We will publish a series of articles that will serve to us, but also to you readers to understand, what the risks and the advantages are to patent or not the Software. The Software sector is in tumult, especially in these months and reading you will understand because. The two strategies that obviously will be considered, and also the research question are: Patent Software or Not Patent Software in the Netherlands?

Group assignment 3.2

Before to start a winding road, should be useful to furnish some definitions, or frequently asked question, that start to address the problem on because there is a war in act in the Software Sector Software runs your computer, but what kind of software does your company use? Do you buy software from a company like Microsoft or do you use open-source software? Your organization probably already uses both proprietary software (like the kind from Microsoft) and open-source software.

What is open-source software?

Open-source software is software that is built and enhanced through public collaboration. It is free and it gives the user unrestricted access to the source code. The source code shows how the software works in a language that programmers can understand. In order to use open-source software, users must agree to a license, which usually includes the ability to run the program, have the source code, change the source code, and distribute it. When you build something with open-source software you have to provide others the opportunity to do the same thing, which is how the software is further developed. Collaboration is also how problems with the software are detected—glitches are more easily detected when many people look at and use the software. However, some licenses restrict users from putting open-source software into proprietary licensed software.

What are the alternatives to open-source software?
Proprietary software is another way of providing your company with software. Unlike open-source software, it is paid for and does not come with the source code. Companies that develop software, like Microsoft, hire programmers to build and fix their software programs. Microsoft's chief strategist recently sent out a warning against open-source software, though the company has decided to give their largest clients access to the Windows 2000 source code—as long as they don't reuse or modify it.

So, open-source means free?
While the software is free, there are other elements that are not free. For instance, corporations must still pay for training and support for open-source products. But the cost is still less than using proprietary software. Companies like IBM and Sun Microsystems offer support packages for open source software users.

Why doesn't everyone use open-source products?The concept of open-source software is sometimes hard to understand for IT executives who are more familiar with buying software. Concerns about support and accountability are valid when thinking about using open-source software. But supporters assert that open-source is more reliable because problems can be found and fixed quicker. The success of the Linux operating systems (a version of the Unix operating systems and a free alternative to Microsoft Windows) has improved the reputation and increased the popularity of open-source development.

Group assignment 3.1

Competing firms in the Dutch software industry

Dutch competitive markets are open and give access to new investments, both foreign and domestic. The Dutch government is committed to promote competition in the market and stimulates the use of new technologies. There are a significant number of local Dutch software and services firms, ranging from very small (often serving niche markets) to a few large firms. Most Dutch firms primarily target the domestic market with business applications - accounting and administrative software - and custom products. Among the larger, multinational Dutch business software providers are Exact Software, headquartered in Delft and Unit 4 Agresso NV of Sliedrecht, the Netherlands.
[Source: www.Buyusa.gov]

The software market in the Netherlands consist of many companies. From early starters who only do maintainance, small applications and for example internet applications. To multinational firms who provide software for the whole world.
Firms who join the stock exchange are selected to define the market size of the software market and to see which firms are competing in this market. Since they seems to influence the market the most. The general website of YearAnnuals oublishes yearannuals of firms who have a quotation on the stock exchange market. Below here these markets are formulated:

Distance between the leading an lagging firms

There are several methods to analyse which of these Dutch software firms are leading and which are lagging, can be done by several methods.
One way of looking at competitiveness of firms is by looking at their patents share. The firms who own the most patents will have the most profits.

Another way of indicating leaders and laggerds in a competiting market is by looking at their revenues and their profits. In the table below the distance between several companies can be seen:

When looking at the leading companies, the following companies are in this category:
1. Exact with a revenue of E 21,2472,000.00 and a total profit of E 33,402,000.00
2. Getronics with a revenue of E 2,380,000,000.00 and a total profit of E 32,000,000.00
3. Ordina with a revenue of E 383,446,000.00 and a total profit of E 14,882,000.00

Firms who are lagging in the software market are firms with low or even negative profits.
The three firms who are really lagging in this market are:
1. Tele Atlas, with a revenue of E 200068000.00 and a total profit of E -21,840,000.00
2. Lycos Europe, with a revenue of E 125464000.00 and a total profit of E-20,236,000.00
3. Blue Fox Enterprises, with a revenue of E 45308000.00 and a total profit of E-12,520,000.00
So there is a hugh gap between the leading and the lagging firms respectively Exact and Tele Atlas. The same amount of money one firm earns, does the other one lose.

