Developing

the Future
2007 A report on the challenges and opportunities
facing the UK software development industry
 Foreword 3

GORDON FRAZER
MANAGING DIRECTOR, MICROSOFT UK
VP, MICROSOFT INTERNATIONAL

Imagine it is 2015 and the trends outlined in In the summer, many people will prefer to work
this report have come to fruition. from home, running their global office from a
laptop on the garden table.
The City of London will have overtaken
New York as the world’s financial hub, But for those who do make the journey into
also rivalling Silicon Valley in the number work, the surroundings will be need to be
of internet-based start-ups being launched. equally convivial. Anxious to attract the best
The revolution in information technology will minds and give them the most productive
have transformed the world of entertainment. environments in which to collaborate with
London’s Soho will have the biggest movie one another, companies will increasingly
digital effects industry outside Hollywood occupy Silicon Valley style campus locations.
and the convergence of television and the Abandoned or run-down industrial estates
internet will bring about a renaissance in on the edges of provincial cities will rapidly
visual entertainment. The UK will lead the be transformed into green landscaped
world in the production of video games. Californian-style campuses.

“I HOPE THAT THIS DOCUMENT WILL NOT ONLY SPARK If the trends highlighted in this, the second
edition of the Developing the Future report,
DEBATE BUT ALSO IGNITE ACTION TO ENSURE THAT THE UK
are allowed to blossom, then this attractive
TAKES FULL ADVANTAGE OF THE FANTASTIC OPPORTUNITIES vision of the Britain of tomorrow can then be
THAT ARE NOW IN OUR GRASP.” the new reality. But what needs to be done
to make this change?
But the boom will not be confined to London
or even to clusters of excellence such as This report outlines the challenges that lie
Cambridge or Scotland’s Silicon Glen. ahead if Britain is to make this happen.
The industrial wastelands of the north will
Chief amongst these is ensuring that the
now be transformed by the information
UK’s skills match the speed of technological
industries as the phenomenon described
change now taking place. The supply of IT
in this report as ‘knowledge services’ sweeps
graduates must increase to reflect the UK’s
across the whole of Britain. Well over half
shift to a Knowledge Economy. Schools must
the UK’s gross domestic product (GDP)
also ensure that crucial computing skills are
will be accounted for by knowledge services,
made available to all at GCSE level as well as
a category which includes financial services,
at A-level and beyond. Industry must also work
creative services and IT.
in concert with academia and government to
The process of off-shoring will have also ensure that UK citizens can constantly refresh
breathed new life into the regions. Globalisation their skills throughout their working lives.
has long since migrated the old manufacturing
The second edition of Developing the
industries abroad. But the second wave of
Future not only comprises original research
off-shoring will involve locating routine back
commissioned by Microsoft on these fascinating
office functions to developing countries
themes, it also includes independent articles
such as India and China, enabling UK
from luminaries such as Will Hutton, outlining
companies to concentrate on the research
unique perspectives on the massive change
and development needed to bring world-beating
now taking place in Britain.
new products and services to market first.
Cities like Liverpool and Newcastle will win I hope that this document will not only spark
international reputations as a result of debate but also ignite action to ensure that
their thriving multimedia industries. the UK takes full advantage of the fantastic
opportunities that are now in our grasp.
In order to attract the cream of the IT graduates
starting to stream out of Britain’s universities,
these regional cities will be working overtime
to improve their quality of life. This is proving
to be even more important than ever before
as technology will enable professionals to
work from wherever they wish.
4 Sponsors

DR ANDREW TUSON MIKE RODD TO M W I LLS - S A N D F O R D

CITY UNIVERSITY, LONDON THE BRITISH COMPUTER SOCIETY INTELLECT

London is at the hub of the UK's Knowledge This second DtF report has moved our Intellect is pleased to contribute to the second
Economy, key to our prosperity. Such activity understanding forward on the challenges and edition of Developing the Future, a report we
is by its very nature IT-intensive. IT professionals opportunities we collectively face. The UK is hope will stimulate the debate and action
are not only engaging in developing the well positioned, but there are changes to the needed to drive innovation in the UK.
underlying technology, but in using it to make global economic environment that demand
UK businesses more effective in a globally adaptation. Globalisation in IT is not the There is currently a trans-Atlantic innovation
competitive marketplace. death-knell that received wisdom portrays. divide. The UK does not spawn start-ups
In fact, the potential global opportunities and fast-growth new companies in the same
Underpinning this is the talent of the UK’s IT that are open to us are tremendous. way as Silicon Valley solely because of a
professionals. This is an important challenge However that does not mean success is difference in business philosophy, as is often
for the UK. IT professionals are at the forefront assured, or that the road will be easy. supposed. It is as much to do with public
of change and are charged not only with sector attitudes to encouraging growth and
understanding the technology but also the For business, the challenge is two-fold. innovation. In the US, for example, a large
business environment as the IT industry moves Firstly, to take advantage of new models for part of public procurement expenditure is
from being a provider of technical services to IT services and software, making knowledge ring-fenced for small and medium sized
a provider of business services; the demands services an integral part of their overall strategy enterprises (SMEs). In the US, 23% of prime
on them have never been greater. and mission. The second challenge is to help federal government contracts and 40% of
staff transition as job roles change by supporting subcontracts must go to SMEs. It has been
This has implications for Higher Education. continued education and skills development. estimated that if the UK Government were
The drop in applications to computing degrees For that to take place, our industry needs to to adopt a similar strategy, it would inject
is of concern. The changing nature of the collectively lift its eyes from short-term problems almost £8 billion into British SMEs. This could
industry requires us to look hard at what we are and act together for the long term. be combined with research and development
teaching at schools and universities, and how. tax credits to encourage SMEs to develop
We need to work with our stakeholders to For government, the challenge is to create innovative new products and services.
provide graduates with the qualities to succeed, the right frameworks for an agile workforce.
both for themselves and for society. We also Without structures and support in place, Were the UK Government to support British
need to produce the high-quality research businesses will simply be unable to make innovation in this way, it is not only the SMEs
that underpins innovation. these transitions; they will be left without the which would benefit. The public sector would
right skills, and our citizens will be adrift in also find itself repaid with the kind of solutions
The rewards for getting this right are great: the international job market. This will require needed to support a 21st century democracy.
greater prosperity for all, a dynamic, inclusive real delivery on the promise of lifelong learning
IT profession that offers real challenge and job and support, and at this point the route to
satisfaction, interesting and stimulating school that delivery is uncertain. There is much
and university curricula, and a university sector to be done!
that can provide world-class research and
education in computing. There are also challenges in education.
There is a misunderstanding at all levels
about the difference between ICT user skills
and the discipline of computing that
fuels the Knowledge Economy. We fear
this misunderstanding is turning off students
and teachers, and may be behind some of the
educational pipeline problems. Students need
to be inspired and informed of the opportunities
and excitement that a career in computing offers,
and yet collectively we have convinced them
neither exists.

Fundamentally, the issue is the pace of change.

Today’s 16 year-olds were born at the same
time as the web. They are the first generation
of natives in our digital, web-enabled world.
Providing a competitive education for them
and those that follow will require us to adapt
quickly to this new environment. This report
sheds light on how we can make that
transition, and confirms that the benefits
are there for us to reap if we succeed.
 5

Contents
9
Introduction and key points 6

G L O B A L I S AT I O N
Why Globalisation is Good For Us 10
Meeting the Challenge:
Professional Education and the HE Perspective 11
Globalisation 12
Innovation and Globalisation 18
China to Catch Up with UK in Five Years 19
21
I N N O V AT I O N
Emerging Trends and Technologies 22
The Bard of Whitehall 23
Innovation 24
The State of Entrepreneurship in the UK in 2007:
Lead, Follow or Get Out of the Way 34

SKI LLS
Shoring Up the Foundation
Imminent Demise of Computer Science is Greatly Exaggerated
38
39 37
Lessons in Learning 40
Professional Education: The Role of Work-based Learning 41
The China Syndrome 42
To Succeed in the Global Economy the UK Must Commit
to the Technology Skills 43
Knowledge Transfer: Linking HE with the IT Industry 44
Skills 46

THE FUTURE
How Today’s Teenage Kicks Will Turn Into
Tomorrow’s Best Business Practices 62
61
Futures Emerging Technologies 64
Value Chain Snapped Asunder 68
Introduction:
D E V E LO P I N G T H E F U T U R E 2 0 07

This is the second report in the ‘Developing the Future’ (DtF 2007) series commissioned by Microsoft® that researches
the UK software development sector in the UK. The report reveals that the UK economy is fast approaching a point
where the Knowledge Economy will contribute 50% of UK Gross Domestic Product (GDP). The report also reveals that
the software sector is the most significant contributor to growth and prosperity for the creative industries and shows
the greatest contribution to the UK National Accounts for the creative sectors.

There are several key recommendations within DtF 2007 that must be acted on now to address the widening skills gap
(breadth and depth of skills), stimulate excitement and interest in ICT/computing education from age 11 and actively
support innovation and growth within the SME software development sector.

K E Y F I N D I N G S F R O M D E V E LO P I N G T H E F U T U R E 2 0 07 :
1. The UK economy is fast approaching 2. London’s growing role as an innovation 3. Private sector investment of £127 billion
a point where the Knowledge Economy hub and the emergence of new global a year on intangible assets now equals
will soon contribute 50% of UK Gross markets will drive economic growth that in tangible assets.
Domestic Product (GDP). in the UK.
According to the most recent available figures,
The ‘Knowledge Economy’ includes sectors With its unique overlap of financial services, investment from the private sector in intangibles,
such as financial services, IT, business services technology, media, venture capital, and such as software, research and development
and creative services and today employs 41% government interests, London is rapidly and brand value, is approximately £127 billion.
of all workers by occupational classification becoming a global hub for a new class of Comparing the USA with the UK, recent
and 40% of GDP by industry classification – entrepreneur as well as being an international expenditure on intangibles is 11% of UK GDP
expected to rise to 50% by 2010. The fastest capital for creative industries such as digital versus 13% of US GDP. This contribution is
growing component of the UK economy, it is effects for the film industry and video games. about the same contribution that investment
predicted to have a 40% graduate workforce in tangible assets has on GDP.
by 2020. The emergence of rapidly expanding economies
in developing countries such as China and The importance of this to the IT sector is
This report also reveals that the software sector India are simultaneously creating new business significant. Of the £127 billion, 15% is spent
is the most significant contributor to the growth opportunities for UK-based enterprises. on software (£19 billion); 10% on scientific
and prosperity for the creative industries, and R&D (£12.7 billion) and 20% (£25.4 billion)
shows the greatest contribution to the UK (SEE PAGE 34) on non-scientific R&D.
National Accounts for the creative sectors.
(SEE PAGE 25)
(SEE PAGE 25)
4. IT industry faces potential 5. There is growing pressure on the 6. There is a loud clear call for the
skills shortage. UK Government to reform the National UK Government to develop appropriate
Curriculum to allow students to study Intellectual Property Rights (IPR) for
In 2005/6 the number of graduates from computing at GCSE level. the ‘digital age’ to support innovation.
IT related degrees that chose to enter careers
in the IT professions was only 30%. This is There is a call from several bodies (including By adopting the pragmatic recommendations
set against the UK IT workforce averaging academia) for the Government to begin to from the Gowers Review, the Government has
156,000 – 179,000 per annum that covers reform the National Curriculum in a way that an opportunity to stimulate the growth in the
both new jobs created from growth and will provide an opportunity for students to information and communication technology
replacement demand. Put another way, study computing at GCSE in an innovative (ICT) sector that is now required to support
70% of IT graduates chose or found alternative and exciting way. This is coupled with a call UK’s future wealth and prosperity.
activities or jobs outside of the IT profession from many agencies including e-skills to put
in 2005/6, with 10.1% going on to study excitement for Computing and science back There is also a specific call for the UK
for higher degrees or other qualifications, into the curriculum. GCSE ICT is not currently Government to examine how it might emulate
10.3% are unemployed, 4.3% are engaged about providing the specific skills for Computing the USA small-to-medium sized enterprise
in other activities and 3.8% are not available but offers a means by which students gain skills (SME) development strategy that earmarks
for employment, study or training. Of those in computer and software use. 25% of public expenditure for innovation and
finding employment 6 months after graduation growth in the SME sector. Growth in wealth
a proportion may be classified as IT workers (SEE PAGE 56) and prosperity will come from growth in the
within other industry sectors based on the SME sector.
current government careers taxonomy and
(SEE PAGE 27)
some may be in interim jobs.

The question facing the UK is whether there

will be enough people working in the primary
IT sector to develop the tools, applications
and technologies that will be needed in other
sectors that are heavily IT dependent such
as financial services.

Despite numerous industry initiatives, currently

only around 20% of the UK’s IT workforce is
female. If it is to fill its skills gap, the IT industry
needs to recruit from the entire talent, not merely
the masculine half. Currently, only 17% of those
undertaking IT-related courses are women.

(SEE PAGE 46)

globalisation 9
 Why Globalisation is Good For Us
BY W I LL H U T TO N A N D I A N B R I N K LE Y

There is a growing perception that the process being flooded by cheap goods from emerging The real danger is not that China will overtake
of globalisation in general, and the practice economies such as China. But it is difficult the West, as many doom merchants warn,
of off-shoring in particular, represent a massive to see how Britain has been disadvantaged but that it will lag too far behind. Without a
10 threat not only to jobs in the UK but also to by having its competitiveness bolstered by sustained influx of Western skills, China
the British economy as a whole. globalisation. could start to retreat away from its increasingly
democratic business model and revert to
It is not only manufacturing jobs that are now In the bad old days before the global markets
its more traditional and totalitarian state.
disappearing to China, the argument goes, of the 21st century, British firms faced with
Over $800 million has already been spent
but increasingly also white-collar jobs in rising salaries would simply raise the price
on screening the internet and blocking
innovative sectors such as technological of their products, resulting in the inevitable
websites that include the word ‘democracy’.
research and development. The prophets inflationary spiral. In the current era, competition
of doom say that unless the tide of off-shoring from overseas manufacturers makes it Another potential brake on the rapid acceleration
can be somehow stopped, Britain will soon impossible for UK companies to raise prices of Britain’s knowledge management services
be overtaken by the developing economies arbitrarily. Even the huge rise in energy costs could be a skills shortage. The UK already
of Asia and the Far East. has done little to increase prices in the era has to import many of its IT workers and this
of globalisation. situation is likely to worsen as the population
This widely-held view could not be more wrong.
continues to age. In developed countries like
Globalisation offers Britain its best chance of In any case, there is little foundation to claims
the US, around 40% of PhDs in the US are
sustained economic growth since the start of that the UK is being flooded with cheap imports
awarded to people from outside the US,
the industrial revolution over 200 years ago. from China and that this is resulting in low
as companies are finding it harder and harder
The practice of off-shoring and the rapid wages and unemployment. The big exporters
to recruit from their own country. As other
growth of developing economies such as to the UK by a considerable margin are
markets develop, it is likely that many of
India and China will help drive this growth. Germany and Japan. China accounts for
these bright people will either return to their
roughly the same level of exports into the UK
Underpinning Britain’s future success is own rapidly developing economies or never
as Belgium and there is no cry that Britain is
its leadership in what have come to be leave them in the first place.
being flooded with imports from Belgium.
broadly referred to as ‘knowledge services’.
But, in the medium term, it is likely that bright
These include financial services, IT, business But there is now a growing danger that
young professionals with the appropriate
services and creative and cultural services. the blizzard of negative press surrounding
skills will continue to be drawn to clusters
In these rapidly growing markets, Britain is globalisation could blind Britain to the incredible
of excellence such as the City of London
the undisputed European leader. The Eurostat opportunity now facing it. The UK is in a strong
or Cambridge and that Britain will increase
European Union International Trade in Services position to become a world leader in knowledge
its leadership in knowledge services. The real
2006 edition reports that Britain is currently the services. Today’s global economy has already
test may be if the UK can accomplish this
biggest European exporter of services, providing created a robust international market in sectors
transformation without the kind of social
over 25% of the total, easily outstripping its such as IT and financial services. But the scale
disruption that accompanies the industrial
closest rival, Germany. Knowledge-based of today’s knowledge-based industries is likely
revolution.
services increasingly underpin the domestic to be dwarfed by their future growth.
UK economy, currently accounting for 40% The other side of the skills coin is the question
According to the World Bank, the growth
of Britain’s GDP. of how to handle people who find their skills
of the world’s middle class, the market for
becoming redundant in the switch from traditional
According to the Office for National Statistics, knowledge services, will become exponential
manufacturing to knowledge services. This time
the past decade has also seen a massive over the next two decades. In its report,
around, it is the factory workers who rapidly
boom in the UK exports of services associated Global Economic Prospects, the World Bank
shed their value in the labour market of the 21st
with the Knowledge Economy: financial has forecast the emergence of what it terms
Century. For example, after Rover closed it was
services, computing services, business a global middle class within the developing
found that many of the people who had been
services, royalties and licence fees. In the ten world that will number around 1.2 billion by
employed in the factory were unable to find
years to 2005, exports of these services grew 2030. The World Bank believes that this
new employment at anything like their former
by over 100% compared with just over 50% rapidly growing group will participate actively
salary levels.
for more traditional services such as transport in the global marketplace, demand world-class
and travel. products and aspire to international standards If the UK is to meet the challenge of
of education. globalisation fully, it must ensure that the
The critics of globalisation say that Britain has
workforce is helped to re-equip itself with the
paid a heavy price for this growth with jobs This development of a worldwide middle class
IT and communications skills needed to make
disappearing to the Far East as companies will provide a ready market for the knowledge-
the transition from 20th Century factory hands
strive to cut costs by reducing wages. based products and services now being
to 21st Century knowledge workers.
The evidence does not bear this out. developed in the UK. For example, the UK
now has the biggest video games industry Will Hutton is the former editor of
Far from globalisation being a threat to the
in the world. Video games conceived and The Observer and author of The Writing
UK, it is its saviour. Globalisation is the chief
developed in the UK are played on consoles on The Wall. Ian Brinkley is Knowledge
reason why the UK is not in the throes of a
and computers everywhere from Beijing to Economy Programme Director at the Work
balance of payments crisis. Globalisation can
Birmingham, Alabama. Foundation.
also take much of the credit for the fact that
unemployment is at its lowest level for anytime As the 21st Century progresses, the growth
since the 1970s and that Britain is not seeing of overseas markets in countries like India
the kind of inflation that caused the crash and China will provide massive growth for
at the end of the 1980s. sectors such as the video games industry.
The off-shoring of key skills in IT and financial
It is also widely but inaccurately argued that
services will only drive the growth of the new
the flip side of the globalisation coin is the
middle class in these rapidly developing regions.
way in which the developed countries are now
Meeting the Challenge: Professional Education
and the HE Perspective
B Y P R O F E S S O R D A V I D B O LT O N ,
D E A N , S C H O O L O F I N F O R M AT I C S , T H E C I T Y U N I V E R S I T Y

Computing in Higher Education (HE) plays a In contrast, the City University’s School of Our experience points to the need for HE
key role in the IT industry, both in workforce Informatics has risen to these challenges. computing departments to engage more
education and in providing an underpinning The numbers and quality of the computing closely with the demands of the IT profession
science base. The changes in the IT industry undergraduate intake has been retained if they wish to flourish. We are moving to a 11
described in Developing the Future come at since 2001 and postgraduate numbers post-disciplinary world where traditional
a time when HE in the UK faces its own have risen by over one-third in just two years. knowledge boundaries are being supplanted
challenges. This is fuelling a healthy debate Research productivity and funding have also by a career and industry-led HE market,
about the extent to which market forces increased strongly. A focus on dependable and where teaching and research become
should determine the nature of computing socio-technical systems and active links with ever more linked to the needs of external
HE provision in the UK. industry underpin a vibrant research culture, stakeholders.
enabling research-led teaching.
Universities are competing in a global education In short, we are seeing a reinvention of
and research market and recognise that We believe that fundamental to our success professional identity that will transform
gaining funds from additional sources is is the way in which we view and engage with computing in HE. Long term, the most effective
essential. Government policy is moving firmly IT as a profession, aligning ourselves with outcomes will be delivered by engagement in
to a skills and knowledge exploitation agenda the University’s mission to provide rigorous a two-way process. While HE must develop
(e.g. the Lambert and Leitch reports) at a time research and education for the world of work. a more professional focus, the IT profession
when other pressures such as the Research and industry also need to work in partnership
We have forged strong IT industry links
Assessment Exercise have to be addressed. with HE to develop a better understanding
over the past 20 years, enabling us to deliver
of their roles. The British Computer Society
Furthermore, funding changes three years ago integrated in-depth placement experience
as well as other national professional and
from the Higher Education Funding Council in and in-demand professional skills to both
industry organisations will play an increasingly
England resulted in computing being assigned undergraduate and masters students, making
important part in this process.
to a lower price group, lowering per-student them highly employable. Moreover, this focus
funding, and increasing the squeeze on already is central to the marketing of the courses,
hard-pressed university computing departments. positioning us as a professionally-led University
With economies of scale favouring fewer, and securing high quality students attracted
larger departments, and a falling computing by courses which reflect their career aspirations.
undergraduate intake nationwide, the end
result has been downsizing or closure for
some departments.

