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Danish IT industry booming

In the past two years, major foreign IT companies have established or expanded their development divisions in Denmark – and Danish IT entrepreneurs are increasingly securing new capital from both Danish and foreign private equity funds.
Click on the image to view the areas to which some of the largest IT companies have chosen to locate in Denmark. Illustration Belle Djerberg  

Publiceret: 07.12.2016
Af Rikke Brøndum mail

‘India to become an IT superpower’ stated an article in Information, the Danish daily, in December 2003 and predicted that the biggest slice of the world’s software development – including Danish software development – would move to India.

But this prediction has since proven to be very wide of the mark. Denmark is currently well on the way to building up a leading position in Europe in the development of new software. In the past two years, companies such as IBM, Microsoft and Uber Software Development have either set up or expanded development divisions in Copenhagen, Aarhus and Aalborg.

A statement published by Invest Europe representing European private equity funds shows that of the Nordic countries Denmark currently attracts the largest share of investment from foreign funds. It is especially IT companies such as Vivino, Trustpilot and Falcon Social that are drawing money to Denmark.

“We are increasingly seeing that foreign IT companies view Denmark as a unique innovation laboratory. The fact that Microsoft, for example, has its largest European development centre in Denmark and that IBM is now setting up an innovation centre with 250 employees here is no coincidence,” says Steen Hommel, director of Invest in Denmark.

He points out that Denmark is a leader on several parameters when it comes to digitisation.

“We offer access to highly qualified IT specialists and the Danes and Danish businesses are good at using digital solutions. These large foreign IT development centres generate increased attention and may potentially attract other important IT investments,” he explains.

See also: Digital hub to make Denmark the digital test center of the world

Recent graduates in great demand

These developments can also be felt in the job market. This year admissions to university software courses rose by 62% compared to last year and new graduates are being snapped up.

“There is a very great demand for software graduates, especially those who specialise in algorithms and big data. This year, we doubled our intake and instead of applying to the Danish Ministry of Education for a grant, like we usually do, we financed this expansion ourselves because the need is to acute,” explains Mads Tofte, rector of the IT University of Copenhagen.

It is not just in Copenhagen that recent graduates are able to land a job by just snapping their fingers. In the case of Uber Software, it was the Danish developers and the environment in and around the Katrinebjerg research environment in Aarhus – where Google also has its development division – that secured the investment.

See also: Tech giants love Denmark

Financial sector supporting the IT industry

With new IT entrepreneurs attracting investment from abroad and well-known, established players, such as Microsoft and IBM, the contours of a real IT cluster are starting to form. It is still too early to proclaim Denmark Europe’s IT hub as competition from Sweden and Germany is still fierce.

“But there is no doubt that we now have a critical mass of Danish IT companies such as Simcorp, Sitecore, NNIT and Netcompany. The narrative from the start of the noughties that Danish businesses would all outsource their IT to Asia is something we can now definitively say was wrong,” says Mads Tofte and refers to the financial sector which is helping to attract new IT developers and entrepreneurs.

See also: Historical growth boosting the technological revolution

Copenhagen is currently branding itself as the new fintech hub which aims to gather the best IT developers for the financial sector.

One example is Tradeshift which this summer received a capital injection of USD 75 million without even looking. Accenture has calculated that investments in Danish fintech companies from 2012 to 2015 increased from USD 8 million to USD 168 million.

This means that Denmark is fast catching up with Sweden – which has otherwise been a leader in this field – and is now a player in attracting more foreign operators to the field of financial IT.

Especially British developers are looking for new countries in which to establish themselves because the United Kingdom’s exit from the EU may make getting their services approved in the rest of Europe more difficult.

“The financial sector was one of the first industries in Denmark to embrace IT as part of its core business. Most people are familiar with MobilePay, of course, but there are many other forms of IT that are currently being developed for the sector. Both the banks and employee unions are working to brand Copenhagen as a new financial IT cluster that will be able to generate new business in this area,” explains Mads Tofte.

See also: The processing of data cannot be prioritised highly enough

Red alert on the horizon

 
Despite the increasing number of money streams and success stories, Denmark’s competition with its neighbours is still fierce.

The Danish government’s latest prognosis shows that Denmark will be short of 19,000 IT and electronics specialists by 2030.

The general framework, such as tax on profits, also affects the inclination to invest in Denmark. Denmark still only occupies seventh place in Europe in terms of ability of countries to attract venture capital investments measured against GDP.

“When we look at the big picture, there is no doubt that access to qualified employees will be a hindrance in future. We should, of course, be happy that the graduates we have are able to attract the big players to Denmark and to start new, successful businesses that bring capital from abroad. But if they are to remain here, we have to ensure that they also have a good environment in which to operate,” says Adam Lebech, industry director at DI Digital. 

THE CONFEDERATION OF DANISH INDUSTRY BELIEVES

  • The business community and schools should work together to boost interest in IT and technology among pupils and upper secondary school students.
  • Universities should increase their intake for computer science, engineering and natural science courses.
  • The Danish government should relax requirements for residence permits for foreign IT specialists.

Find out more about the Confederation of Danish Industry’s digitisation efforts

We are increasingly seeing that foreign IT companies view Denmark as a unique innovation laboratory.
STEEN HOMMEL, DIRECTOR OF INVEST IN DENMARK
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PUBLISHED: 12/7/2016 LAST MODIFIED: 12/7/2016