[source: website: Jaarverslag.onfo, http://jaarverslag.info/annualreports][img]

Group assignment 2.2

Rating the Five Forces of the ICT software market in the Netherlands (5 = strong, 1 = weak)

Barriers to Entry - Weighting 1
-The software sector is also likely to have open windows of locational opportunity, because the firms do not require a specific regional condition and entry barriers are low. Starting a software firm only requires a computer and some computer programming skills (1) .
-There are few barriers preventing foreign software companies from successfully importing and selling their products in The Netherlands. As a member of the European Union (EU), the Netherlands applies the EU common external tariff to goods imported from non-EU countries.
-No tariffs or import duties are levied on software products entering the EU countries from the United States
-There are no restrictions on importing or using encryption products in the Netherlands.
-The language spoken in the Netherlands is Dutch. English is widely spoken and becoming a second language to many, particularly in the ICT sector. About 77 percent of the population speaks English, many of them very well.
-Banking facilities for international transactions in the Netherlands generally meet or exceed the rest of the world standards. All banks are accustomed to various international banking transactions.
-The Netherlands is a technologically advanced country with an excellent transportation and telecommunications infrastructure.

[source 1: Haug, P. (1991), Regional formation of high-technology service industries: the software industry in Washington State. In: Environment and Planning A 23, pp. 869-884]

Bargaining Power of Buyers - Weighting 3
-The top 100 Dutch companies, particularly those that process large amounts of data such as multinational firms Shell Oil, AKZO-Nobel, Philips, DSM, and banking and insurance companies, e.g. ING-Group, ABN-AMRO and Rabo Bank and Fortis, have traditionally been among the largest investors in all types of software products and services. The Dutch government, particularly Defense and Transportation have also considerably invested in recent years, as have the public utility and health care sectors. The business market as a whole has also been a significant user. This mean high buyer volume and also high buyer switching costs relative to firm switching costs. At the moment, looking at the market perspectives there aren't high levels of buyer concentration vs. firm concentration.
-High level of product differences, the Dutch software market is composed by small and medium enterprises that tailor solutions for each type of issues.
-High attention to the reputation of the brand of the firm.

Bargaining Power of Suppliers - Weighting 4
-The input is, in one way or another, important to the buyer.
-Suppliers' respective products are differentiated to such an extent that it is difficult or costly for buyers to switch from one supplier to another.
-More suppliers pose a credible threat of forward integration.

Market Growth - Weighting 5
-Total growth market perspective is great. The total Netherlands IT market - software, hardware and services - amounted to approximately USD 13.2 billion in 2004 and is expected to grow to approximately USD 13.9 billion in 2005.
-The computer software market, estimated at about USD 5.3 billion in 2004, was still the fastest growing segment within the Information Technology sector although reported growth figures dropped to single digit percentages in recent years.
-These opportunities are expected to result from the introduction of new technologies, increased use of the internet, as well as requirements for security and storage solutions and the need to streamline business processes.
-The demand for fast internet continues to grow rapidly in the Netherlands and the deployment of broadband connectivity is increasing both in the consumer and the business market. Stimulated by these high technology infrastructures and large user segments, there are new developments in E-business, E - government and E-commerce, as well as a trend toward more portable computing and use of new digital and converging technologies.

Intensity of Rivalry - Weighting 3
-The Netherlands offers a competitive, yet open market, which is accessible and welcomes new investments, both foreign and domestic.
-The Dutch government is committed to promote competition in the market and stimulates the use of new technologies.
-Most Dutch firms primarily target the domestic market with business applications - accounting and administrative software - and custom products. Among the larger, multinational Dutch business software providers are Exact Software, headquartered in Delft and Unit 4 Agresso NV of Sliedrecht, the Netherlands.
-The Netherlands, however, does primarily depend on imports. Approximately 65-70 percent of software products available in the Netherlands are reportedly imported.

Conclusion:
Competitive forces are weak; profitability of the software sector in the Netherlands is high.