“Our experience points

to the need for HE
computing departments
to engage more closely
with the demands of the
IT profession if they
wish to flourish.”
PROFESSOR DAVID BOLTON,
DEAN, SCHOOL OF INFORMATICS,
THE CITY UNIVERSITY
 Developing the Future | Phase 2-07

Globalisation
THE CREATION OF OPPORTUNITY THE IMPACT OF OFF-SHORING
For many, globalisation means ‘off-shoring’ Little research has been carried out to
12 and the threat of large numbers of jobs date regarding the productivity benefits
moving overseas. Although this is the of off-shoring, and this seems surprising
view implicit in many newspaper headlines given how great a perceived impact the
about jobs leaving Britain never to return, phenomenon of off-shoring is as a threat
the reality is far more complex. to jobs and opportunities in this country.

The economic benefits of globalisation There is also currently no accurate

may be felt in different ways across society. and objective measure of the impact
Some economists state: “In the rich world, of off-shoring on jobs in the UK or the
labour’s share of GDP has fallen to historic extent to which this affects IT and software
lows, while profits are soaring.”1 employment. The UK Government does
not monitor what is happening and has
The issue of protectionism is not just talked
no up-to-date evidence. At the very least,
about in the UK, The German Marshall
there is a need for the Government and
Fund found last year that, although most
the Department of Trade and Industry
people still say they favour trade, more
(DTI) to monitor the impact of off-shoring
than half of Americans want to protect
on employment and the economy.
companies from foreign competition
With accurate indicators it might be
even if that slows growth.1
simpler to plan meaningful policies
But protectionist policies could potentially and strategies for the future.
jeopardise the benefits of off-shoring.2
In order to try and gain some insight as
In the absence of real data about the
to the potential for off-shoring and the
long-term effects of off-shoring and
possible implications on labour markets,
outsourcing, the negative public perception
we have looked at research begun in
is partly a reaction to the perceived threat
2005. This is a contentious area and
of globalisation rather than a considered
one which generates considerable anxiety
rational response. The danger is that the
and disagreement. The available research
perception is seen as the reality, and policies
analyses the potential availability of
are developed on the basis of received
off-shore talent in 28 low-wage nations
wisdom and not hard evidence.
and the likely demand for it in service
Research has shown that in reality, jobs across eight of the developed world’s
the process of global economic integration, sectors; automotive, financial services,
of which off-shore outsourcing is a highly healthcare, insurance, IT services, packaged
visible component, diffuses the best software, pharmaceuticals and retailing.3
business ideas and management tools,
This analysis offers two conclusions:
intensifies competition, and sparks
innovation. It therefore ultimately leads • Off-shoring will probably continue to
to lower prices and higher wages as create a relatively small global labour
well as bigger profits that companies can market without sudden discontinuities
reinvest in new business opportunities.2 in overall levels of employment and
This is explored further in the section wages in developed countries.
on Innovation within this report.
• Demand for off-shore labour by
companies in the developed world
will increasingly push up wage rates
for some occupations in countries with
developing economies, but not as
high as current wage levels for those
occupations in developed ones.
1 The Economist (January 20th 2007)
2 McKinsey Governing Globalisation Diana Farrell 2004 Number 3
3 McKinsey Sizing The Emerging Global Labor Market Diana Farrell,
Martha A. Laboissière and Jaeson Rosenfeld
 Developing the Future | Phase 2-07

These conclusions suggest that the RESEARCH, SKILLS AND

threat of loss of jobs and lower wages TECHNOLOGY INVESTMENT –
due to off-shoring in developed countries INNOVATION DRIVES COMPETITIVE
13
may not, over the longer term, be as ADVANTAGE
catastrophic as currently perceived. Today, off-shoring is occurring primarily to
This is an area which is continually evolving reduce costs and to boost productivity.
and requires further accurate monitoring. But how will it develop in the future?
Without accurate information, the ‘perceived’ Automation and innovation are driving
threat or ‘fear factor’ has the potential growth, with technology taking over more
to drive the development of protectionist responsibility for undemanding human
policies which could ultimately damage tasks. Off-shoring mundane work is just
the competitiveness of the economy. a transitional step to reduce the cost
This makes it vital that up-to-date data is base when a business process moves
collected and analysed so that informed from innovative to mainstream before
policies can be developed. becoming automated. With Moore’s
Law (the observation that the power of Automation and
WHAT ARE THE REAL IMPLICATIONS computers doubles every 18-24 months)
OF OFF-SHORING? delivering increasing computer power,
innovation are driving
The research that has been undertaken computers are taking more and more growth, with technology
suggests that the productivity benefits routine functions, as well as many taking over more
advanced knowledge functions from
of off-shoring are most evident in the
people. Therefore, the place to invest
responsibility for
service sector.4
is in the creation of new tools and undemanding human
But it is difficult to paint a true and technologies that fuel this process. tasks. Off-shoring
accurate picture within any given industry
as productivity gains from off-shoring are There is an argument that organisations mundane work is
not fully recorded across industry sectors. going overseas and off-shoring many just a transitional step
This makes press stories of the impact of of their services including software
development, see an initial productivity gain.
to reduce the cost
off-shoring more stressful for employees
than they would be if a more realistic But as other firms within the industry base when a business
picture were available. which off-shore accrue the same gains, process moves from
the original competitive advantage
According to the Organisation for Economic inevitably reduces. The pressure is then
innovative to mainstream
Co-Operation and Development (OECD), on to find the next competitive advantage before becoming
information and communications so more firms will look to innovation, automated.
technology (ICT) industry growth is either in product or business processes.
forecast to increase5 and the technically Demand to innovate will therefore be
more complex tasks such as design and firmly at the forefront of most firms’
testing and research and development agendas. The Government commissioned
(R&D) are increasingly being shifted Cox Review6 published in 2005 looks at
to China. But most Chinese ICT firms the threat posed by emerging economies
are small compared to their US and and highlights the need for innovation
EU competitors. and creativity in developing UK industry
so that we remain competitive in the
face of growing overseas competition.

4 Olsen, K. B. (2006), “Productivity Impacts of Off-shoring and Outsourcing:

A Review”, OECD Science, Technology and Industry Working Papers,
2006/1, OECD Publishing
5 OECD – article – ICT Industry growth set to increase by 6% in 2006
can be found at http://www.oecd.org/document/34/
0,2340,en_2649_33723_37487522_1_1_1_1,00.html
6 Cox Review of Creativity in Business: building on the UK’s strengths,
2005 can be found at http://www.hm-treasury.gov.uk/
independent_reviews/cox_review/coxreview_index.cfm
 Developing the Future | Phase 2-07

The emerging economies’ investment Initial analysis shows that it is currently Stiglitz recognises that globalisation
in new technology-based industries is more difficult for smaller small-to-medium offers tremendous financial rewards that
already resulting in impressive capabilities sized enterprises (SMEs) to take advantage benefit the overall economy. But if we
14
in scientific research and they are investing of cost reduction strategies from do not manage the negative impacts of
massively in education, technical skills and globalisation than it is for larger globalisation then we could see a
creative capabilities. As a consequence, companies. Larger businesses have backlash. What we are seeing at present,
it is now the high-skilled jobs in the established operational centres in he believes, are reduced wages for
hitherto leading economies that are emerging economies such as Asia, unskilled workers in the developed
coming under threat.6 lowering the cost of production of countries which exacerbate the trends
goods and services. But this may begin which already exist from the changes
The OECD says: “What is impressive,
to change as more SMEs become in technology and computerisation of
and worrying about the emerging
aware of how off-shoring can improve many unskilled jobs.
economies is not where they stand today
their speed to market (see Sally Ernst’s
but how they are positioning themselves “In the North, global competition has
article on page 19).
for the future.”6 helped drive down wages of unskilled
The growth of the Knowledge Economy workers, exacerbating similar trends
In the early 1990s, companies in
and the efficient deployment of off-shoring coming from changes in technology
North America and Europe started
is dependent upon the success of the and the weakening of labour unions.”8
commissioning software from Indian
IT and software development industries
sources, mainly for routine applications, He believes what we are actually seeing
within this country.7 Much of the future
on the grounds of cost. Today, it is for is that globalisation is in some cases
prosperity of the UK therefore depends
advanced applications on the grounds being used as an excuse to take away
upon the health and growth of the IT sector.
of capability. In the first half of 2005, social protections for individuals.
Indian exports of software and IT-related
“When last spring, young workers in
services are estimated to be worth THE SOCIAL IMPLICATIONS
France went on protest concerning their
over $5.5 billion.6 OF OFF-SHORING
low wages and weakening job protections
But the rapid growth of China as an Although many organisations are they were told globalisation demands it.”8
off-shoring rival to India has led the Chinese continuing to experience huge financial
to conclude that, as its economy grows, gains from their current off-shoring
the cost advantage it currently has will go policies, there are concerns over its wider
to the next emergent economy. It therefore social impact.
needs to develop new skills and services. A recent speech given by Joseph Stiglitz,
Over the last two years, it is China which Professor at Columbia University, New
has had the fastest global rate of increase York and winner of the Nobel Prize for
in R&D, now estimated to have reached Economics, highlights both the difficulties
1.5% of GDP. As a result of this, and opportunities of globalisation.
the capability that is being built-up is
one of high investment, high-level
skills and a low cost base.6

“What is impressive, and worrying about the emerging

economies is not where they stand today but how
they are positioning themselves for the future.”
OECD

6 Cox Review of Creativity in Business: building on the UK strengths

Nov 2005
7 Interim report on the 2007 green paper on the creative and
Knowledge Economy
8 Making Globalisation Work – J Stiglitz. The Times Feb 18 2007
 Developing the Future | Phase 2-07

RECOMMENDATIONS • IT and technological skills are required

• Increased investment in skills, education across the whole economy. All industry
and knowledge by the Government and sectors, not just the IT industry in isolation,
15
employers is vital over the long term. need to collaborate to ensure that the
A highly skilled workforce is essential transferable skills required are
for the Knowledge Economy and all developed within our education system.
employees need to have access to Actions: for academia and industry
opportunities and incentives to develop facilitated by Government to provide
their skills. a debate and working paper on skills
development and industry liaison where
• Actions: UK Government should put UK HEIs can begin to meet the needs
in place some robust incentives for for short/medium term education
implementation of the skills agenda7 with objectives for industry.
particular emphasis on SMEs. An action-
oriented pilot with the DTI and others • We need to understand the ‘social’
that would determine a best practice and ‘cultural’ requirements of society
in order to understand how to motivate • Strategies and policies to foster growth
model for incentives for up-skill/cross-
individuals to continue to learn and and economic development can only
skill development within this sector is
develop new skills. be based on accurate data. It is a priority
crucial; this should be considered firstly
Action: for a key company in the UK IT to understand the real drivers for
as a consultative report and secondly
sector to analyse and report on off-shoring and the potential gains both
as a plan for policy change should the
initiatives that have (and could) be to corporations and to society.
research point to the need for change
developed to support an integrated skills Action: for Government agencies,
in policy direction.
agenda framework across all sub- academia and industry to initiate
• Actions: for academia and industry sectors. The report could then be used research that will provide the initial
facilitated by Government to provide to help inform policy or Government scorecard and statistics for the
a debate and working paper on skills decision making that could further economic drivers behind globalisation
development and industry liaison provide incentives for a collaborative strategies adopted by business.
where UK Higher Education Institutes approach to ensuring that CPD/life-long • It is also important to monitor the
(HEI) can begin to meet the needs learning becomes the responsibility of investment and development strategies
for short/medium term education the citizen but with full support and of other countries, in order to understand
objectives for industry. guidance from Government and industry how they benefit and to forecast
supported wholly by UK HEIs. how they may affect our economic
• Communicating the benefits of learning performance and ability to compete
and education is vital to changing in the future.
behaviours and creating the will of Action: for industry and Government
individuals to commit to their own agencies to collaborate on an analysis
personal development. of strategies and outcomes from
Action: from UK Government and modern globalisation initiatives to
industry consortium to provide a provide a mechanism to begin to
communications programme to drive forecast the impact on UK economic
incremental changes in behaviour. performance.

7 Interim report on the 2007 green paper on the creative and

Knowledge Economy
 Developing the Future | Phase 2-07

The challenges facing SUMMARY Additionally this section examines the

Contrary to press reports that off-shoring areas of investment which have a major
the IT sector will affect impact upon economic growth of the
16 the UK economy is creating unemployment in the UK, it is
enabling UK companies to grow and Knowledge Economy. It shows that the
substantially, and this take on more staff. UK lags many other nations in terms of its
investment in research and development,
makes it vital that At the same time, globalisation means education and information technology.
those challenges are that low-wage economies are benefiting This is important because there is a high
from companies in developed economies
understood and such as the UK and the US off-shoring
correlation between economic growth
and investment in these areas.
addressed effectively back-office operations. Globalisation offers
as the success of the companies in the UK the prospect of Both China and India have invested heavily
fantastic financial rewards as markets in these areas and as a result are enjoying
IT sector affects the considerable growth in their knowledge
such as China and India increasingly
entire country. hunger for goods and services from based economies. Levels of skills are
developed countries. growing in these economies and it is
possible, even likely, that they will
The fastest growing part of the UK compete with the UK for research,
economy is the Knowledge Economy. innovation and highly skilled work.
This is also true for many other countries. The report suggests that if Britain looks
Currently, depending upon the definition at the investment strategies of these
used, the Knowledge Economy in the countries it will begin to see how they
UK makes up around 40% of GDP. are positioning themselves for the future.
Its contribution to UK prosperity is essential This makes it vital that the UK increases
and profound. It is included here because its investment in these areas. Whilst the
the growth of the UK Knowledge Economy report acknowledges the need for
is underpinned by the software development Government investment, it states that
and IT industries. The challenges facing employers also need to recognise that
the IT sector will affect the UK economy they too should invest in their workforce
substantially, and this makes it vital that skills and in research and innovation if
those challenges are understood and they are to continue to prosper.
addressed effectively as the success of
the IT sector affects the entire country. The UK must remain aware of the social
implications of globalisation. The benefits
In this section we have examined the of increased profits and prosperity must
hard facts; what it will take to succeed. be across society, and both the Government
Skills and education are vital to the and employers must invest in our workforce
Knowledge Economy, and without continual so they too can ensure they have a future
investment in these sectors there are real role in the developing economy, otherwise
social dangers, both in terms of social there is huge potential for social unrest
unrest and a polarised society. and inequality.
 Developing the Future | Phase 2-07

Off-shoring is examined both from

the point of view of industry but also the
individual. There is evidence to suggest
17
that ‘ordinary workers’ may not be benefiting
from global trade. The implications of this
are considered. If workers feel threatened
and perceive no benefits then there is
the possibility of a backlash against
global competition, in terms of a call for
‘protectionist’ policies and a dis-incentive
to re-skill and compete, both of which
would be harmful for the UK economy. Globalisation may have the benefit of stimulating
Off-shoring may give economic benefits innovation as the UK seeks to remain competitive.
currently, but there is a question as to
whether they can be sustained over the
long term. Therefore UK organisations
must look to other ways to maintain their
competitive advantage, such as innovation
and new developments either in products
and services or in business processes and
the creative application of new knowledge
and skills.9

Globalisation may have the benefit of

stimulating innovation as the UK seeks
to remain competitive.

The report argues that we need to invest

and develop strategies to ensure our future
competitive role in the global economy.
However, it is important, that these are
based on accurate information, and not
perceived threats and ‘headline’ stories
which do not give the full picture. The data
on which we need to plan is not available
and the collection and analysis of this
needs to be made a priority.

Finally, the report looks at some of the

actions, labour policies and investment
strategies which would increase our ability
to compete and offer possible solutions
for many individuals confronted by the
threat of the loss of their livelihoods
through globalisation.

