Can the UK Succeed in a Global Software Economy

Can the UK Succeed in a Global Software Economy?

- £20 billion annual contribution to UK economy at risk from skills shortage

London, July 5th, 2006: We’re all familiar with the decline of manufacturing in the UK – once the largest in the world. Is the UK software development industry at risk of following it? A major new report published by an initial working party including LancasterUniversityManagementSchool and the British Computer Society examines and highlights the facts.

Three months ago, the Office for National Statistics (ONS) revised its criteria for calculating the value of software production to the UK economy. This led to a massive leap in its estimated value, with the figures for 2003 rising from £2.5 billion to £20 billion. According to the ONS, there are some one million workers involved in the UK software industry, including both commercial developers and those designing software for in-house use. But this million-strong workforce and its £20 billion contribution to the UK economy is under threat.

Those involved at the start of the software industry some three decades ago are now moving toward retirement and there are simply not enough graduates waiting to take their place. The number of UK students applying to study Computer Science has halved in the last five years. Even if the numbers of students recovered to previous levels, there would still not be enough to meet the demand for software developers.

“With the same passion that young people enjoy the music players and computer games which the industry develops,” says Matthew Bishop, Senior Director of Microsoft’s Developer Platform Group. “They need to realise that their own futures can lie in creating the software that enables those experiences.”

“The UK faces an acute and growing shortage of high-end software skills,” warns Bishop.“But there is an opportunity to confirm the UK as a creative hub, combining the invention and innovation instincts and design excellence that have characterised other UK successes.”

The report clearly shows the need for industry, academia and government to work together to raise the profile of an industry that contributes £20 billion annually to the UK economy and to make it an attractive career choice once again. It highlights a growing skills gap in the UK which is especially problematic in computer science and its related industries. It calls for all those involved to work together to fill this gap by encouraging more students to take computer science as a degree subject, attracting more people to re-skill as software developers and to persuade companies to train more new recruits into software development.

Also highlighted as a threat to the industry is that insufficient UK software developers are being trained in the higher level skills that will be in demand in the future. Other countries in Asia and Eastern Europe are showing they can do the same quality of sophisticated software development work as the UK but at lower cost and are producing hundreds of thousands of relevantly-trained graduates every year. Academia and employers are not communicating effectively, meaning that courses and jobs are often out of step. The high quality of UK software innovation is often not matched by the business skills necessary to encourage capital funding. As a result, high-tech University spin-out companies often attract lower levels of funding than their non-University counterparts.

The report also points out that the UK software industry lacks a unified voice and that only by acting now can the UK ensure that the basic skills in software development, currently being lost to off-shoring, are replaced by more high-end, value-adding development skills that will remain in the UK.

UK Software Industry Key facts:

Employs almost one million people
Contributes an estimated £20 Billion to the UK economy
Needs almost 150,000 new entrants every year
First generation of IT workers approaching retirement age
No longer perceived to be an attractive career
In the last five years:
50% drop in applications to computer related degrees
47% drop in systems engineering students
60% drop in software engineering students
Down to 20,000 new IT graduates per year
200,000 ‘basic’ jobs will be off-shored by 2010 - equivalent to the population of Brighton
Clear and present danger to high-end jobs from Eastern Europe and Asia
Acute and growing shortage of high-end software skills
Software companies account for 22% of the companies invested in by venture capitalists, but only receive 5% of the total funding

Calls to action:

Technical innovators must develop better business skills to attract venture capital
Academia and employers must communicate more effectively
IT must re-establish itself as an attractive career
UK software industry must develop a clear and unified voice
Take advantage of creative environment in the UK to set apart its software industry throughout the world

The report will be published on Wednesday July 5th at The Cabinet War Rooms, Whitehall. Senior Microsoft personnel will discuss the report’s findings alongside representatives of leading trade associations and other companies involved in the report’s preparation including:

Elizabeth Sparrow, BCS

Prof. Edward Truch, LancasterUniversityManagementSchool

Bola Rotibi, Ovum

Tilly Quanjer, eSkills

Matt Bishop, Microsoft

Mark Quirk, Microsoft

Notes to editors

About Microsoft Corporation

Founded in 1975, Microsoft Corporation (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realise their full potential.

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