Sources:
-Sources used for this survey include information and forecasts from Central Bureau of Statistics, EITO, IDC, ICT Marktmonitor, and various trade contacts, vendors, trade journals and related independent market research studies about the Information and Communication Technology sectors.
-"The spatial evolution of the Dutch software sector: Open windows of locational opportunity?" Anet Weterings Faculty of Geosciences Department of Economic Geography, Utrecht University, 2004
-Boschma, R.A. & A.B.R. Weterings (2005)," The effect of regional differences on the performance of software firms in the Netherlands", Journal of Economic Geography 5, pp. 567-588
-H. Kox, A. Lejour, R. Montizaan (2005), "The free movement of services within the EU", n° 69, CPB Netherlands Bureau for Economic Policy Analysis.

Group assignment 2.1

Which technique has been used for the Dutch ICT software industry analysis?

Understanding the dynamics of competitors within an industry is critical for several reasons. First, it can help to assess the potential opportunities for your venture, particularly important if you are entering this industry as a new player. It can also be a critical step to better differentiate your self from others that offer similar products and services. One of the most respected models to assist with this analysis is Porter's Five Forces Model. This model, created by Michael E. Porter and described in the book "Competitive Strategy: Techniques for Analyzing Industries and Competitors", has proven to be a useful tool for both business and marketing-based planning.
Porter's Five Forces attempts to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry. This model may be used as a tool to better develop a strategic advantage over competing firms within an industry in a competitive and healthy environment. It identifies five forces that determine the long-run profitability of a market or market segment:

- Suppliers
- Buyers
- Entry/Exit Barriers
- Substitutes
- Rivalry

Marketing, Sales and other professionals in just about any organization know how important it is to have answers to questions like: Who is in your 'industry' and which organizations compete against you for the same customers? What are their skills, capabilities, strengths, weaknesses, strategies and so on? Which target markets are they going after? How do they compare to you? And most important: How can you outsmart (outsell!) your competitor? Five forces model provides the answers.

Penetration of broadband use
With a penetration of 19 percent/100 users in 2005, the Netherlands has the highest penetration of broadband use in the world after Korea. A unique characteristic of the Dutch broadband market is the high level of competition among infrastructures offered by telecom and cable operators. About 60 percent of the Dutch users are connected via (Asymmetric) Digital Subscriber Line (A)DSL), with 40 percent hooked up via cable. The demand for fast internet continues to grow rapidly in the Netherlands and the deployment of broadband connectivity is increasing both in the consumer and the business market. Stimulated by these high technology infrastructures and large user segments, there are new developments in E-business, E - government and E-commerce, as well as a trend toward more portable computing and use of new digital and converging technologies.

Internet Users
Internet use is also considerable, increasing from 3 million users in 2000 to 10 million in 2002 and 11 million in 2004. In 2004, there were 2.8 million broadband internet users

Technology and tailored solutions
Among the best prospects for increased growth in the diverse software sector are networking software and security products, e.g. intrusion detection and prevention products, development tools, generally all types of Windows, Linux and UNIX-based products, storage resource management software, E-business applications, e.g. Customer Relationship Management (CRM), Enterprise Resource Planning (ERP) and Supply Chain Management (SCM), database and business intelligence products, application management and content management products, and game software for the consumer market.

Others important driving forces

- Quality of the product/service delivered
- Reliability
- Flexibility and reputation of the supplier
- Innovative approach
- Cost

Group assignment 1.b

Introduction

Purpose of this study is to analyze the situation of the software sector in The Netherlands looking at the regional concentration of firms. The idea to undertake this analysis comes from several information that we found searching on the websites on how much is relevant the geographical location for the growth of the sector. Despite the facts that in software sector the innovation tend to cluster into the firm border and the transportation costs are low, seems that the location play a fundamental role for the firm's survival. Following the problems that we have had to collect specific data on the firms (income, number of employer, export and import performance), we have chosen to base our research mainly on the study of the available literature and also on few data that we gathered on private firms websites. The idea to focus on this sector is also reinforced from the fact that in the last few years several important software warehouses are moving to the open sources system to furnish their product, mainly Linux and big computers producers start to adopt on large scale this system (HP, IBM, and DELL). This lead, especially in the EU to a fiery debate on the patent software regulation that, in briefly mean suffocate the small and medium enterprise that in the case of The Netherlands means the three quarters of the whole sector, but a resume of this debate will be furnished as complementary part of this report. The data and consideration of the software sector in The Netherlands are based on three main papers and are related to the year 2002.