9 The Relationship Between Publicly Funded Basic Research And

Economic Performance a SPRU Review Ben Martin and Ammon Salter
With Diana Hicks, Keith Pavitt, Jacky Senker, Margaret Sharp and
Nick von Tunzelmann Science Policy Research Unit University of
Sussex Falmer, Brighton BN1 9RF, UK
 Innovation and Globalisation
DR J E R E MY B EALE, CB I

Traditionally, innovation in the IT services and Some of the most dynamic SMEs may now A new approach to accommodate flexible
enterprise software sectors (and much of even be able to operate on something of a learning is needed. The acquisition of higher
the packaged software sector too) has been global scale, offering products to niche global level skills and access to these skills is vital
18 driven by large companies who, with significant customer segments using the internet. But the to all sectors of the economy and they can
purchasing power, have forced the globalisation cost reductions of doing so are generally only be developed through the continued
of the supply side as they themselves have less important if you’re able to provide collaboration between industry and academia/
faced increasing international competition highly customised or innovative products educational organisations. One way to
across the board. Suppliers have off-shored to to high value customers, as markets are accelerate innovation is to radically re-think
develop and maintain competitive advantages less competitive and economies of scale HE/industry engagement and collaboration
based largely on costs. The economic benefits less vital to margin maintenance. so that the SME sector can benefit fully from
of off-shoring and economies of scale have, knowledge transfer programmes and access
However, barriers currently exist to
however, while accessible by multi-nationals, government support and other initiatives.
widespread and deep adoption of IT services
been less appreciated by and available to SMEs. This should be developed in consultation
by SMEs. First, they are often concerned
with all business sectors and academia,
While large users have driven the off-shoring about having suppliers and their products
to promote the formation of HEI and private
agenda, suppliers’ competitive advantages of close at hand and designed according to the
sector hybrids to develop Continuing
doing so are now tending towards equilibrium requirements of their business operations.
Professional Development (CPD)/life-long
as the cost advantages of doing so are Being designed initially for large companies,
learning and other professional development
becoming eroded over time. many applications and systems need to be
and skilling initiatives
re-configured for the needs of smaller ones.
The UK SME segment is therefore vital; it is
This can be costly for suppliers, but SMEs are Harnessing the innovative potential of SME
where margins still exist and where innovation
very wary of being sold a technology rather suppliers is not beyond the reach of large
will help ensure competitive advantage.
than a solution and are loathe to make suppliers. Large users are increasingly
Many large companies engage with SME’s
investments unless they are vital for business outsourcing supply to consortia usually led
in their supply chains, and the application or
success. To grab the opportunities for by large prime contractors who augment
use of ICT within SMEs are key generators
economic prosperity, inward investment and in-house skills by buying in specialist SME
of overall economic growth and employment.
continued support is required from suppliers. technical competence or niche market
SME’s are often the fastest growing part of
customer relationships. The design skills
most developed and developing countries, Second, the skills required in computing or
adopted in such consortia can be adopted
and where significant value-adding occurs. IT change more rapidly than in other science-
and refined for more general service
This of course depends upon the type of based subjects, and this makes it particularly
migration from large to small users.
SME. But smaller companies are often difficult for SMEs to exploit the advantages
more dynamic than large ones because of technological innovation. This makes
they’re driven by entrepreneurs to whom professional development and updating
large corporations can’t offer sufficient skills vitally important to SMEs. Only by
reward or flexibility. Smaller companies collaborative development can we ensure
are also often able to connect with local that the sector can access relevant
customers better than large corporations – programmes in ways which benefit them.
an important attribute in high wealthy
economies where personalisation of
products and services is important. “A new approach to accommodate flexible learning
is needed. The acquisition of higher level skills
and access to these skills is vital to all sectors
of the economy…”
DR JEREMY BEALE, CBI
China to Catch Up with UK in Five Years
B Y S A L LY E R N S T, C H I E F E X E C U T I V E , S I N O C O D E

When developed nations first began off-shoring Much of the work that would have, until recently, Developers who ignore the opportunity to
software development to India, the IT industry been off-shored to India is already coming off-shore in China not only face higher costs
had a 15-20 year window in which to create to China. The cost of off-shoring software than they need but also risk cutting themselves
rapidly growing, highly competitive companies development to India has been rising by off from the world’s fastest growing and 19
through right-shoring. 15-20% a year and has now reached a point potentially largest market.
where most Indian software development
Unfortunately for the laggards, the 15-20 year
companies now have large hubs in China
window has now closed, and many missed
or plans to develop them. China is growing
the boat. India has developed a powerful rival
as a destination of choice, with off-shoring
software industry of its own, competing very
increasing at an annual growth rate of 8% in
effectively with UK firms both on-shore and
2003 to 11% in 2006. By contrast, India as
in its own market.
a destination is in decline, falling from 42%
However, UK technology firms can learn to 39%.
from this experience and find new markets
All the evidence points to China developing
with which to right-shore such as the new
its own national software industry even faster
off-shore destination of choice, China.
than was the case in India. The Chinese literacy
The challenge for UK firms today is the
rate is over 90% contrasted with India’s,
acceleration of affordable travel, ease of
which is less than 65%. China currently has
immigration, free trade agreements, and
35 national training schools and aims to train
robust enabling technology. These phenomena
800,000 software engineers versus India’s
have shrunk the window of opportunity
600,000. Crucially, China has enforceable
for UK firms to realise the benefits of right-
intellectual property (IP) protection laws as
shoring their skills base to 3-8 years.
part of its agreement with the World Trade
Laggards won’t just miss the boat this time Organisation (WTO).
around, they’ll be dead in the water as the
The situation is particularly urgent for smaller
large commodity skills base in developing
players which have far slimmer resources than
nations becomes quickly saturated by
larger organisations. Small and medium sized
innovative technology companies who are
enterprises (SMEs) do not have the cash
then empowered through their right-shoring
to pay teams of London programmers
strategy to lock out competitors in local
£100 an hour, support non-productive
and foreign markets.
staff or cope with rapid staff turnover.

“Laggards won’t just miss

the boat this time around,
they’ll be dead in the
water as the large
commodity skills base
in developing nations
becomes quickly
saturated by innovative
technology companies
who are then empowered
through their right-
shoring strategy to lock
out competitors in local
and foreign markets.”
SALLY ERNST,
CHIEF EXECUTIVE, SINOCODE
innovation 21
 Emerging Trends and Technologies
B Y D R . S H I R L E Y W I L L I A M S , H E A D O F I N F O R M AT I O N S Y S T E M S ;
THE UNIVERSITY OF READING

I have just attended a meeting with educational From the point of view of the researcher,
colleagues from around the world (from Hong there are the obvious challenges of developing NECESSITY IS THE
Kong to Argentina), on an idyllic island. the technologies and recognising the trends, M O T H E R O F I N N O V AT I O N
Unfortunately for me, the island was not real; but there is also the need to develop: INTERVIEW WITH BT’S ANDY GREEN
the meeting was in a Multi User Virtual standards, interoperability frameworks, tools
Environment (MUVE). The meeting happened for interactions, understanding the semantics, Sometimes, it is only when a company has
because someone I know, through a Community automating processes. its back against the wall that it really starts
of Practice, was online at the same time as a to innovate. After BT span off its mobile
For industry the challenges exist in recognising business BT Cellnet, now known as O2,
colleague and I were trying out a new product.
what to adopt and when; but perhaps the in 2000, it found itself the only former
My acquaintance invited us to join him and
biggest challenge comes with the students: national incumbent telecoms operator in
some others he knew and we were able to
learn about the product together. • Some of the trends and technologies that Europe without a mobile arm at a time
middle aged academics see as new and when mobile phones were seen as the
The experience reflects a number of emerging cash cows of telecoms. The former state-
exciting are everyday and mundane to
trends and technologies. It could be classed owned operator was also struggling under
the younger students.
as informal learning. There was no schedule a £30 billion burden of debt.
or agenda; we wanted to learn and so we did. • Students (certainly from the UK) are very
22 There were examples of what can be called motivated by marks, and they expect to Sheer necessity forced BT to innovate
presumption; all of us were producing some of participate in formal learning; anything and to focus on the global potential offered
the learning material we used and sharing that less formal can cause them to be worried. by the internet, particularly the way in
provided by others. No one took the role of which voice calls that were once sent
the teacher. The technologies that supported • Some people believe when students graduate across traditional telephone networks are
the experience included: a grid of computers they should know everything that they need now being routed via the internet using
providing the MUVE, our internet connections, to know. internet protocol (IP) software.
the provision of internet voice (VoIP) for At a time when many traditional operators
telephone conversations, and online text were in denial over the price revolution
translation between our different languages. wrought by new internet-based virtual
This is just one example of what emerging telecoms operators such as Skype and
trends and technologies can offer. There are Vonage, BT decided to embrace innovation.
many other things that are now possible, According to Andy Green, BT chief
that were not only five years ago, and there executive of group strategy and operations:
are many more changes to come. From the “BT was very early to realise that IP would
point of view of the educationalist there are revolutionise the communications industry.
a number of challenges: We launched the first widely available
• Having an awareness of emerging trends commercial voice over IP (VoIP) service
and technologies; for business about six years ago. But our
IP vision was based on the importance of
• Ensuring that these new things feature in more than just voice over IP. It’s about any
the syllabus; media that needs to be in real time –
• Exploiting new opportunities for developing voice, video and data.”
educational material; BT has also benefited from the fact its
• Recognising the competition between head office is based in the City of London
different technologies and trends. For example at a time when the UK capital is fast
the conflicts between discussion forums becoming the world’s leading financial
and blogs. centre. BT now connects nearly 45 of the
leading global stock exchanges, including
New York, London and Tokyo. As the
service continues to grow the UK operator
is opening up new markets such as the
recent additions of the Mexican Derivatives
Exchange and Taiwan Stock Exchange.
The Bard of Whitehall
I N T E R V I E W W I T H M A R K O ’ N E I L L , C I O D E PA R T M E N T F O R C U LT U R E , M E D I A A N D S P O R T

On Mark O’Neill’s desk sits a copy of the but where organisations such as his are in O’Neill is concerned that, unless public bodies
complete works of William Shakespeare. danger of being left behind. like his can establish a two-way dialogue with
But it is not for reading. suppliers, there is a real danger that government
“The technology being provided to private
will become increasingly distanced from a
O’Neill keeps the hefty tome handy in order consumers is becoming far more powerful
public that is increasingly more technically
to remind himself and his staff of a frightening and effective than that offered to organisations
literate and expects the same from all its
bureaucratic statistic. Two years ago, O’Neill’s such as mine. For example, the internet voice
service providers, regardless of sector.
department used to generate the equivalent services (VoIP) services offered by Skype or
of the complete works of Shakespeare in even Tesco are far more powerful than 99% “It may not be a big thing at the moment, it is
terms of paperwork every 1.5 days. Today, it of corporate communications products on the far easier to buy books on Amazon than it
generates the same colossal number of market. is to do your taxes online. But if the rate of
words every 1.5 hours. O’Neill predicts that, change increases, how are we to ensure that
“We live in a rapidly moving agile environment
at current rates of growth, by next year it will people still regard the structure of public
in which innovation in IT is increasingly being
generate the same number of words as service as having value,” he said.
driven by entrepreneurship. One of the problems
Shakespeare every 15 minutes.
from the public sector viewpoint is that our He admits that, in an era where
This gives his department a deadline of less sheer size as opposed to average small-to- teenagers spend much of their leisure time
than 12 months to develop an information medium sized enterprise (SME) means it can communicating via the internet using social 23
management system capable of handling be hard to partner with small agile companies.” networking and messaging services rich in
this potentially overwhelming volume of data. digital photography and video, public sector
But, according to O’Neill, large IT corporations
But O’Neill wants to do more than merely communications are in danger of becoming
are also failing to deliver as a result of not being
manage the data, he wants to be able to control outmoded. But he added that the public
attuned to the specialised needs of large public
it in a way that would allow his department’s sector does have some isolated examples of
sector clients.
staff to mine it from wherever they happen to be. it trying to drag itself into the 21st Century.
“The industry fails to grasp that an organisation
For the last year and a half, O’Neill has “At last we are starting to move forward,
like ours has an absolutely vast customer base
been trying to develop an IT project called but it is incredibly slow. If things do not
which comprises virtually everybody on the
the Information Management Programme. change, we will be forced to end up
planet. We are trying to sell tourism to the UK
This would comprise an information management developing our own technology. This is
as a concept,” said O’Neill. “That means trying
system that will handle the huge volume of data not really a path we want to go down,”
to reach anybody on the globe who might
being generated while delivering the IT industry’s said O’Neill.
one day consider coming to London.”
Holy Grail, commonly referred to as Any3,
But he acknowledges that the public sector
the ability to deliver any data anywhere anytime. He added that instead of trying to work with
presents a real challenge to the IT industry
This would enable his department’s staff to clients such as his department to develop
simply because it inevitably moves far slower
work flexibly, either from home or anywhere focused solutions to their problems, the IT
than the pace of technological change.
outside the office. O’Neill also believes another industry too frequently simply tries to sell them
pillar of the new system must be ease of use its latest stock products and applications. “One major problem for large public sector
and flexibility, backed up by a robust virtual bodies is that, by the time a feasibility study
management scheme. “The real challenge for the IT industry is that
has been done, the technology under
it has developed a number of bad habits.
consideration is often obsolete,” he said.
But so far, O’Neill says that the IT industry has It is, for instance, the most fashion conscious
failed to meet his department’s requirements: industry there is. It is even worse than the But he believes that, if the public and private
“No part of our plan struck us as being fashion industry itself. The whole industry tends sectors can work together they will be able
particularly revolutionary. But we went to to focus on selling one specific technology to use IT to transform the way government
the marketplace eight months ago and or buzz word at a given time, often to the bodies communicate with the public.
found it a disappointing experience.” detriment of both itself and its clients,”
“It is not about technology and buzz words
said O’Neill.
“I have been out to the market with well- but about constructing environments that
defined requirements, but have repeatedly He quotes the example of the way in which people want to be part of. That is the
been told by IT suppliers that they cannot the industry furiously peddled solutions to the fundamental challenge,” said O’Neill.
match our needs,” said O’Neill. “I find it predicted software problems that would result
incredible that this should be the case at a from the switchover to the year 2000, commonly
time when the public sector is moving away referred to as Y2K. At the time, the prophets LE SSON S LEAR N E D:
from office-based systems towards of doom were predicting that old computer There are several key issues arising from
community-based communications.” programmes failing to account for the switch this interview with the chief information
over to the year 2000 would be responsible officer (CIO) of the Department for Culture,
O’Neill has little doubt that the IT industry
for all manner of disasters, including planes Media and Sport experiences:
has the technology to deliver the applications
literally falling from the sky.
the public sector needs but that, for a number • Niche suppliers need access to the latest
of reasons, it is failing large areas of the O’Neill says that Y2K was not an isolated research in order to service public bodies
public sector. aberration but an example of the way the more effectively.
IT industry all too often likes to do business.
“The technology needed to deliver precisely • Government bodies should alter its
Rather than building solutions for
what we want is doubtless sitting on someone’s approach to IT procurement so that it is
organisations such as his, it likes to create
desk in Silicon Valley but it has not been brought more of a partnership rather than merely a
new technology and then market it in its
to market,” said O’Neill. project model.
own time and on its own terms.
He believes that many public bodies are being • The IT industry as a whole should start
According to O’Neill, a term like knowledge
forced to exist in a world where cutting edge to offer public bodies the same level of
management can be used to sell anything
technology is being offered to consumers, innovation currently directed at the
from software to tape drives.
consumer market.
 Developing the Future | Phase 2-07

Innovation
INTRODUCTION With knowledge services soon accounting
The process of innovation and creativity for half the UK’s gross domestic product
is under the spotlight, particularly in the (GDP), innovation in IT will drive growth in
technology industries and the developing financial services, technology and telecoms,
Knowledge Economy (KE). As technological travel, retailing, creative industries including
changes make new products and services the media and entertainment. All these
possible, organisations that are able to sectors increasing rely on internet-based
innovate quickest will gain a commercial communications and IT to develop new
advantage if they launch their products products and services.
effectively into a demanding and The Government has identified that
technology-hungry world. computing/IT/software constitutes the
Research into innovative and successful fastest growing section of the UK Creative
24 organisations shows that there are a Economy (CE). Not only is software or
number of factors which enable success. computing at the interface of all sections
Those organisations which offer their of the CE as the key enabler for growth,
products or services in a way that is faster, in its own right it also constitutes the
cheaper and better than their competitors largest component of the CE. The CE
will prosper over those which are slower. contributes around 7.3% of GDP with a
growth rate predicted to raise this to 10%,
“In today’s changing economy, the key to probably by 2010. The contribution that
faster, cheaper, and better is to bring the software and services makes is the largest
full force of a company’s knowledge to of all sub-sections of the CE, showing a
bear on the effort. Knowledge – not land, 2.7% contribution to GDP.
labour and capital – is now the lifeblood
of a corporation.”10 The CE, which overlaps the KE, has
around 41% of the UK workforce by
occupational classification.11 Analysis
INNOVATION RAPID AMONG SMES
shows that the KE is the fastest growing
Innovation in the UK is increasing more component of the economy in the United
rapidly in the small-to-medium sized Kingdom and that it is expected to have
enterprise (SME) sector than any other. approximately a 40% graduate workforce
Additionally, we see that the proportion by 2020. In practical terms, this means
of ‘innovation active enterprises’ is around that as we increase productivity, per
62% (2005), which is an increase of 14% capita income will increase, which will
from 2001 data. This includes a 15% have an impact on demand. There will be
rise for enterprises with fewer than 250 a cultural shift from ‘desire to demand’ as
employees and an eight percentage point increased wealth and status place greater
increase to 75% for larger enterprises. pressures for new products and services.
In essence, the predicted growth rates will
shape the demand for business innovation
over the next 20 years and beyond.

10 McKinsey Quarterly Review Creating A Knowledge Culture S Hauschild

T Licht and W Stein 2001 No 1
11 Work Foundation & preliminary report for the Green Paper on the
Creative Economy/Industries 2007
 Developing the Future | Phase 2-07

Although there is still much debate over INTELLECTUAL PROPERTY CURRENT INNOVATIVE ACTIVITY
the exact definition of the Knowledge Investment in intellectual property (IP) is a Research undertaken by the UK
Economy, we need some measure of core part of software development and Department of Trade and Industry
how the UK is performing in comparison protecting this investment is vital to business (DTI)12 shows the number and type
to overseas competitors. The Work success. of organisations in the UK which are
Foundation takes a wide definition as involved in innovative activity. Data from
it includes the ‘creative’ and ‘cultural’ New initiatives and legal frameworks
2002-04 shows that, 57% of enterprises
industries. Using this extended definition are evolving which should protect new
were classed as being innovation active
of the Knowledge Economy we are able businesses and stimulate the spread of
during this period (see figure 1) and that
to make cross country comparisons of how commercial ventures. The report suggests
large enterprises with more than 250
important this is to different economies. recommendations that could expand
employees were more likely to engage
Using the Organisation for Economic innovation in the SME sector by additions
in some sort of innovation activity (72%)
Co-operation and Development (OECD)/ to the current set of Government policies
and compares the benefits this would
than smaller enterprises (57%). 25
Work Foundation definition and applying
bring with similar initiatives in the USA.
it to the UK economy, it shows that
about 40% of GDP is accounted for But while having robust IP networks
by knowledge-based industries. is important, it is essential that IP is
underpinned by creative research
Ireland is the most knowledge based
and development and a true culture
economy in the OECD, with these
of innovation.
industries accounting for 48% of GDP
followed by the US, Germany, and Sweden,
Size of Enterprise: Employees
with around 43% and 40% of GDP in
the UK and France. We see therefore 10-250 250+ All 10+
the contribution of knowledge based
industries to OECD countries is significant Innovation Active 57 72 57
and set to increase. This section provides
Product Innovator
greater detail into how this is broken
(share with new to 25 (56) 39 (59) 25 (56)
down and considers the impact that market products)
computing/software and services on
the rapidly growing creative economy. Process Innovator
(share with new to 15 (30) 31 (31) 16 (30)
industry processes)
INTANGIBLE ASSETS
Private sector investment of £127 billion Ongoing or abandoned
10 21 10
a year on intangible assets now equals activities
that in tangible assets.
Innovation related
54 68 54
According to the most recent available expenditure
figures, investment from the private sector
Both product and
in intangibles, such as software, research 10 22 11
process innovators
and development and brand value, is
approximately £127 billion. Comparing Either product or
30 48 30
the USA with the UK, recent expenditure process innovators
on intangibles is 11% of UK GDP versus
Figure 1:
13% of US GDP. This contribution is about Enterprises who were innovation ‘active’, by type of activity, 2002-04 Source Economic Trends 628 DTi/ONS
the same contribution that investment in
tangible assets has on GDP.

