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How Important is Nokia for the Finnish Software Industry?

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Since Nokia announced the change in their software strategy and decided to partner with Microsoft instead of continuing to rely on Symbian, we have been approached several times by media with the question:

"How important is software development that is done for cell phones for the Finnish Software Industry?"

Unfortunately, we currently have no definite answer to this question. However, the question is indeed on our radar for the soon-to-be-launched 2011 Software Industry Survey. Before the new data is in, we can still search our old data for some clues on the subject. In 2010 we focused more on the question of "who is your customer", which e.g. revealed the large portion of B2B and the dismal portion of consumer software. However, we did not go as far as to look into specific technological platforms in connection with the customers' industries.

Looking back a bit futhrer, the survey did include a question about customer industry in 2006 and  2007. At that time so-called "vertical software" was a hot topic in Finland. The idea was that instead of focusing on general application software, firms should specialize in serving a particular industry. The question was later dropped because the classification contained overlapping categories, some of the categories were of different size than others, and the question generally was not very reliable. Nevertheless, this is the best data that we have at the moment about the industry focus of Finnish software companies.

The figure below show the frequencies how four different mobile phone related industries were chosen from the list that totaled 29 named industries. Based on this figure, a fourth of the software companies in 2006 and 2007 that responded to the software industry survey developed their software for the telecom sector. Although the reliability of this figure has room for improvement, it still shows that the Finnish software industry at the time was very telecom focused.

 

The next question is how these companies have developed over time. I used a three-year compound average growth rate as a measure for success and have listed the mean for this statistic grouped by customer industry in the table below.

Customer industry 3 year revenue growth (CAGR) Number of firms
Electronics and high tech. 14.1% 10
Information and com. tech. 8.3% 47
Telecom industry 10.6% 11
Mobile industry 2.6% 12
Other industries 3.2% 146
No particular industry 11.0% 82

These figures show that generally the companies focusing on telecom related industries have grown faster than companies focusing on other verticals. What is more interesting is that the firms that were not focusing on any particular industry seem to have grown faster than other companies. Among several possible explanations, being too focused on a vertical might not have been the best strategy for those companies.

For the 2011 survey, we will focus on mobile software development from two different perspectives. First, we will ask the companies to indicate on which platforms they develop software for. Second, we will ask the companies to rate how well several statements related to Nokia match the situation that the company is facing currently. I have included the current working version of these two questions below for commenting. Changes can still be incorporated during the next two weeks, so comments on making the survey better would be welcome.