Software sector in The Netherlands (1)
The Windows of Locational Opportunity are assumed to be still open for the software sector in the Netherlands for two reasons. The first reason is that the number of firms active in the software sector (17.991) was still rising in 2002 The Dutch software sector consist of many small firms specialized in niches of the business - to - business market. Therefore, the firms are very dependent on the investment behavior of their customers and a drop in the demand for software products might already cause many exists. Moreover, even when the shakeout has started, such a process might take decennia before the industry will spatially concentrate.

The figure above illustrates the Index of numbers of firms, entrants and bankruptcies (2) from 1995 - 2002 for Nace 72 [source (1): "The spatial evolution of the Dutch software sector: Open windows of locational opportunity?" Anet Weterings Faculty of Geosciences Department of Economic Geography, Utrecht University, 2004] [source(2): Statistic Netherlands 2003]

The second reason why it is unlikely that the software sector benefits from localization economies is the lack of a standardized technology in the business-to-business software market. Contrary to the consumer market, Microsoft not (yet) dominates this market but competes with several UNIX workstations. The quickly growing importance of the Internet also lead to new market opportunities and the battle for market dominance continued. Following these consideration Weterings apply the "Windows of local opportunity model" based on the main assumption(3) that new industries cannot profit from agglomeration economies during the initial phase of the industry due to the mismatch between the new locational demands(4) and existing regional conditions. This stage of the spatial evolution is dominated by a-spatial factors such as spin-offs, network relations and creativity of entrepreneurs to change their environment.
Waterings found positive effects of localization economies on the performance of software firms, the software firms are not yet concentrating in a few regions. Perhaps the software sector is slowly shifting from the initial phase to the second phase of its spatial evolution(5). During this change, cost competition will become more important and only firms with the most competent routines will survive while other firms exit the industry. In other words, a shake-out takes place. However, such a change might take several years. The shake-out in the automobile industry, for instance, took more than 30 years. Our empirical study has shown that the mismatch between the specific needs of software firms with respect to knowledge and skills and the regional conditions has become less. Moreover, software is further standardizing and integrating and more firms specialize in software products instead of only customized production. Nevertheless, still several technologies are competing within the business-to-business software market(6). Perhaps the spatial concentration of the software sector takes place when one of those technologies starts to dominate the market and the role of cost competition increases.
The table that follow represent(7) , in more clear manner how the software firms are distributed on the Dutch territories. The firms indicated represent those specialized in ICT software development, industrial automation, Internet services, network provider (all registered at the chamber of commerce at NACE codes 72101, 72102,7220, 7230, that is the ICT software sector as a whole).

[(3)source: Boschma, R.A. & G.A. van der Knaap (1997), "New technology and windows of locational opportunity: indeterminancy, creativity, and chance. Chapter 7 in: Reijnders, J.P.G. (ed.), Economics and Evolution. Cheltenham:Elgar, pp. 171 - 202.]
[(4)source: Boschma, R.A. & J.G. Lambooy (1999), "Evolutionary economics and economic geography. In: Journal of Evolutionary Economics 9, pp. 411 - 429.]
[(5)source: In order to clarify the two stage of the spatial formation of new industries could be useful the following table (Source: Boschma & Van der Knaap 1997)]
[(6)source: Grimaldi, R. & S. Torrisi (2001), "Codified-tacit and general-specific knowledge in the division of labour among firms. A study of the software industry". In: Research Policy 30, pp. 1425-1442.]
[(7)source: Boschma, R.A. & A.B.R. Weterings (2005)," The effect of regional differences on the performance of software firms in the Netherlands", Journal of Economic Geography 5, pp. 567-588]
[(8)source: The Dutch NACE code 72 is slightly different from the European standard. The standard defines 72.1 as hardware consultancy, while in the Netherlands code 72.1 includes consultants concerning automation and system developers (OECD, 1998). Consequently, firms registered at NACE(8) 72.1 in the Netherlands might develop their own software and are, therefore, included in the survey. NACE 72.2 covers consultancy activities for software and software development, and NACE 72.3 data-processing activities.]

The problem that we want analyze is:
Looking at the firms geographical distribution, at the characteristics of the Dutch software sector (mainly small and medium enterprises) and at the emerging problems on EU software regulation, which way have to follow the Dutch policy makers in order to exploit the potentiality of the sector?