The importance of this to the IT sector is

significant. Of the £127 billion, 15% is
spent on software (£19 billion); 10% on
scientific R&D (£12.7 billion) and 20%
(£25.4 billion) on non-scientific R&D.
12 First findings from the UK Innovation Survey, 2005 S Robson and
L Ortman DTi Initial analysis of the UK 2005
 Developing the Future | Phase 2-07

Comparing these findings with similar It is interesting here to note that the
data from the innovation survey in 2001 smaller enterprises have shown a greater
(1998-2000) shows that the overall proportional increase in innovation
proportion of innovation-active activities over the larger organisations.
organisations had increased.12
There are many factors influencing
The proportion of innovation-active innovation within the UK:13
enterprises in the 2005 survey is around
• Past macro-economic instability has
62%, an increase of 14% on the previous
generated cautious investment strategies
survey. This includes a 15% increase for
enterprises with fewer than 250 • Willingness to invest in ‘intangible assets’
employees and an 8% increase to 75% • Organisations should generate a culture
for larger enterprises. The proportion of to support innovation
26 enterprises reporting product innovation
increased by 11% and the proportion • Organisations must monitor and react
reporting process innovation increased to external factors
by 4% (see figure 2 below). • Appropriate intellectual property rights
(IPR) for the ‘digital age’

Percentages • Competition drives innovation

Of which, 31 • Skills and knowledge underpin innovation

new to industry 31
• Networking, partnerships and
19
collaboration
Process
Innovator 15
PAST PERFORMANCE AFFECTS
Of which, 57 THE PRESENT
new to market 43 Past UK macro-economic instability has
created a level of economic uncertainty,
Product 29
Innovator
making organisations averse to high risk
18
and thereby taking a cautious view on
investment in new product development
Wider 36
Innovator and research and development.
45
Past research has concluded that there
Innovation 62 is a very definite, positive, relationship
Active
48 between economic performance and
productivity and investment in research
66
Any of below and development (R&D).9 Research also
61 shows12 that the cost of investment in
innovative activities is commonly regarded
0 10 20 30 40 50 60 70
as one of the most significant barriers
2001 Survey 2005 Survey to innovation. While there is a continuing
requirement for publicly-funded research
Figure 2:
Comparisons of 2001 & 2005 UK Innovation Surveys: Proportions of innovation Enterprises there is also a need for the IT industry to
Source: Source Economic Trends 628 DTi/ONS
invest in new research and development
as this underpins innovation which is
essential to creating competitive
advantage and sustainable prosperity.14
9 The Relationship Between Publicly Funded Basic Research And
Economic Performance a SPRU Review Ben Martin and Ammon Salter
With Diana Hicks, Keith Pavitt, Jacky Senker, Margaret Sharp and
Nick von Tunzelmann Science Policy Research Unit University of
Sussex Falmer, Brighton BN1 9RF, UK
12 First findings from the UK Innovation Survey, 2005 S Robson and
L Ortman DTi Initial analysis of the UK 2005
13 OECD report ‘Innovation Policy and Performance’ published in 2005
14 ‘Why British University Computing Research Deserves Better Funding
and Recognition’ BCS, UKCRC
 Developing the Future | Phase 2-07

While investment of this kind could be EXTERNAL FACTORS AFFECTING “Generally data for the UK indicates that
financed by larger corporations, it is INNOVATION most firms do not place a great deal of
increasingly difficult for smaller Organisations do not operate within a emphasis on formal methods protecting
organisations within the SME sector to vacuum, they respond to the legal and intellectual property. They prefer to use
fund this sort of investment. Research regulatory framework surrounding them informal methods because they are
has shown that smaller businesses find and to their customers and competitors, more cost effective.”13
the lack of qualified personnel one of and to their suppliers and employees. Research has also indicated that
the more important constraining factors Research suggests that the lack of universities tend to use more informal
on their ability to innovate.12 However, restrictive and complex trade regulations methods of protecting their intellectual
collaboration and networking with academia within the UK is an active encouragement property. As the incentives for academics
also allows the SMEs within the IT sector to innovation, and a lure to inward to exploit become stronger, they are
to influence the future and to support its investment, although other surveys12 becoming more sophisticated about
own innovation through initiatives such find that the impact of UK and European 27
protecting exploitable IP while still
as Knowledge Transfer Partnerships Union (EU) regulations are a barrier to publishing the basic research for peer
(KTP),15,16 and student internships. innovation for smaller enterprises. review. It would be much easier if the
As Silicon Valley in the US has shown, The Confederation of British Industry patent system on this side of Atlantic
clusters are also important to developing (CBI) concludes that the Government was like the US system where academics
innovation. This why innovation in IT in the should focus its strategic thinking on have up to 12 months after first disclosure
UK is frequently focused around locations minimal regulation principles, and on to file a patent so academic publication
such as Cambridge, the Thames Valley encouraging a best practice culture (which has to be timely and competitive)
and Scotland’s Silicon Glen. to support e-business.17 can be done before patent filing.

CREATING A CULTURE DEVELOPING INTELLECTUAL

OF INNOVATION PROPERTY PROTECTION
There are a whole range of cultural factors Other incentives which currently exist
which also help determine organisational to spur new innovations, however, do not
tolerance for risk, employee empowerment, seem to be fully understood. Intellectual
innovation, and a willingness to design property rights (IPR) for example were
new and flexible organisational structures
As Silicon Valley in the
designed to provide incentives for
and work processes. innovators and inventors, as they provide US has shown, clusters
There is also a relationship between a time period where new inventors can are also important to
organisations that are seen to be recoup costs without the worry of developing innovation.
responsive to the needs of their being challenged by competitors.
This why innovation in
customers and their staff, and their However, formal IPR methods, such as
attractiveness as a place to work. patents, can only be used if the knowledge
IT in the UK is frequently
Recent research has shown that is able to be easily documented. focused around locations
‘e-enabling’ employees (implementing Therefore, new innovative business such as Cambridge,
electronic processes within an organisation) processes, even if they are bespoke
has multiple benefits, ranging from better
the Thames Valley and
and fundamental to the success of an
communications to increasing IT skill levels organisation, cannot be easily patented. Scotland’s Silicon Glen.
amongst existing staff.17 This empowerment Many firms therefore need to find ways
is a known factor in stimulating creativity to protect their competitive advantage
and innovation within an organisation. but this cannot be done through any
formal method such as patents.

12 First findings from the UK Innovation Survey, 2005 S Robson and

L Ortman DTi Initial analysis of the UK 2005
13 OECD ‘Innovation Policy and Performance’ published in 2005
15 KTP’s proven scheme for encouraging tech’ transfer partnerships
between universities and industry managed by the DTi
16 KTP detail found at www.ktponline.org.uk
17 e-value matters October 2005 ISBN 0-85201-614-X sponsored
by the DTi
 Developing the Future | Phase 2-07

While protecting intellectual property is But, since the US is still the largest Within the IT sector, the restrictions on
considered vital for innovation and business single market for software, the intelligent legally protecting software algorithms and
economic competitiveness, research shows12 entrepreneur would generally file a programs has led to the concept of the
that there is a difference in perception US patent first to protect the high ‘fast innovator’; a company that protects
between larger and smaller companies. ground and think about a UK or its trade secrets and uses an accelerated
Initial investigations indicate that IPR European patent second. product to market business strategy.
protection costs are more easily carried
Companies also need to understand that There are often many different ways to
by larger organisations and that SMEs
there are alternative methods to support solve a software problem, so even if an
find the costs harder to meet and
innovation protection other than obtaining algorithm is patented another company
therefore justify, although venture capitalists
legal protection. The Gowers Review may be able to invent a completely
(VCs) look for a start up to have a patent
survey into alternative protection measures different solution and bypass the IP.
on the core IP as a way of protecting
shows how companies of varying sizes At the end of the day, out engineering
28 their investment.
view differing practices. and out selling is really what matters.
The UK Government recognises the need
for IPR and commissioned the Gowers
Review, which was published in December
Percentage of respondents
2006.18 The review recognises the need
for a modern IP scheme to support Size of enterprise: employees
the ‘digital age’ and ensure the UK
10-250 250+ All 10+
can stimulate creativity and innovation.
This would enable Britain to compete in Formal
the global, knowledge-based economy,
Confidentiality agreements 11 22 11
recognising that IP acts as an incentive
to both individuals and firms to innovate Trade marks 6 16 6
and create, knowing their investment
Copyright 6 10 6
is protected. The review makes a
number of recommendations in terms of Patents 5 13 5
strengthening the existing systems and
Registration of design 4 11 4
making these cost effective. However,
it recommends, “greater balance and Strategic
flexibility of IP rights to allow individuals,
Lead-time advantage on competitors 9 17 10
businesses and institutions to use
information and ideas in ways consistent Secrecy 8 19 9
with the digital age.”19
Complexity of design 5 9 5
The lack of intellectual property protection
Figure 3:
for algorithms, software or enhanced “Rating different methods for protecting innovation” Source: First findings from the UK Innovation Survey 2005 ONS
business processes are barriers to
innovation. While the Gower Review
recognises some of these issues, the UK
Government could do more to assist small
companies in protecting their IP. Initiatives
such as extending the tax credit system
to cover the costs registering a patent,
or other forms of IP, would assist many
SMEs, as owning a strong IP portfolio can
be an incentive to financial investment.20

12 First findings from the UK Innovation Survey, 2005 S Robson and

L Ortman DTi Initial analysis of the UK 2005
18 Gower review can be found at www.hm-treasury.gov.uk/
independent_reviews/gowers_review_intellectual_property/
gowersreview_index.cfm
19 Gowers Review of Intellectual Property, December 2006, HMSO,
ISBN: 978-0-11-84083-9
20 Information Age Partnership 2007 i2010 Working Group Ensuring
the right conditions for an innovative, inclusive and competitive
UK Knowledge Economy
 Developing the Future | Phase 2-07

Initial investigations for this report show KNOWLEDGE AND INNOVATION

that some innovators are using USA Innovation depends heavily on knowledge,
IPR protection for software systems and with science and technology being key
algorithms; even though they may not be areas in the information technology (IT)
able to fully fund the costs of pursuing industry. The UK has, despite lower levels
breaches of infringement in the courts. of funding when compared to other nations,
The motivation behind the initial protection a very successful and high-quality
of their innovations has more to do with science base. “The UK leads the G7
the potential for financial exit strategies (an international forum for the governments
than anything else. It is suggested that of Canada, France, Germany, Italy,
an organisation that wishes to exit via a Japan, the United Kingdom and the
trade sale arrangement to a larger USA United States) in terms of citations
company will gain more by having this relative to both population and gross 29
protection in place than if it ignored it. expenditure on R&D.”13

The OECD research shows that the

COMPETITION SPURS CREATIVITY
benefits from knowledge transfer are
AND INNOVATION
directly proportional to a firm’s own
The cycle of innovation continues21 at investment in innovation. It quotes
an ever increasing pace. Research has “Relatively low levels of innovation
shown that there is a very positive link investment therefore probably mean
between increased competition and that UK businesses are, compared to
increased innovation. A review of the their major competitors, less well placed
international empirical evidence suggests to exploit research carried out in the
that the link between innovation and UK science base. Weaknesses in
competition is positive.13 skills are another barrier to successful
According to research by knowledge transfer.”13
PricewaterhouseCoopers’ ‘Innovation SUPPORTING NETWORKING AND
Survey’, top innovators generate over 75% COLLABORATION – SCALE-UP
of revenue from products not in existence COLLABORATION WITH ASIA
five years ago.6
Networking and collaboration have a
The need to innovate, to create new profoundly positive impact on innovation.
products, goods, services and innovative This is because organisations rarely
and effective new processes and innovate alone but rely on others for
operations is critical to the UK’s future, additional knowledge and expertise as
so nurturing an innovative culture within well as access to additional resources and
the IT sector is essential. shared risk. According to OECD research13
the UK performs well in this area, although
too often this networking pattern was
seen as intermittent and patchy.

6 Cox Review of Creativity in Business: building on the UK’s strengths,

2005 can be found at http://www.hm-treasury.gov.uk/
independent_reviews/cox_review/coxreview_index.cfm
13 OECD report ‘Innovation Policy and Performance’ published 2005
21 Research on global competition and innovation, Dialogic Consulting
2007, www.dialogic.co.uk
 Developing the Future | Phase 2-07

It has been recommended that the UK

US EU/UK measure Comments
must scale-up its collaboration with Asia’s
innovation hotspots if it wishes to exploit Eligibility Small and medium SME only Much simpler and
sized enterprises less prone to the
its science and technology industry within (SMEs), Several exploitation of
the global market. According to recent minority groups, loopholes
press commentary in the Financial Times women owned,
HUBzones
(FT)22, it is vital that the UK increases its
collaboration in Asia. The article states Overall % set 23% primes
aside goal
that “Top priority is for Britain to ‘unleash
mass collaboration’ now while Chinese 40% sub 10% – no It might de facto
contracts distinction between result in sub-
and Indian innovation is still developing,
primes and subs contracts only
rather than in 10 years time when it will
be too late”. It says: “The centrepiece Dept goals Set by Small Set by Small
30 Business Business Service
should be a £100 million global research Administration (SBS) or Office of
and development collaboration to help (SBA) Government
fund programmes with target countries Commerce (OGC)
on particular themes.” Individual Set by agencies Set by departments
contract goals or OGC
DEMAND LED INNOVATION Size eligibility 100s and depending EU SME definition Much simpler
criteria on sector and sub- only
Customer demand also affects innovation. sector
It seems that customer demand for
Industry sectors All Would it be possible
‘high tech’ innovative products in the
to restrict it to hi-
UK is strong. “UK imports of ‘high tech’ tech or possibly
goods account for roughly one third of to start there?
all imports.”13 Legal basis Opt out for US Not permitted There have been
only in World Trade today – according suggestions that
It has been suggested that one way of Organisation to some. Do we SME set aside may
promoting innovation could be to amend (WTO). need EU law not be allowed under
the procurement processes and criteria change? current EU law
of major purchasers of high tech supplies Innovation grants Small Business Research and Small Business
such as the UK Government, “Solely relying Innovation Research development (R&D) Innovation Research
on cost as a criteria for evaluation in Programme (SBIR) grants Programme (SBIR)
$2 billion each year has some similarities
technology intensive areas is not good to small businesses to the R&D Grant
practice.”13 It has been further suggested for innovation program, but orders
that the SME sector could benefit of magnitude larger
substantially if Government procurement Small Business- Small Business Collaborative R&D Some similarities
systems could be modified. A recent report University Technology Transfer program to the DTI’s
estimated that, if the UK Government Collaboration Program (STTR) Collaborative
$200 million R&D program.
were to purchase goods and services UK program is of
from the UK SME sector, it would inject comparable size
something approaching £8 billion into SME Mentoring The SBA Mentor- 1. Princes Trust Not the same scale
stimulating growth in this sector.23 Protege Program 2. Business Link

A recent 2006 report by Intellect24 on HUBzones – Historically Underused Business Zones

potential changes to public procurement SBA – Small Business Administration
OGC – Office of Government Commerce
policy highlights some interesting WTO – World Trade Organisation
observations. Some commentators reason GPA – Government Procurement Agreement
SBIR – Small Business Innovation Research
that the level of public procurement
expenditure, ring-fenced for SMEs in Figure 4:
Comparison of US SME ‘set aside program’ and a possible UK/EU program – Source: Intellect
the USA, drives innovation in a very
significant way.
 Developing the Future | Phase 2-07

The French have been leading advocates • Each department decides for each This enables the students to gain an
of an SME set-aside programme in Europe. contract the relevant percentage set understanding of all aspects of running
Tom Wills-Sandford commented that he aside for that contract, but the total a business, and to be at the edge of
is surprised that the UK Government is set aside must add up to their agreed day-to-day business decision-making.
not also supporting the French initiative. department target The Cambridge Centre for Entrepreneurial
In his view, the establishment of an Learning at the Judge School of
• In the procurement process large
SME set-aside programme would do Management is another good example
businesses bidding for prime contracts
as much for innovation in UK as any of the way in which some institutes of
must provide a plan to use SMEs and
other government programme being higher education are adapting to the
then the plan will be subject to audit
considered. It would also make the UK needs of the UK’s increasingly
after the contract has been awarded.
Government much more innovative. entrepreneurial culture.
Incentives (and penalties) should
The table (figure 4, left) provides a be considered
comparison between the USA and what 31
• A Mentor-Protégé programme
the UK could do in a proposed ‘set-aside’
would have a very useful role to play.
programme of investment to support
Consideration should be given to
innovation by public sector procurement
how this might be introduced.”
policy changes as detailed in the report
by Tom Wills-Sandford. The ideas are quite streamlined and there
are tangible benefits that could be derived
The Deputy Director of Intellect, Innovation depends
from employing this as part of a strategy
Tom Wills-Sandford believes that the
for supporting innovation in the SME heavily on knowledge,
UK could consider methods by which it
provided similar support to SMEs and
sector. The UK Government needs to with science and
re-examine its current policies.
has some pragmatic suggestions of how technology being key
this would be achieved. He says “I believe areas in the information
an EU/UK programme could be based ENCOURAGING NEW
ENTREPRENEURS technology industry.
on the US model but with the following
characteristics, many of which streamline As innovation and creativity become
the process: more significant within the economy, it is
interesting to note that more and more
• Only oriented at SMEs (measured
Master of Business Administration (MBA)
by size) – no special cases
students are keen to learn the secrets of
• A goal/target set by a strengthened becoming a successful entrepreneur.
Small Business Service of 10% of Nowadays, there are a number of MBA
central government procurement programmes that include an
£s going to SMEs ‘entrepreneurship elective’ where students
can learn skills such as economics
• No distinction between primes and subs
management, operations systems,
and no separate targets. (In the US 23%
venture capital finance and, most
prime contracts must go the SMEs and
importantly, spend some time working
40% of sub contracts to SMEs)
with entrepreneurs.
• Establish one definition for an SME
The University of Oxford, Saïd Business
rather than several
School, is operating a new ‘Enternship’.25
• Small Business Service to agree with Within the Oxford programme new students
each Whitehall Department their target often choose to work with the SME sector
for the FY but the targets must balance rather than the larger multi-nationals.
out to 10% across Whitehall

13 OECD report ‘Innovation Policy and Performance’ published in 2005

22 FT.com ‘Scientists urged to work with innovation hotspots’
Clive Cookson January 17 2007
23 i2010 Information Age Partnership Ensuring the Right Conditions for an
Innovative Inclusive & Competitive UK Knowledge Economy 2007
24 A UK Perspective on US Procurement Preference Programs –
Small Business Set Aside; Tom Wills-Sandford, February 24 2006,
Intellect www.intellect.org
25 “Work placements with a difference” MBA supplement –
The Times, London, 18th January 2007, p12
 Developing the Future | Phase 2-07

There is an enormous OPTIMISING PRODUCTIVITY Over its 15 year history, MSR has made
LEADS TO INNOVATIVE CULTURE – major contributions to every MS product
need for science and PROVIDE TIME TO INNOVATE and indeed incubated several of them,
industry to connect Competitive pressures mean organisations e.g. Digital media, Web Services (Indigo).
and to work together are constantly finding new ways to optimise
to commercialise the their employees’ productivity and many FLEXIBLE WORKING,
new ideas are being adopted by UK firms. EMPOWERMENT AND INNOVATION
emerging research. Giving staff ‘innovation time’ away from Given the changing demographics in the
their normal work duties is an idea UK and the pressure to recruit and retain
conceived in the US that is gradually highly skilled employees, organisations
spreading to the UK. must find ways to keep and reward the
“There is a growing belief that by de- workforce which they have. Flexible
32 cluttering employee minds of the minutiae working, performance related pay and
of everyday working life, creativity and stock options are proven methods of
innovation must surely blossom.”26 achieving this. Another alternative to
flexible working is to provide good
Initiatives such as ‘staff suggestion
workplace services to busy professionals.
schemes’ are being introduced in many
These can include laundry pick-up,
large organisations. In some cases these
childcare, grocery delivery, lunch and
have led to new products and services.
dinner services and a concierge service.
Google’s policy of allowing its engineers
the freedom to spend 20% of their time Recent government figures28 reveal:
to pursue products they are passionate • 92% of employers provide paid leave
about26 has created new products and for fathers
services such as Google News and
Google Suggest. • 75% of workplaces provide parental
leave (additional leave to either father
Other interesting examples of where these or mother)
concepts make a difference are Microsoft’s
‘Think Week’, where Bill Gates Founder • A quarter of workplaces allow some
and Chairman spends time considering (non-managerial) employees to
the future of the technology company work flexitime
based on his own ideas together with • In terms of flexible working arrangements,
a set of high profile ‘papers’ that are 64% of employers accept that employees
submitted by employees. This can also can switch from full-time to part-time
be illustrated by Live Labs ‘Think Tank employment (64%, up from 46% in
Incubator’ for Web 2.0 with Microsoft 1998), 41% use job-sharing, 28%
Research (MSR) and MSN.27 term-time only contracts and 28%
Microsoft also has a 750-person world- home working
wide research organisation that competes Given the pressing need for organisations
and collaborates with the best universities to become more creative and innovative,
worldwide to ensure it is abreast of and workplace policies which improve staff
contributing towards developing the state motivation and morale seem to be a
of the art. vital step forward.

26 Personnel Today January 16th 2007

27 Live labs information can be found at http://labs.live.com/
28 5th Workplace Employment Relations Survey (WERS), July 2006
 Developing the Future | Phase 2-07

RECOMMENDATIONS SUMMARY
• To reconsider the options for support for Those organisations that innovate quickest
SME innovation and growth and examine will gain a competitive edge. There is a
if and how the UK could adopt a similar well established link between innovation,
strategy for public procurement within increases in productivity and economic
this sector in a similar manner to growth. Creativity drives the development
the USA. of new ideas, creating new products and
new markets. Innovative business
• Consider options for financial support
processes improve efficiency, benefiting
for innovation within the software sector
individuals, customers and society.
as a means for stimulating SME growth,
a re-appraisal of the R&D classification Although the UK has a history of success
that places software development in research and development, it is not
outside of accepted R&D should be exploiting this in terms of translating 33
thought through more fully to ensure research success into new innovative,
that we encourage rather than commercially successful opportunities.
discourage innovation. There is an enormous need for science and
industry to connect and to work together to
• Develop the pragmatic recommendations
commercialise the emerging research.
from the Gowers Review to develop an
appropriate IPR for the ‘digital age’. At a recent Royal Society meeting,
a senior R&D manager from Unilever
• To re-examine how the UK can work
admitted, “he would be relaxed if more
towards a solution with the French
of their synthetic chemistry moved to
National Assembly to ratify the London
Shanghai, because the unique strengths
Agreement on IPR for the sector.
of their British labs were in combining
DtF 2006 highlighted this as an issue:
hard science with a sophisticated
essentially this proposed an effort to
understanding of what makes consumers
simplify the language and regime to
tick, drawn from social and behavioural
reduce the costs of obtaining patents
sciences. A growing number of scientists
in Europe.
and R&D-intensive businesses recognise
• If the London Agreement looks these opportunities and are reorientating
irretrievable then the Government should themselves to meet them. Now policy
examine the recommendations in the needs to catch up.”29
Gowers Review and provide alternative
economic measures that might enable
SMEs to either copyright or protect
innovations via a formal or semi-formal
set of affordable procedures.

• Industry should recognise that

innovation can be born from supportive,
non-restrictive work practices and
develop new strategies that provide
employees with the time to think in
order to contribute to innovation.

29 The science lobby is getting it wrong on innovation’

http://www.ft.com/cms/s/
9044734e-6ae0-11db-83d9-0000779e2340.html
Financial Times November 3,2006 By James Wilsdon
 The State of Entrepreneurship in the UK in 2007:
Lead, Follow or Get Out of the Way
B Y J U L I E M E Y E R , C E O , A R I A D N E C A P I TA L

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government interests, London is rapidly website designed to streamline the process if they are good – as they are in the ‘eye of
becoming a global hub for a new class of moving home for the 6 million people the tornado’ and are dealing with how the
of entrepreneur. who change address in the UK every year. markets are dynamically evolving in real-time.
Moveme.com has raised seed funding from Entrepreneurs think differently; they see
One typical example is Eric Baker, the founder
investors including Advent Venture Partners things that others don’t. They feel compelled
of online ticket exchanges ViaGoGo and
and Accelerator, an investment fund managed to make things happen because something
StubHub, which was sold to eBay earlier this
by father-and-son entrepreneurs Robin and doesn’t exist which they believe should.
year for $310 million. He is planning his next
Saul Klein. The web-based service creates a Sometimes that can take the form of blind
venture in London, having found funding from
personalised checklist of all the things needed faith which leads to catastrophe. But, more
one of the top venture capitalists. Baker is far
to arrange a move, ranging from notifying utility frequently, it represents a sharp insight
from unique; there is a wave of newcomers
companies of a change of address to hoisting which is harnessed into a step change in
from the English-speaking world and beyond
a grand piano through the first-floor windows. how an industry operates.
currently streaming into London. The simple
The site automatically generates the relevant
fact is that some of the best people in the If a company acquires that asset of the
documents as and when they are needed.
world are here. entrepreneur’s insight and innovation, then it
34 It can also be used to book removal and
can lead in that industry breakthrough.
Niklas Zennström, founder of two of the most insurance services.
Time and time again, we see that the
disruptive start-ups in the internet’s history,
When asked what was driving him to set benefits of market disruption and dislocation
KaZaA and Skype, now also bases himself
something up again, Brent replied: “What? accrue to the numbers one and two players
in London. KaZaA was the peer-to-peer file
Sit this wave out? No way.” who embrace it. Said another way, the disrupter
swapping that sounded the death knell for
will be acquired by the entity they most disrupt,
the music industry’s traditional distribution But there are key differences between
and embracing the disruption can be very
channel; Skype let the internet voice (VoIP) this dotcom boom and the previous one.
value-enhancing.
genie out of the bottle, providing free Something new is happening not only in
telephone calls over the internet and forcing the way that the internet is shaping our lives One reason why corporates buy start-ups is
the traditional phone companies into a this time round or in Web 2.0 as the industry to add new DNA to the corporate gene pool
downward price spiral. loves to call it, but also in how new technology and introduce a new way of thinking into
innovations are becoming bedded down in the how they operate. Sometimes there is massive
No sooner had Zennström sold Skype to eBay
industry. Briefly put, venture-capital-backed organ rejection by the body, but there have been
in September 2005 for nearly $4 billion that
start-ups are being acquired much earlier by hugely successful acquisitions. In the best of
the rumours started about Joost, an interactive
corporate enterprises which can offer scale to these, the start-up culture has had a positive
software for distributing TV shows and other
these entrepreneurs and which are looking to effect on the corporate culture. The EMAP
forms of video over the Web using peer-to-
expand the way they grow new products and acquisition of WGSN is one example.
peer TV technology. This time around,
services. Through their corporate development WGSN is a Bloomberg service for the fashion
Zennström is taking greater care with
units, most larger companies operate a mixed and style business which was acquired by
copyright issues than was the case with
economy where they balance the greater EMAP in October 2004 for £140 million.
KaZaA, which ended up fighting an
certainty of organic growth and its longer Since then, WGSN’s business has doubled.
international legal battle with the music labels.
time horizon with the benefits of inorganic
The Joost software developers are currently
growth, namely an earlier starter position
in negotiations with TV networks and have
and greater innovation.
signed up with Warner Music, Indianapolis
Motor Speedway Productions (Indianapolis 500,
IndyCar Series) and production company
Endemol for the beta. In February 2007, Viacom
entered into a deal with the company to
distribute content from its media properties,
including MTV Networks, BET and film studio “Entrepreneurship is not for the faint-hearted;
Paramount Pictures. it is about persisting and taking total accountability.”
But it is not only new entrepreneurs who are
being drawn to London. Leading entrepreneurs JULIE MEYER, CEO, ARIADNE CAPITAL
from Web 1.0, the first dotcom boom which
ended seven years ago, are back, having
dusted themselves down from the dotcom
crash and learned some crucial lessons
about the harsh reality of business.
But there is still a large black cloud hovering The good news is that, in 2007, economics is Entrepreneurship is not for the faint-hearted;
over London’s future as a global hub for trumping politics around the globe. The triple it is about persisting and taking total
entrepreneurial innovations. The UK is still play of the internet, entrepreneurship and accountability for a company and your life:
feudal in many ways. A large segment of individual capitalism is encouraging people the good, the bad and the ugly. Accountability
society wants to argue for the master/slave of all walks of life to dream big dreams. is a good credo for any society. The UK
relationship, the employer/employee relationship Previously people were given aid and told to needs radical forces and mobilised people
despite the fact that the individual revolution stay in their ghetto. That is changing fast. who intend to take back their rightful ownership
brought about by the internet is busting wide Leading British entrepreneur Paul Barry-Walsh of their society by reducing the role of
open these outmoded relationships. The UK has, for example, founded the Fredericks government in their lives, and letting
has the richest poor people of any other region Foundation to give micro-loans to disadvantaged entrepreneurs drive growth.
in the world, but you can count on one hand people who want to bootstrap themselves up.
Venture capital has often been a catalyst for
the £1 billion companies that have started
Iqbal Quadir, one of the founders of the this growth. But venture capital should have as
from scratch over the past 30 years. Some of
Grameen Phone, the mobile phone operator its aim not only making a return for its investors
the finest entrepreneurs have gone elsewhere
start-up that has taken Bangladesh by storm but also creating the leading businesses.
to build their dreams.
over the past 10 years, said: “Capitalism Sadly, there are few new European businesses
It sometimes appears almost as if there was about empowered authority which didn’t that have become world leaders which were
has been something pre-meditated about necessarily activate the citizenry; the internet founded less than 30 years ago; the group
35
the Government’s penchant for squashing stands that on its head, and shifts the power includes Vodafone, Sage, and ARM. Far fewer
the ambitions of the UK’s homegrown to the Individual – making Individual Capitalism were backed by venture capitalists.
entrepreneurs. Over the past ten years, the the force of the 21st Century.”
role of Government in British people’s lives
Nick Ogden, is the founder of internet payment
has increased dramatically. It is not difficult
provider WorldPay, has recently founded
at all to connect the dots between government,
VoicePay, a new service which uses voice
their lack of accountability and a diminished
biometrics to verify purchasers’ identities
entrepreneurial sector. A massive tug of war
when making an online transaction.
is happening between the surge of
When asked what he was most proud of,
entrepreneurship in London, and the
Ogden replied: “Never missing payroll”.
unnecessary difficulties of setting up
Entrepreneurs know where the buck stops.
a business in the UK.
It stops with them and sometimes hits
them smack in their forehead.
skills 37
 Shoring Up the Foundations
BY S I R D I G BY J O N E S

The foundations of Britain’s future skills base But even these employers are discovering Such is the need for this basic re-skilling
are in urgent need of support. The level of that they need increasingly modern skills for to take place that, unless companies start
literacy and numeracy in England’s green even the lowest-level jobs. Basic IT skills have participating on what is still a Government-
and pleasant land is well below that in joined the traditional ‘three Rs’ of reading, funded scheme on a voluntary basis,
many so-called ‘third world’ regions. writing and arithmetic as the minimum the Government may consider making a
skillset needed to perform any but the similar scheme compulsory, in which case the
Official research suggests that there are
most unskilled work. employee would be forced to pay. If this did
around seven million adults in the UK who
happen, then many employees would do the
cannot read and write properly and 11 million According to Government research, the
absolute minimum to comply and some might
who cannot add two three figure numbers. advance of information and communication
even discriminate against hiring those in need
According to the latest available government technology and its rapid adoption in the
of this kind of re-skilling.
research, around a third of people of working workplace has fundamentally altered the
age in the UK do not have a level 2 qualification, way businesses operate. The development The picture in this case of larger organisations
five or more O-levels or GCSEs. This summer, of other technologies such as bio-technology is much more encouraging. Companies like
around half the teenagers taking GCSEs will are expected to have similarly far-reaching Compass and McDonald’s employ large
fail to achieve a grade C or above in English effects on the way in which society operates. numbers of people who lack basic literacy,
and maths. Only about 19% of Germans and These developments provide opportunities numeracy and computing skills. And they
15% of those in the US have such low skills. for the UK economy as it has been shown that do an excellent job of co-operating with any
Even other European countries which have countries that play a central role in developing initiative aimed at improving their skills base.
traditionally had high numbers of unskilled new technologies stand to gain most from But the support and co-operation of companies
workers approaching the UK level are managing their diffusion. Skilled workers will be better in IT is also essential if those at the bottom
to retrain people. For example, in the 10 years placed to adapt to the new business and of the skills ladder are to be given a
to 2001, France has reduced its proportion production techniques brought about by helping hand.
of low-skilled workers dramatically, from 26% technological change. Those unskilled jobs
Sir Digby Jones is the former
to 15%. which still remain are disappearing quickly
Director-General of the Confederation
as knowledge services fast replace the
There is nothing new in this sorry state of affairs. of British Industry (CBI).
old economy and even the most basic
Britain has historically had a far poorer skills
tasks require some degree of digital input.
base than many other countries, with higher
It is estimated that, by 2012, there will be
education traditionally the preserve of a
38 privileged few. In the 1960s, only one in
no more than 50,000 unskilled jobs in the
whole of the UK.
18 young people went to university with
many people not even bothering to complete This low-end skills gap has become so
formal schooling. As late 1979, only 40% wide that people with literacy problems are
of the workforce held any qualification and desperate to have something done to remedy
a relatively low proportion of young people the situation. When the Government ran its
stayed in education after the age of 16. national ads using the concept of ‘gremlins’ to
Although there have been considerable bring home the point that help with re-skilling
advances in attracting people to the higher is there for those who want it, they received
levels of education, there has been almost around 1.5 million phone calls requesting
no progress made at the lower end of the help with roughly 300,000 signing up for
skills scale. training courses.
The lack of basic literacy and numeracy All the indications are that people who are
amongst a disturbingly large proportion of in need of basic re-skilling at this level are
the workforce has little to do with the linguistic fully aware that they need training and will
shortfall associated with immigrants from non- take advantage of it when offered.
English-speaking cultures. The worst area of The government’s Train to Gain scheme
Britain in this respect is Northern Scotland, is designed to give them the help they
where there is very little immigration. need by releasing them from their full-time
employment for two or three hours a week.
It is more than a national disgrace that there
has been no substantial improvement in literacy Many of the people with basic literacy
and numeracy among the adult population of problems who are in full-time employment
Britain in the last 30 years. It is a potential work for small business employing only a
time bomb. Three decades ago, in the middle handful of people. A typical example would
years of the 1970s, Britain was still rich in be a small delivery or haulage company
those industries that once relied on a vast employing young men to lift and carry.
pool of unskilled labour. Mines, docks, shipyards, It is often hard to convince the owner of
factories and the merchant navy were all big such a business that it is in his direct interest
employers of the unskilled. Today, there are to participate in the Train to Gain scheme.
only 2.5 million jobs in the UK. A large But without this co-operation, those employees
proportion of these are provided by big with skills in reading and writing and basic
public sector employers such as the Ministry computer literacy are likely to face a jobless
of Defence, the National Health Service and future further down the line.
local authorities.
Imminent Demise of Computer Science
is Greatly Exaggerated
BY P R O F E S S O R K E I T H M A N D E R : C H A I R , C O U N C I L O F P R O F E S S O R S A N D H E A D S O F C O M P U T I N G ;
P R O F E S S O R O F C O M P U T E R S C I E N C E A N D D E P U T Y V I C E - C H A N C E L LO R , U N I V E R S I T Y O F K E N T

Suggestions that the teaching of Computer The economic advantage of studying for a Public funding will continue, but private
Science in universities is about to fade degree in Computing also remains very strong funding (through students paying variable
away are premature. While it is true that in countries like China and India, which are at fees), funding from industry (in the form of
applications for undergraduate courses in different levels of their economic development bursaries, salaries for industrial placements,
Computer Science have fallen by about from the UK, and these countries are producing golden hellos, and the write-off of student debt)
50% since 2001, the subject’s value to the many thousands of graduates per year, fuelling and funding from higher education institutions
graduate remains as strong as ever, and will a strong off-shoring business in the development (HEIs) themselves (in the form of bursaries to
be so for the foreseeable future. Computer of computing applications. facilitate participation) will feature much more
Science is concerned with the understanding, in the higher education landscape.
The perceived erosion of the economic
design and exploitation of computation and
advantage of studying Computing in the UK The emerging market in higher education,
computer technology, combining theory with
has been brought into sharper focus by the and the simple laws of supply and demand,
the solution of immediate practical problems,
introduction of variable fees into the higher would, for many subjects, see graduate
combining scholarly and professional activities,
education system. While UCAS data shows salaries influencing application trends, with
underpinning the development of both small
that since 2001 the number of students HEIs adjusting staffing levels to cope with
scale and large scale organisational systems,
applying to read Computing in UK universities increased demand. But Computing is not
as well as with helping individuals in their
has dropped by about 50%, graduate quite like other subjects. It evolves quickly and
everyday lives.
employment data shows that the number of the industry is truly global, with the capacity
The pervasive nature of Computing, and its Computing graduates entering employment to move its operation from one country to
wide application, produces a complex within the UK has risen. Many reports claim another at the press of a button. Its lingua
employment market for Computing graduates. that the demand for Computing graduates franca, English, has become increasingly
This ranges from industrial sectors concerned will increase, perhaps dramatically, in the widely spoken throughout the world, reducing
with the production of foundational hardware next few years. If the current trends continued the competitive advantage of highly-salaried
and software technology, through stand-alone into the future, by about 2009 the number native speakers.
hardware and software products, industrial of Computing graduates produced will be
Market forces will regulate this in the long-term.
applications (particularly, for example, in the wholly insufficient to meet demand. This is
But in the short to medium-term, the academic
financial services, media and telecommunications an unfortunate fact, since the Computing
computing community needs an alliance not
sectors) and finally to the business solutions graduates of 2009 were recruited in the
seen in the UK since the earliest days of the
deployed in the majority of entrepreneurial Autumn of 2006.
subject. This would involve HEIs, the wide
businesses serving real human needs
The UK derives significant competitive spectrum of the computing industry, the 39
throughout the developed world.
advantage from its Computing industry. professional bodies, the Government and the
While Computer Science courses produce For this to continue, it is important that this funding/research councils, all working together
graduates that are able to enter any of these industry remains strong, and that universities to safeguard the fundamental contribution that
employment sectors, demand for such produce graduates – particularly those with computing occupies in the UK economy and
graduates is likely to be concentrated in those the high-level design skills from which the UK in the wider society, with particular emphasis
parts of the industry for which the deep derives much of its prosperity – in sufficient on inspiring young people to recognise that
technical knowledge of hardware and software numbers to meet the national need. University role and to want to be a part of it. Although
is a pre-requisite (i.e. that part of the industry Computing is therefore a subject of major many are already engaged in this activity
concerned with the production of foundational strategic importance to the UK. Fortunately, through varied links between universities and
components) and in parts of the industry the Engineering and Physical Sciences industry, through professional accreditation
where analytical and logical skills are at a Research Council (EPSRC)’s recent of courses, and through the active promotion
premium. This section of the industry will have International Review of Information and of the subject in schools, the scale of the
a requirement for fewer graduates than those Communication Technology (ICT) Research problem should not be underestimated.
parts of the industry concerned with business (February 2007) shows that Computing
There are no silver bullets, no magic
solutions (which will recruit no less research remains strong – second only to the
paradigms and insufficient ‘guru lectures’ to
satisfactorily from a broader range of USA on many academic metrics. But it also
sustain a whole degree programme. But the
disciplines, including Computing, Information notes the worrying decline in the supply of future
shared enthusiasm, commitment and sense
Technology, often combined with other researchers as undergraduate numbers fall.
of adventure that still characterise that
subjects such as Business and Management, Despite the relatively large numbers of students
computing will be a good starting point.
as well as many other degree subjects outside still studying the subject, Computing may be
the Computing discipline). vulnerable as universities downsize their
computing departments as demand from
Throughout the 1980s and 1990s there was a
undergraduate applicants declines.
strong economic advantage to studying for a
degree in Computing. This advantage was Although academic computing feels vulnerable
eroded in the public’s perception from around at the moment, it is not out-of-touch, it is not
2001 when the ‘dotcom’ bubble burst, but is dying, and it will not die while it continues to
now returning to its former levels as reported innovate. Over the next few years, we shall
in the recent UUK/PWC report (The economic see new alliances emerging, particularly for
benefits of a degree, February 2007), and the funding of higher education, insofar as
as evidenced by salary levels, employment it relates to the more vocational subjects
levels and international competitiveness. like Computing.
 Lessons in Learning
B Y PA U L S M I T H , G L O B A L M A N A G I N G D I R E C T O R ,
O F F - S H O R E S O F T W A R E D E V E L O P M E N T, H A R V E Y N A S H

UK companies are becoming increasingly Six thousand miles away, Vietnam has wrapped In all, we have a skills gap in UK IT
reliant on the IT superpowers of South Asia. its economy around a scientific future – professionals. Combine that with an ageing
As our skills resource dwindles, theirs grows. churning out some of the world’s leading population, net drops in scientific education
Modern business flounders without world- IT thinkers. More than 80% of the country’s and a glut of affordable, willing resources in
class technological innovation and maintenance, students are scientists. And Vietnam is foreign destinations and it is clear that drastic
so we have no choice but to look abroad in not alone; China, Japan, Taiwan, India… action is needed.
pursuit of global competitiveness. Strategic Each is looking to transmute in the West’s
If we look again to Vietnam, the model is
outsourcing and the inward immigration of eyes from exploited off-shore commodity
simple: large businesses form their own
knowledge workers is now intrinsic to the to innovation powerhouse.
universities with governmental endorsement.
UK IT environment.
Worryingly for our IT future, the UK population This is having a marvellous effect on the
But our distant goal must be to learn to is ageing. Over the last three decades, the schools below and the working world above.
compete again, to become a force in training median age of the UK population rose from It is like a throwback to apprenticeship, but
and development, to excel in IT research and 34.1 years in mid-1971 to 38.8 in mid-2005. with the rigour of academic tuition applied.
enhancement. Our foreign outsourcing allies This is primarily the result of past trends in The result, of course, is that the modules
have just the educational model upon which fertility, although recently declines in mortality provided by this new breed of university are
we should base our skills recovery – and we rates especially at older ages have been precisely suited to the world of work which
must start learning from them immediately. playing a major role, according to the Office enthusiastically embraces the students upon
of National Statistics. their graduation.
Borders are no longer barriers. The net effect
of migrant workers on the UK is clearly positive, Looking ahead, there will not and should not Conservatively, it will take fifteen years to fill
According to the Centre for Economics be an end to outsourcing abroad, as foreign the skills gap. If each decent-sized company
and Business Research commissioned by workers in so many markets carry a cost were to commit to providing excellent on-the-
Harvey Nash, £54.3 billion was the uplift advantage we could not possibly equal. job training today, sponsoring students next
of GDP in 2005. Yet a science and technology polarity in the year and working with a partner university on
world is an unwelcome prospect. There is designing and funding a vocational course, the
Unsurprisingly, the spread of online technology
not a single valid reason to suggest the UK UK would be back on track in five years time.
has increased the demand for information
cannot rediscover its ability to excel in IT –
technology specialists – in particular software
and to start to operate and innovate at the
developers. According to the Office of
rate of the world’s IT superpowers. But we
40 National Statistics, in 1995 just 2,142 software
must be robust and immediate in our approach
specialists came into the UK. In 2005, 20,900
to reparation.
were welcomed. More difficult to measure is
just how many overseas developers are currently More and more of our IT needs could be
employed by UK firms. The number is in the outsourced or supplied by migrants. But do
tens of thousands – costing UK business we really want to sacrifice our digital
hundreds of millions of pounds each year. innovation for ever? Do we want to become
Although the word ‘costing’ can be badly dependent in our use of IT and in the
misconstrued – there is nothing necessarily development of new technologies? An ideal
uneconomical or damaging about outsourcing. outsourcing model would be one where the
On the contrary, constructive and strategic UK innovates and manages and the foreign
use of overseas suppliers can form part of a supplier, with its cost advantages, activates
sound platform upon which to run a business. and produces on our behalf.
Moreover, many of the UK’s biggest and best
There needs to be a radical change of attitude
businesses have no choice but to outsource,
amongst the pillars of responsibility. As the
as there is simply insufficient local resource
trend is towards increased trade in IT between
to satisfy current needs.
here and the Far East – we could do worse
But cultural disinterest in technology and than learn from those cultures. In many Asian
science has become an endemic affliction countries which lead in IT, children look up to
among those born in the UK. “I’m hopeless scientists with awe. In South Korea, for example,
at maths” is heard with alarming frequency in technology giants such as LG and Samsung
offices up and down the country. Unfortunately, are part of society’s fabric, and a prestigious
it is often said with resignation – even pride – career target from school-age upwards.
as if it were an irreversible flaw in our Maths and science is taught with rigour and
ethnic make-up. Elsewhere in the world, discipline until 18 in many countries and the
such educational poverty might only be per capita achievement of students in science
announced when earned by unfortunate far outstrips what we manage in the UK.
economic circumstance and where rudimentary
According to the CBI’s 2006 statistics,
scientific instruction lies beyond reach. In the
China alone is producing upwards of 300,000
UK it is at least available for all, but its detail
science graduates each year. India produced
is out of sight and unwelcome for most.
a staggering 450,000 engineering graduates
By contrast, our population does at least
in the last academic year. While in the UK,
recognise the value of science – even if only
figures reveal a decline in all science subjects,
passively. According to a recent nationwide
from GCSE through to A-level and tertiary
MORI poll, 86% of adults think science makes
education.
a good contribution to society.
Professional Education:
The Role of Work-based Learning
BY V I R G I N I A W I LLI A M S , P R O F E S S I O N A L LI A I S O N D I R E CTO R ,
S C H O O L O F I N F O R M AT I C S , C I T Y U N I V E R S I T Y

An element of practical experience is City encourages students to develop the skills

necessary to develop competence in any they will need to gain successful entry into
profession, and higher education institutions the workplace. Starting with an initial skills
are now offering courses with substantial self-assessment, students work with personal
practice-based elements in order to meet tutors to identify their own development needs
the expectations of students, employers, and interests. Employers work with City to
and professional bodies. Research suggests develop students’ communication skills
that 70% of learning comes from experiences, through workshops on presentations,
either planned or unplanned, thus emphasising interviews or CVs. Industry knowledge is
the need to ‘learn from real work’. developed by means of expert lectures.
Employers regard the higher level intellectual City students use the British Computer
abilities associated with university study as Society’s Professional Development Scheme
necessary for competitiveness in the IT industry to document placements and internships.
of the future. However, analysts agree that the Students are assessed for a Certificate in
higher education (HE) sector has a very low Graduate Professional Development, which
market share of the employee learning market, can include Key Skills and National
however defined, and this is seen as an Occupational Standards, using a framework
opportunity by some in the HE sector. developed in conjunction with e-skills UK.
City University arranges role-based, project- There is a great deal of workforce development
based and usually paid work experience for activity underway in the HE sector, with
students, with a wide range of employers, substantial employer engagement with HE to
lasting between six months and three years. provide work-based development opportunities.
The most common model is the one-year
There are, however, issues that need to be
undergraduate sandwich placement, but City
addressed if work-based learning is to expand.
has innovated by introducing new models for
its IT students. First, work-based learning is a contested area,
not least because it challenges the very
On the Professional Pathway, City
essence of universities as the primary source
undergraduates take work-placement IT roles
of knowledge. We cannot afford to let debates
41
alongside their studies. For three years of a
about the value of different types of learning
four-year degree programme, the only fixed
or where learning is best situated to divert
elements are tuition at City one day per week
attention from the more important issue of
and a substantial software development
how higher education institutions (HEIs)
project done in the workplace. Employers
and employers can best ‘co-develop’
often choose to employ Professional Pathway
the workforce.
students for the whole three years of the
programme, although shorter periods are Finally, this co-development requires a new
also acceptable. model of ‘co-financing’ with employers paying
for the development that will bring added
In addition, City postgraduate students can
value to their businesses, staff contributing
undertake a client-based project for an
through the time they give and the state
organisation and use the work as the basis for
paying to accredit the learning.
their dissertation. Help from City is available to
the employer and student in formulating these
internship projects.
Work-based Learning Advisors are key to the
success of City’s schemes. They visit employers
and students during placements/internships
to ensure that expectations are being met on
both sides. City offers flexible arrangements
that fit with employer needs, while supporting
students in ways that maximise the benefit
they derive from the opportunities.
 The China Syndrome
BY P R O F E S S O R DY L A N J O N E S - E VA N S ,
D I R E C T O R , N AT I O N A L E N T R E P R E N E U R S H I P O B S E R V AT O R Y F O R W A L E S

“Give a man a fish and you feed him for a day. There is a role for large firms to work more
Teach a man to fish and you feed him for closely alongside small firms to ensure that
Skills are the key to
a lifetime”. business can access the right type of unlocking potential
information about their technology or market
Given China’s pre-eminence as one of the
cheaply and quickly. Many large businesses, within the population.
most important economies of the 21st century,
especially within knowledge-based sectors
it is worth examining this ancient Chinese
such as biotechnology and IT, have developed
proverb in the context of skills and learning
strategic partnerships, or have acquired small
within business organisations, as it may well
high technology firms to enable them to gain
hold the key to where the West can take on
access to a specialist type of knowledge
the might of this new Asian superpower in
which is not currently available within
terms of global competitiveness during the
their organisations.
next 10 years.
There is evidence that small firms can, through
The UK Government recently published the
both formal and informal arrangements with
Leitch Report, which examined the UK’s long-
large companies, gain access to knowledge
term skills needs and set out ambitious goals
that, in turn, will lead to increased efficiency
for 2020. If achieved, these would make the
and competitive advantage to both partners.
UK a world leader in skills. It clearly indicated
For example, research indicates that not only
that skills are the key to unlocking potential
did the inward investors into Wales create
within the population and that without
high value jobs but, through their skills
increased skills, we would condemn ourselves
development initiatives, raised the quality
to a lingering decline in competitiveness,
of learning amongst smaller companies
diminishing economic growth and a bleaker
involved in their supply chains.
future for all.
The dissemination of such best practice
However, if we are to compete with the
throughout different industrial sectors can
growing pre-eminence of countries such as
create an effective ‘learning loop’ between
China and India, the issue is not about the
small and large firms which could be the
skills of individuals alone. Businesses must
answer to many of the questions being asked
42 also adapt to the changing competitive global
in terms of how we compete with the growing
environment, usually by becoming skilled at
economies of China and India.
creating, acquiring, and transferring knowledge.
Within such ‘learning organisations’, the
generation and acquisition of new ideas is
essential if learning is to take place, and
whatever the sources of these ideas, they are
the trigger for improvements that will lead to
greater profitability which, in turn, will increase
the competitiveness of the UK as a whole.
For UK businesses, one of the major barriers
to learning is that of organisational inertia as
many businesses find change a difficult
process and often resist change, even when
they are threatened with extinction because
previous actions have ‘worked well in the past’.
As a result, even successful firms can become
complacent, learn too little, and eventually fail.
To Succeed in the Global Economy the
UK must Commit to Technology Skills
BY K A R E N P R I C E , O B E , C E O E - S K I L LS U K

The UK is facing a potentially critical shortage This should be complemented by a sector-

of technology skills. The UK’s IT industry is wide commitment to the development of the
growing at five to eight times the national existing IT professional workforce. Over 70%
average, and around 150,000 entrants to the of the UK’s workforce in 2020 has already
IT workforce are required each year. At the left compulsory education. The development
same time, every year, fewer young people of IT professionals to meet changing business,
choose to study technology-related subjects technological and global needs is a primary
at school and university; and every year fewer challenge for the UK if we are to remain
technology graduates choose to embark on successful ten years from now.
a career in IT. This mismatch urgently needs
Over the next decade, UK employers will need
to be addressed.
increasing numbers of business-oriented IT
In the first instance, we must improve the professionals who can function in customer-
attractiveness of technology careers and the facing roles and are prepared for ongoing
quality and relevance of IT-related education. change. This requires a sophisticated set
Drawing new talent into the IT workforce is of skills and understanding, one that
vital to its renewal and growth. encompasses business, communication,
team working and project management skills
Between 2001 and 2006 there was a drop
as well as in-depth and up-to-date technical
of 43% in the number of students taking
knowledge. IT professionals need to be
A-levels in Computing (from 10,913 in 2001
encouraged and able to develop their skills
to 6,233 in 2006). The uptake of IT-related
throughout their careers, with access to
degrees almost halved between 2001 and
recognised qualifications that meet consistent
2005 (from 27,000 in 2001 to 14,700 in 2005).
standards and employer and individual needs.
Of these IT-related graduates only around
three in ten choose to enter IT occupations The global landscape for IT professionals
upon graduation. and the IT industry is undergoing constant
evolution and this will only accelerate with time.
There is also a growing chasm between
It is vital that we continue to understand and
technology-related education at school and
address the skills and development implications
university and employer needs. At school level,
of these changes so that the UK has the 43
most IT courses focus on IT user skills, which
IT professionals it needs to succeed in
have little relevance to today’s IT careers.
every sector of the economy.
We need courses that bring out the excitement
and relevance of IT to modern day lives and
that transform the attitudes of young people,
particularly women, towards careers in IT.
At university level, many IT courses focus on
computer science, with little business content.
There is an urgent need for more university-
level courses to combine IT and business, with
“IT professionals need to be encouraged and able
creative and stimulating programmes of study to develop their skills throughout their careers.”
that enable students to develop the full range
of skills required for a modern career in IT. KAREN PRICE, OBE, CEO E-SKILLS UK
 Knowledge Transfer: Linking HE with the IT Industry
BY P R O F E S S O R R O B I N B LO O M F I E L D , P R O F E S S O R O F SYS T E M A N D S O F T WA R E
D E P E N D A B I L I T Y, S C H O O L O F I N F O R M AT I C S , C I T Y U N I V E R S I T Y

Knowledge transfer is not a one-way process We are also active at a policy and regulation
where the wisdom of academia is somehow level. Again, this is a two-way process
transferred into the minds of students and where we can both shape the agenda within
clients in the IT industry. If this arrogant Government, EU and corporate bodies but
attitude was ever appropriate, it is no longer. at the same time understand their needs and
Research and teaching need to be informed priorities. This can be a very efficient mechanism
by current practice, responsive to its if we work at a senior enough level, as we do.
challenges and to learn from it.
Finally we have experimented with spinning
The research focus at City is on dependable in a high-tech company (Adelard) so that it
socio-technical systems and this requires a is co-located with our Centre for Software
close cooperation between HE and industry. Reliability. This proves a direct ‘water cooler’
The systems we depend on are pervasive and synergy with low interaction costs. It has
we need to work closely with those responsible provided staff to teach who are also
for them in areas outside the IT industry such practitioners plus a route for collaboration
as financial services, air traffic management and contact with a wide client base.
and energy.
In our area of socio-technical systems, as in
At City we have a number of ways in which so many others, Knowledge Transfer is about
we achieve this close coupling between HE developing and being able to sustain trusted
and industry. In our research, we work on real relationships. This involves specific skills
systems and real problems with partners that and opportunities and is something that
own and address systems critical to the UK can be facilitated at an institutional as well
economy. We have an approach that de-risks as a personal level. It involves investment,
these interactions with industry but allows us commitment and patience from all concerned.
access to real systems. To do this we have
spent years building up confidence and trust
in how we work. For example, we exploit the
good links we have with the City of London
in developing a research partnership with the
44 City of London Police on High Tech Crime.
Of course, we have the usual mechanisms
available to us of Knowledge Transfer
partnerships (KTP), case studies, spin outs
etc and we use these as and when we can.
But two-way working on real systems and
real problems means we also need the
resources to provide what our partners need.
This requires flexibility and perhaps a broader
interaction than is customary (the ‘Knowledge
Transfer’ product can be quite broad and in
our field sometimes requires engaging with
solved problems previously solved but
unknown to the community).

“Knowledge Transfer is about developing and

being able to sustain trusted relationships.”
PROFESSOR ROBIN BLOOMFIELD, CITY UNIVERSITY
 45

“We need courses that

bring out the excitement
and relevance of IT to
modern day lives and
that transform the
attitudes of young
people, particularly
women, towards
careers in IT.”
KAREN PRICE, OBE, CEO E-SKILLS UK
 Developing the Future | Phase 2-07

Skills
INTRODUCTION POTENTIAL SHORTAGE OF
Research for this section of DtF 2007 QUALIFIED IT PROFESSIONALS
develops the themes from DtF 2006 IN THE UK
from commentary and challenge into In 2005 the number of graduates from
analysis and action. The education IT related degrees totalled 15,930.30
and skills agenda for IT in the UK is Six months after graduation 71.5%,
the linchpin for the success and growth of 11,390, were in employment or employed
the UK knowledge and creative economy. and studying; but only 42.4%, 4,829,
Skills and education develop the knowledge were employed in the IT sector.30
and flexibility to adapt and respond to Research shows that unemployment
market trends, competitive pressures among IT graduates is higher, at 10.3%,
(e.g. globalisation) and provide the than the average for all subjects, 6.2%.
means by which the UK can become
In 2005/6 the proportion of graduates
a lead innovator in IT.
from IT related degrees that chose to enter
The section deals with three main areas: careers in the IT software professions
was only 30% (rounded).31 This is set
1. Skills: providing insight into UK skills
against the UK IT workforce requirement
agenda from within the education
that averages 156,000 – 179,000 per
system through to the work-place.
annum that covers both new jobs created
It examines current strategies such
from growth and replacement demand.
as the IT Management for Business
(ITMB) degree and goes on to provide Put another way, 70% of IT graduates
46 action-oriented solutions for the chose or found alternative activities or
implementation of a unified skills jobs outside of the IT profession in
agenda within the work-place. 2005/6, with 10.1% going on to study
for higher degrees or other qualifications,
2. Secondary Education: analyses the
10.3% are unemployed, 4.3% are engaged
fracture points in the current system,
in other activities and 3.8% are not
explains what impact these have on
available for employment, study or training.
the overall education and skills agenda
Of those finding employment 6 months
for the UK and provides solutions and
after graduation a proportion may be
recommendations for action.
classified as IT workers within other
3. Higher Education: examines the trends industry sectors based on the current
in undergraduate and postgraduate government careers taxonomy and
applications for both full and part-time some may be in interim jobs.
modes of study. It provides a developed
There is an increasing demand for
insight into the output from university
alternative graduate level skills that are
to industry and provides examples of
only being met in part by graduate
successful strategies that some
qualifications in computing. Research for
universities are employing.
this report indicates that there is indeed
The section shows the problems that a ‘pipeline’ problem with fewer students
the UK will face if it cannot develop a electing to study computing at higher
cohesive action oriented strategy between education institutions (HEIs) since the
industry, academia and Government. high point in 2001.

30 Data source: prospects.ac.uk & HESA

31 HESA, Destinations of Leavers of Higher Education, 200, cited by
prospects.ac.uk, survey carried out 6 months after graduation
 Developing the Future | Phase 2-07

The number of advertisements monitored Research shows that 70% of all US jobs
for permanent and contract IT staff created since 1998, 4.5 million, require
appears stable at 150,000 since 2005.32 judgement and experience. These jobs
The acknowledged number of entrants now make up 41% of the labour market
required for the IT workforce averages in the United States. Most developed
between 156,000 and 179,000 a year. nations are experiencing a similar trend.34
This figure covers new jobs created from
Britain is experiencing a huge need
growth as well as replacement demand.
for highly skilled employees across all
The sector may, therefore, be heading for industry sectors, in particular those
a crisis that could have a substantial impact industries which demand knowledge
on the growth of the UK Knowledge of technology and IT. Individuals with
Economy. But there are immediate IT knowledge are finding their skills in
interventions that can be taken to begin demand not just within the IT industry
to turn the problem around and accelerate itself but across other industry sectors.
the growth of this important sector of
The IT sector can no longer assume
the UK economy.
that all IT graduates will work within the
IT industry. Many will use their skills
DEVELOPING SKILLS TO within other sectors where rewards are
UNDERPIN THE GROWING the highest, working in sectors such as
KNOWLEDGE ECONOMY financial services. The universal demand
There is a close correlation between for skilled IT people is great news for
successfully developing the Knowledge new graduates, but a challenge for the 47
Economy and the need for a highly software development and IT industry
educated workforce. The Leitch Report sector itself.
(December 2006) examines the skills
requirements within the UK. It states ECONOMICALLY VALUABLE SKILLS
that the UK should aim to become a
Evidence of the types of skills required
world leader and focus on economically
by the industry is provided by the survey “The UK’s skills base
valuable skills. The Leitch Report
on the ICT labour market produced by remains weak by
recognises that although considerable
e-skills UK.35 The survey undertaken in international standards,
progress has been made with regard
the third quarter of 2006 indicates that
to education and skills in the UK, it is
there is still a skills shortage and that
holding back productivity,
still behind other countries.
there are particular areas which are growth and social justice.”
“The UK’s skills base remains weak by more problematic than others. The greatest
LEITCH REPORT
international standards, holding back problems are in those areas where
productivity, growth and social justice,” applicants with high-level technical skills
said the report. are required, such as computing and
software engineering. Around one in ten
Even if current targets to improve skills
businesses reported suffering recruitment
are met, the UK’s skills base will still lag
difficulties during the period. A similar
behind that of many comparator countries
proportion of ICT recruiters were having
in 2020. “The UK will run to stand still,”33
problems finding suitably skilled
warns the review.
applicants for jobs.
Research by several agencies, including
The sector skills council (e-skills UK)
e-skills UK, CBI and McKinsey, shows
reports that when employers are asked
that companies are hiring more workers
for more detail about recruitment
for complex rather than less complex jobs.
difficulties, they state that software
engineers are considered to be the
32 Computer Weekly/Salary Services Ltd. As reported by e-skills UK
most difficult to recruit. 33 Towards 2020 Science – Microsoft Research UK 2006
http://research.microsoft.com/towards2020science/
background_overview.htm
34 Competitive advantage from better interactions; Beardsley,
Johnson and Manyika, McKinsey, 2 2006
35 e-skills UK ICT Inquiry, Quarter 3, 2006
 Developing the Future | Phase 2-07

Government statistics36 are likely to point The novel application of technology across HIGHER EDUCATION
to a growth in the software sector over other industry sectors in this way not only
BRIDGING THE WORLDS OF
the coming years (to 2010 – forthcoming requires technical skills but also business
ACADEMIA AND COMMERCE
Green Paper on the Creative Economy) knowledge, communication skills, specialist
and the UK could face a worse crisis knowledge combined with knowledge of The education sector does not necessarily
in the near future if this issue is not IT practice and project management skills. respond in the same way as the private
addressed now. Combining knowledge of technology with sector to emerging economic trends.
other skills and applying these integrated It is simplistic to assume that all the
The data that is available at present requirements of a skilled workforce can
higher skills gives organisations the ability
makes it difficult to separate out the key be met by the education sector alone.
to develop new innovation which in turn will
skills for sub-sectors of the ICT industry. It is also naive to assume that academia
drive a sustainable competitive advantage.
The definition of ICT not only includes is motivated solely by the needs and
computing but other areas such as Organisations cannot afford to lose highly requirements of industry. However, academic
telecommunications. The data does not, skilled staff with years of knowledge and institutions are more exposed to market
therefore, give us a conclusive picture experience and rely on trying to hire forces now that students pay for part of
of the skills shortage as related to the younger employees with an exact skills their own tuition.
software sectors. Some planned work match for the projects they wish to
with the ONS, industry and academia complete. There are not enough new
KEEPING PACE – EDUCATION AND
(Summer 2007) will aim at providing entrants into the IT profession to make
INDUSTRY REQUIREMENTS
a more robust jobs/roles taxonomy this a sustainable strategy; organisations
that reflects the changing face of the will have to commit to supporting lifelong New technology is being deployed
IT industry that could be used to derive learning. The process of understanding swiftly where it can offer benefits
more robust statistics in order to technology and its potential is continual, that are both social and economic.
48 differentiate more clearly between the IT and the supporting knowledge and skills Where there is demand for new
industry itself and the more generalised required also require continual updating. technology there is a demand for the
use of technology in other industries. people to deploy it. The industry needs
Assuming that technology and IT has a
more people skilled in computing.
refresh time of around 18 months, then it
PREDICTING SKILLS is fair to assume that the knowledge Demand for ICT workers has been quoted
REQUIREMENTS required to support this technology as being in the region of 150,00037, 38, 39
Organisations increasingly outsource the will also have a finite ‘lifetime’. We have workers per year. This is a huge figure
routine tasks and concentrate on developing moved into a time when ‘lifelong learning’ and has provoked much alarm in some
the tasks which require judgement, is no longer an aspiration but a necessity. sectors of the economy. The UK
experience and knowledge in order Government is examining this issue in
to develop a competitive advantage. greater detail,40 with work that is looking
Using technology to develop new processes, at not only the numerical or statistical
products and improve current work figures but the distribution and mix
operations is vital in many organisations, of skills required for the industry.
not only within the IT sector.
WHAT DO THE FIGURES SAY?

We have moved into a time when ‘lifelong learning’ Dr. Andrew Tuson of City University says:
“The use of the term ‘ICT’ in Government
is no longer an aspiration but a necessity. statistics is telling. It confuses and
combines two distinct though related
industries: Information Technology and
Telecommunications. Does this figure
include telecoms installation technicians?
If so, are we in danger of providing provision
for which there is no real demand?”
36 IT Investment, ICT Use and UK Firm Productivity – summary of ICT
effects, and measurement conclusions, T Clayton, Oct 2005, vol169kb,
no 625; ISSN: 0013-0400
37 Microsoft UK, Developing the Future, 5th June 2006
38 The Office of National Statistics
39 UK Government Creative Economy Programme: Software Summit
21st March 2007
40 Ongoing work towards the UK Government Green Paper on the
Creative Economy
 Developing the Future | Phase 2-07

The skills issue is not a simple one of • Diversity of provision is therefore Tuson said: “To put current recruitment
numbers of graduates. Neither is it a case essential to providing a balanced IT in context, in October 2006 G4
of ‘predict and provide’, a strategy that has graduate mix. The complementary skill- (Computer Science) was the 6th largest
consistently failed in previous government sets offered by ‘Business Computing’ JACS47 group by acceptances48 (9,987).
skills interventions.41 and ‘Information Systems’ degrees – Combining the total acceptances for
long-standing offerings by some G4-G7 groups49 that cover all types of
But there are some clear trends emerging:
universities such as City and Brunel – computing degree, gives a total of 14,313
• A move to ‘higher-level’ skills and roles42 will play a larger role in satisfying acceptances. If this were a single JACS
such as business analysis, IT service employer’s needs. Niche offerings such group, computing acceptances would
management and high-quality, high-value as Games Technology degrees will be the second largest after law.”
technology and software development. also play their part.
The latest UCAS statistics50 for 2007
A salaries report by Hudson43 notes
entry indicate that the large falls in
that although IT salaries are increasing
UCAS COMPUTING RECRUITMENT applications of recent years are levelling
overall, the increase is going to the
The number of students joining UK off. Tuson concludes that “This tells a very
quality end: highly skilled managers and
universities to study computing using different story to that of a discipline in
technologists. IT professionals without
Universities and Colleges Admissions trouble.”51
such skills and expertise are having
Service (UCAS) shows a sharp decline in
difficulty maintaining their earnings and The importance of computing at
numbers of full-time undergraduates
some are seeing their roles disappear. University is also emphasised by
accepted on computing courses, from
Professor Keith Mander, Chair, Council
• The increasing need for IT professionals 29,014 in 2001 to 18,341 in 2005.
of Professors and Heads of Computing,
to be ‘lifelong learners’ and update their Figures for 2007 are considerably more
Professor of Computer Science and Deputy
skills, and the need for the IT industry encouraging and recruitment is up on
Vice-Chancellor, University of Kent. 49
to actively support their employees in previous years, despite the introduction of
“The Engineering and Physical Sciences
making the transition to the changing top up fees.
Research Council (EPSRC)’s recent
skills profile.
Developing the Future 2006 was concerned International Review of ICT Research
• The balance of soft and hard skills is about the falling numbers of students (February 2007) shows that computing
becoming more critical, with soft skills for enrolling on undergraduate computing research remains strong – second only
IT graduates being of more importance degrees in the UK and in other developed to the USA on many academic metrics,
than other STEM44 disciplines. Prospects45 economies. City University’s Dr Andrew but notes the worrying decline in the
quotes research by the analyst group Tuson explains “It is worth noting that supply of future researchers as
Gartner, revealing that sound business there have been boom/bust cycles undergraduate numbers fall. Despite
acumen is just as essential to IT roles in computing recruitment before,46 the relatively large numbers of students
as technical ability. usually around key technological still studying the subject, computing may
• The ‘traditional’ Computer Science degree transitions such as the introduction be vulnerable as universities down-size
with its emphasis on purely technical skills of the PC in the early 1980’s or the their computing departments as demand
will not be enough on its own to meet internet boom at the turn of the century. from undergraduate applicants declines.”
the needs of the IT industry; its valuable The recent recruitment expansion occurred
focus on technological and software when there was a stock-market bubble
development roles covers only a part of based on telecoms and internet start-ups,
a diverse IT industry that increasingly is a time when the market was in clear
focused on supporting businesses in disequilibrium and sending strong and
achieving its aims, rather than solely very unrealistic employment signals
being a provider of technical services. to potential students.” 41 Alison Wolf, ‘Does Education Matter? Myths about education and
economic growth. Penguin Books, 2002, ISBN-13: 978-0140286601.
42 ‘Insights – Trends and UK Skills Implications’, e-skills UK with Gartner
Consulting, 1 Nov 2004.
43 Hudson, IT Salary Survey 2006, at:
uk.hudson.com/documents/jobs_uk_ITSalarySurvey.pdf
44 Science, Technology, Engineering and Mathematics
45 ‘What do graduates do? 2007’ at www.prospects.ac.uk
46 David A. Patterson, ‘Restoring the Popularity of Computer Science’.
Communications of the ACM, 48(9), 25-28.
47 Joint Academic Coding System
48 Source: Universities and Colleges Admissions Service (UCAS).
See Table 9 on: http://www.ucas.com/new/press/news180107.html
49 Computer Science (G4), Information Systems (G5), Software
Engineering (G6), and Artificial Intelligence (G7).
50 Source: Universities and Colleges Admissions Service (UCAS).
See Table 8 on: http://www.ucas.com/new/press/news140207.html
51 For example: Neil McBride, ‘Erase old programme and launch new
version’. Times Higher Education Supplement, 9th February, 2007.
 Developing the Future | Phase 2-07

However, looking further into the UCAS Dr Jeremy Wyatt from Birmingham
data we can see that there are still a University said: “Given that the industry
number of areas of continuing concern: has a history of drawing candidates from
a range of mathematically focussed
• Low levels of female applicants on
science and engineering degrees it is also
computing courses
important to consider the total applications
• Lower entry qualifications to computing to all these subjects. Between 1996 and
courses compared to other subjects 2006, applicants to the hard sciences and
• A decline of 8% in STEM subjects, an engineering declined by about 8%, showing
area which the IT industry is likely to that there is a continuing and long term
recruit from decline in graduates of disciplines which
have traditionally supplied the IT industry
with its technical leadership.”

Average 350 The drop in students studying science,

Tariff Points technology, engineering and mathematics
300 (STEM) subjects therefore has an impact
on the total pool of resources which the
250 IT industry has traditionally recruited from.

200 The recruitment level during the dotcom

boom should not be considered a desired
150 or realistic baseline. It is becoming clear
50 All Applicants
that we are returning to a state of normality
100 with application levels around those of
Computer Science
Applicants the late 1990’s. Computing is still
50 recruiting more undergraduates than
most professions. Advertised vacancies
0
are buoyant52 and around 1999 levels –
2002 2003 2004 2005 2006
150% higher than the nadir in 2003 –
Figure 5:
Rise in Average Tariff Points 2002-2006 with salaries increasing. It is also clear
that the research output of UK computing
departments is world-class with
excellent examples of knowledge
20% transfer to industry.53

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Figure 6:
Female Applicants as Percentage of Home Apps

52 Source: www.jobstats.co.uk
53 EPSRC, ‘International Perceptions of the UK Research Base in
Information and Communications Technologies’. December 2006,
EPSRC.
 Developing the Future | Phase 2-07

LOOKING BEYOND UCAS DATA 160000

Foundation
degrees
Many analysts and the media look only Total HE students operational
140000
at the UCAS statistics – unfortunately FT UGs
FT PGs
these show an incomplete picture. 131280
120000 PT UGs
The research for this report shows that PT PGs

the nominal ‘decline’ in full-time 100000

undergraduate acceptances (all courses)
is being reversed. In early 200754 UCAS 80000
released a report that showed the 73515
number of people applying to full-time 60000

undergraduate courses at UK universities

and colleges has increased by 6.4%. 40000
33255
The rise represents 395,307 applicants
applying to enter HE in 2007 compared 20000 13525

to 371,683 in 2006. The snapshot of 10985

0
data is taken at UCAS’ 15th January
1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
advisory closing date for UK and
Figure 7:
EU applicants. Computing Students in HE with breakdown between
FT/PT as well as UG/PG 1996/97 – 2005/06 DTAHESA-Dialogic
Anthony McClaran, UCAS Chief Executive,
said: “These figures are encouraging for
all who believe the expansion of higher
40000
education is good for individuals and Includes
Foundation
37445 51
good for our society. Not only has last Total HE qualifications obtained Degrees
35000 Total first degrees
year’s dip in applications been reversed,
Total higher degrees
but application levels are now higher 30000 Total other PG
than in 2005 which had previously Total other UG

broken all records. The increase is 25000

particularly marked in England”.
20095
20000
However, the picture for computing
still shows a recent continued decline
15000
from the high levels of 2003 (across
JACS G4-G7) for full-time applications.
10000
In contrast, research for this report55 8255

shows that there is a small but 7410

5000
potentially significant growth in part- 1685
time undergraduates from a moderate
0
baseline in the years from 1996 – 2000. 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005
This increase, or change of emphasis
Figure 8:
on study modes, might also be related HE Computing Qualifications obtained with breakdown between
UG/PG & other UG/PG 1996/97 – 2005/06 DTAHESA-Dialogic
to the introduction of top-up fees.55

54 UCAS, 14th February 2007

55 Dialogic Consulting for City University London, February 2007
www.dialogic.co.uk with baseline data from UCAS
 Developing the Future | Phase 2-07

HE outputs are currently showing a IT GRADUATES – HIGHEST Examination of data from 2005 shows
significant improvement and this is UNEMPLOYMENT – CHOOSING that six months following graduation,
largely in response to the increases CAREERS OUTSIDE OF IT SECTOR 71.5% of IT graduates (from the 2005
seen in undergraduate recruitment in The data for 2006 suggests that the cohort) were in employment (including
2003, as these graduates feed through labour market for information technology working and studying), compared with
the system. However, in the short term is growing and there is demand for new 71.7% for all subjects. IT graduates,
these outputs will decline in response graduates with these skills. Official labour however, were still less likely to be in
to the lower undergraduate recruitment market statistics have shown that the further study (as a sole activity) and more
thereafter. labour market in information technology likely to be unemployed. At 10.3%, the
is rising and recent studies have predicted unemployment rate fell slightly from 2004
Although initial research into the
strong growth in the numbers of vacancies (10.7%), but was still substantially higher
undergraduate UCAS recruitment
in computing/IT of up to 20% for 2006.57 than the average for all subjects (6.2%).
figures for 2007 are showing that for
the moment the picture is healthier
than some commentators would have
the media believe, it will take three
years before these students graduate Believed to be Other
unemployed 4.3%
and take up employment. 10.3%

While the output from HE looks Not available

for employment,
encouraging today, in the short term study or training
3.8%
this picture will change in response to
lower undergraduate recruitment in the Undertaking
further study or
52 recent past. Any recovery in undergraduate training overseas
recruitment will also take some time to 0.1%

feed through the system, so will not Undertaking

other further
solve the immediate skills dilemma. study or training
in the UK
2.6%
DEMOGRAPHIC CHANGES –
Studying in
THE ISSUES AND OPTIONS the UK for
a teaching
The data shows that there is a smaller qualification
1.3%
pool of potential young undergraduates
from which to train and to recruit. Studying in
the UK for a
higher degree
According to Government data,56 under any 6.1%
plausible scenario this country is faced
Working and
with a rapidly ageing population, in common studying
with most other developed countries. 6.3%

Analysis shows that the age structure In overseas In UK employment

employment (see breakdown by
of the UK population has become older 1.1% types of work)
in the last 30 years. Predictions show 64%

that it is likely to age further in the next

30 years. The median age has risen
Figure 9:
from 34.1 in 1971 to 38.6 in 2004, Destinations of UK IT 2005 Graduates
Source: Prospects
and its projected to rise to 42.9 in 2031.
Not only is the population ageing, but the
proportion of the population under 16
is declining. In 1971 over 25% of the
population were aged under 16, in 2004
this fell to 19% and is projected to fall
to 17% by 2031.

56 DNS, People and Migration, www.statistics.gov.uk

57 Prospects 2004-2007
 Developing the Future | Phase 2-07

Unknown Occupations 0.1%

Other Occupations 9.0%

Retail, Catering,
Waiting and Bar Staff 7.7%
Other Clerical and
Secretarial Occupations 8.2%
Numerical Clerks
and Cashiers 2.2%
Other Professionals, Associate
Professional and Technical Occupations 2.5%
Social and
Welfare Professionals 0.6%

Legal Professionals 0.1%

Arts, Design, Culture, Media
and Sports Professionals 4.3%
Information Technology
Professionals 42.4%
Business and Financial Professionals
and Associate Professionals 6.3%

Education Professionals 2.2%

Health Professionals and
Associate Professionals 0.1%

Engineering Professionals 1.7%

Scientific Research, Analysis and
0.1%
Development Professionals
53
Commercial, Industrial and
Public Sector Managers 9.6%
Marketing, Sales and
Advertising Professionals 2.9%

Figure 10:
Types of Work Graduates in UK Employment
Source: Prospects

Year on year the picture is not improving ALL THIS DURING A TIME WHERE THE REMUNERATION IS
and research for 2006 shows that WHEN THE IT INDUSTRY IS HIGH – BUT THE ENTRANTS TO
six months after graduation, 58% of IN ECONOMIC RECOVERY IT CAREERS LOW
computing/IT graduates were in full- A press report58 that referenced the The subject areas of Mathematics &
time work, 7% were in part-time work Prospects research revealed that the Computing and Medicine and related
and 6% combined work and study. level of students applying to study subjects have two of the highest average
However, the research also shows that computer science has halved in five years, annual earnings for both men and women.59
11% were assumed to be unemployed. leaving the sector short of the 150,000 This finding is corroborated by research
Of those in full-time employment, only 45% new entries needed by businesses. undertaken by PricewaterhouseCoopers
were working in the information technology which show that a graduate in Maths or
This data reveals a paradox, why is
sector and 11% were working in Computer Science can expect to earn,
employment amongst IT graduates
commercial, industrial, engineering over his/her lifetime, £241,749 more
comparatively low at a time when demand
or public sector organisations. than someone with two A-levels. So those
for IT graduates is rising, and their skills
graduates who go into the IT industry can
One aspect highlighted for this report are apparently in huge demand? In order
expect to receive higher than average
shows that, of the 58% of IT graduates to try to understand the employment
earnings throughout their careers.60
finding employment in 2006, only 42% statistics it is necessary to look at
(rounded) enter the IT profession. some further research.

Research by FDM59 Group revealed

the disparity that exists in the minds of
graduates that the skills taught to them 58 Computer Weekly (17 July 2006) citing research –
Prospects final destination survey
by university courses were outdated. 59 DfES The Supply and Demand for Science,Technology, Engineering and
Mathematics Skills in the UK Economy Department for Education and
Skills Research Report RR775
60 The Times Feb 7th 2007
 Developing the Future | Phase 2-07

The pre-university student is very well

Science and Health Science and Health All other
Technology Professionals Technology Associate occupations informed and is in essence a sophisticated
Professionals Associate Professionals consumer, one who is able to determine a
(SOC code 22) (All other SOC)
Professionals good opportunity from a bad opportunity.62
(SOC code 21) (SOC code 32)
(SOC code 31) This is view borne out by e-skills UK,
which is an employer-led, not for profit
organisation, licensed by Government
2004 as the Sector Skills Council for IT
947,000 277,000 593,000 1,045,000 26,449,000
(baseline) and Telecoms.

Tilly Travers from the e-skills UK

organisation said: “In a global knowledge-
2014
1,121,000 360,000 666,000 1,122,000 27,314,000 driven economy, IT professionals need
(forecast)
to be numerate, literate, business
and customer-oriented people who
Change understand how to make the most of
18% 12% 30% 7% 4%
(%) technology to transform the way we
work and live. This requires a deep and
Figure 11:
sophisticated blend of business, technical,
Projected employment in STEM occupations in 2014 project management and personal skills –
Source: Science, Engineering and Technology Skills in the UK (DTI March 2006) based on SSDA Working Futures
developed through a varied and
balanced education.”

54 UPDATING COMPUTING EDUCATION Research shows that employers are

The nature of IT has changed in recent looking for business-oriented technology
times with significant numbers of graduates graduates with the ability to demonstrate
entering roles such as business analysis, problem solving, project management,
consultancy and project management. team-working and communications skills.63
Research by the analyst group Gartner,
reported in the Sunday Times and referenced THE ITMB DEGREE AND
by Prospects, has revealed that sound THE WORKPLACE
business acumen is just as essential The need for these combined skills has
to such roles as technical ability. led to the development of the information
Research related to the production of technology management for business
this report61 has begun to examine some (ITMB)64 degree by e-skills UK which has
of the deeper issues and is raising some had some limited success in recruiting
questions including: students or licensing the course itself.
Initial indications in March 2007 show
• How much do key influencers, such as
that more universities are considering
parents and teachers, affect the choices
the ITMB degree as an option to aid
students make?
with recruitment or indeed to offer as
• Is it the case that those influencers a benefit to their students.
have a different opinion of the career
prospects in the IT sector?

• Did the dotcom boom-bust create a

negative perception of the stability of
a career in the software/IT sectors
for key influencers?

61 Research – City University – M. Bowkis 2007; www.dialogic.co.uk

62 Dialogic Consulting, September 2006; interim report for Anglia Ruskin
University, School of Applied Sciences on the changes to undergraduate
recruitment markets in the Eastern Region.
63 e-skills UK – T. Travers, 2007
64 e-skills UK, ITMB degree: http://www.e-skills.com/
cgi-bin/go.pl/itmb/itmb.html
 Developing the Future | Phase 2-07

The ITMB degree and courses from higher The report argues for “a culture of learning WHAT WILL FORCE A HIGHER
education institutions (HEIs) such as City, to be fully embedded across society.” UPTAKE FOR PROFESSIONAL
Brunel and other universities give This cultural change will take time but DEVELOPMENT?
business skills, project management the forecast is one of huge economic There is already recognition of the
and personal skills as much prominence benefits for the country as a whole problems facing the industry and a
as technical skills. “The prize means more economic willingness on the part of many university
prosperity and increased social justice. departments to work more closely with
The ITMB degree includes some interesting
It would deliver a possible net benefit industry. Examples include the Cisco
concepts and, in addition to traditional
of at least £80 billion over 30 years, Development programme and the
lectures and tutorials, the degree course
an annual average of £2.5 billion.”33 Microsoft university programmes.
includes a programme of employer
involvement that keeps students up-to- The discussion so far neglects an important These allow students to learn the IT
date with topical issues in IT. For example, source of HE provision for the IT industry: fundamentals using state of the art
representatives from business regularly masters graduates. UK universities in equipment and software in a practical
share their experiences and vision in the 2004/5 admitted 7,070 full-time and way at the same time as working
form of ‘guru’ or ‘leading-light’ lectures. 1,460 part-time taught masters students towards their academic qualification.
in computing.65 In recent years this has Mike Smith, Principal Lecturer and Cisco
The courses also feature ‘real life’ group
remained broadly stable. co-ordinator at Anglia Ruskin University,
projects during which students work
with IT professionals on authentic Postgraduate provision plays two said: “Anglia Ruskin’s main educational
business challenges. ITMB students important roles. First, it allows established collaboration with Cisco Systems is through
are expected to undertake at least IT professionals to upgrade their knowledge the Cisco Networking Academy Program
one extended business placement, and skills, which given the move to higher- (CNAP). The CNAP is a comprehensive
and these are often hosted by one level skills will be essential if we are not e-learning program that provides students
55
of the supporting companies. to lose existing talent. Second, it provides with the internet technology skills essential
a route for non-IT graduates to enter in a global economy.”

PROFESSIONAL PERSONAL the profession; these graduates often According to Smith, the benefits to Anglia
SKILLS DEVELOPMENT have complementary skills that enrich are numerous, but the key benefits are:
the IT profession. It may be the case curriculum enhancement, external profile
As the population ages and new talent
that these students are more responsive industry certification, external income
becomes less available, employers and
to recruitment efforts. The lead-time and research.
employees will need to re-skill or up-skill
is also shorter for masters study –
existing talent. The need for continual
one year – allowing a faster response
professional development was highlighted
to skills shortages in the industry.
in the Government’s recent report on
skills and education.33 The Leitch Report
argued that in order for people to progress
in the modern labour market, it is critical “In a global knowledge-driven economy, IT
that they are able to update their skills. professionals need to be numerate, literate,
This report goes on to recommend that business and customer-oriented people who
the UK should aim to have 40% of its
adult population educated to a high level
understand how to make the most of technology
(level 4 or 5 – degree and postgraduate). to transform the way we work and live.”
By changing educational targets and TILLY TRAVERS, E-SKILLS UK
offering incentives to HEIs to work
closely with industry, the aim is to enable
adults to continually invest in updating
and developing their skills.

33 Towards 2020 Science – Microsoft Research UK 2006

http://research.microsoft.com/towards2020science/
background_overview.htm
65 Source: Higher Education Statistics Agency (HESA)
 Developing the Future | Phase 2-07

SECONDARY EDUCATION
COMPUTING – THE IMAGE
IN SCHOOLS
There is evidence to suggest that the
problems relating to the shortage of
people entering the IT industry starts
at or during Key Stage 2 in the
education system.

There is a gender gap in the IT The programme has been developed as The current schools ICT curriculum is
industry as a whole and in the software a response to an e-skills UK strategic out of step with the ‘New Media World’,
development industry in particular. objective in order to improve the where content blurred across TV,
Currently, only one in five of the UK’s attractiveness of technology careers, so internet and mobile communications.
IT workforce is female and only 17% that they appeal to the quality, quantity This is compounded by the fact that ICT
of those undertaking IT-related degree and diversity of recruits the industry needs. teaching to 16 years of age is all about
courses are women. In Scotland, only gaining skills in computer software use.
15% of the IT workforce is female. IMMIGRATION Peter McOwan from Queen Mary,
Given the industry’s need for high level University of London said: “Young people
One method of alleviating the skills
skills it cannot afford to overlook large are fighting hard to create the content for
shortage in the software development
sectors of the workforce and so it is TV, but what about the content for PCs,
and IT industry as a whole is to encourage
essential to do more to encourage software? Software engineers have
skilled workers from overseas to work
women into the industry. fulfilling well-paid and successful careers
56 in the UK. Net migration to the UK was
Young women from all walks of life 185,000 in 2005.68 The latest estimates and their work can really change society.
are now, more than ever before, engaging show that around 510,000 people from But students see this world as filled
with the use of computer technology as the A8 accession countries have registered with problematic stereotypes, career
a means of communication. The assertion to work in the UK since May 2004. dead ends and dull office work.
that women are not as good at Computer Migration generally has a positive effect, Changing the perception of the industry
Science is untrue.66 helping to mitigate skills shortages and is a fundamental requirement to attracting
fill jobs. more individuals into an IT career.”
In the USA, the Carnegie Mellon
Women@SCS Action Plan67 has had Between 2001 and 2004, some 110,000 There is an economic justification
some success in increasing the entry work permits were issued in total for IT for supporting this effort. The creative
and retention numbers from 7% to 38% occupations, representing no less than economy, which relies on software, has
between 1995 and 1999. It would be 20% of the total work permits issued been predicted to grow to 10% of GDP
appropriate for a similar initiative to be for all occupations, despite the fact that per annum by 2010.40
established in the UK, so that the small IT occupations represent only 3.5% of
number of women currently recruited the workforce. THE ICT CURRICULUM
to CS degree programmes can gain NEEDS RADICAL REFORM
Although immigration alleviates the problem,
the support of a larger group across
it treats the symptoms not the illness. Within state secondary schools, ICT is
the country.
Britain needs to invest in developing taught as part of the National Curriculum
The CC4G programme, has more than the skills of the UK to ensure the future but has not kept up with the technological
70,000 girls in over 2,400 schools, has ability to compete across the IT sector developments within the industry. Therefore,
been developed for girls in response to the and the whole economy. many students see it as increasingly
gender imbalance within the IT industry. irrelevant and unattractive.

40 Ongoing work towards the UK Government Green Paper on the

Creative Economy
66 Fisher A, Margolis J, and Miller E. “Undergraduate Women in
Computer Science: Experience, motivation and culture” ACM
SIDCSE Technical Symposium
67 Carol Frieze, “Building an Effective Computer Science Organisation:
The Carnegie Mellon Women @SCS Action Plan”, Inroads SIGCSE
Bulletin Women in Computing: vol34. No2. 2002, June P74-78
68 Leitch Review of Skills . “Prosperity for all in the global economy – world
class skills” December 2006. HMSO, ISBN-13: 978-0-11-840486-0
 Developing the Future | Phase 2-07

The National Curriculum forces teachers With many families having greater access
into prescriptive teaching. Many now find to computing technology, children are
themselves in a situation where they are obtaining computing and ‘software use’
forced to teach many areas of ICT which skills far earlier and often at home.
are increasingly irrelevant, and yet neglect In addition many Primary schools
new emerging areas such as digital video are providing good ICT use skills, often
production, animation, music sequencing delivered in quite interesting ways.
and digital image editing.
The problems start to manifest themselves
Many analysts and education specialists at Key Stage 2, here the ICT curriculum
have concluded that the teaching of ICT is outdated and in some instances the
from Key Stage 2 onwards is in need of delivery is a repetition of previous work.
a thorough overhaul and some recognition
Whilst it is recognised that gaining
is given to the belief that the national
computer and ‘software use’ skills is
Key Stage 3 online test would only
essential for entry into the work-place
have exacerbated the problems faced
there is also a need to provide an education
within schools.
option for Computing or Computer Science
The ICT test was designed at an at GCSE within the National Curriculum.
estimated cost of around £25 million The current policy and thinking is only
to measure attainment in practical ICT serving to de-motivate children that see
skills at 14 years. It has been piloted ICT teaching as outdated and boring and
annually since 2004, and was due to be their tendency is to extrapolate this to
statutory from 2008. Some analysts say further study in Computing and indeed 57
that the recent announcement that the Computing as a career option.
test will not be run and withdrawn
More emphasis needs to be given to
signified a u-turn in policy.
the contribution that technology makes
This report has made it is clear that in creating and sustaining the modern
the issues facing the lead into HE from economy.69 To enter higher education,
STEM subjects and Computing within students need to understand something
schools are felt in the HE sector; the about ICT in the same way as they need
direct result has been the decline in to be able understand some mathematics
applications from the high point in 2003/4. or to write an essay.

ICT IN THE NATIONAL CURRICULUM

IS NOT COMPUTING
The significant issue regarding teaching “Young women from all walks of life are now,
Computing in schools is the skewed focus
within the curriculum on computer and
more than ever before, engaging with the use of
‘software use’. With no GCSE in Computing computer technology as a means of communication.
or Computer Science as part of the The assertion that women are not as good at
National Curriculum (only the GCSE in ICT;
Computer Science is untrue.”
which is not about the subject of
computing) learning to use a computer FISHER A, MARGOLIS J, AND MILLER E.
and learning Computer Science become UNDERGRADUATE WOMEN IN COMPUTER SCIENCE:
EXPERIENCE, MOTIVATION AND CULTURE.
indistinguishable as far as students are
ACM SIDCSE TECHNICAL SYMPOSIUM
concerned. The skew in emphasis has
a direct bearing on a students’ view of
the IT industry; one that results in many
negative perceptions.

69 “Ensuring the right conditions for an innovative, inclusive and

competitive UK Knowledge Economy”, DTI, Information Age Partnership,
i2010 Working Group report, 9th May 2007
 Developing the Future | Phase 2-07

RECOMMENDATIONS: • Innovative programmes of continual

• More research needs to be undertaken professional development from industry
into verification of the detail regarding need to be further developed and
the break points in the skills and integrated into the workplace to facilitate
education agenda for the UK with the notion of ‘cradle to grave’ education.
regard to IT and the software industry. • Government needs to examine and
This should be action oriented, with provide the incentives that might be
measurable outcomes. required for the SME sector to ensure
• Large software companies should be that businesses can afford to provide
encouraged to develop and enhance the skills and education packages
their existing education programmes required to develop staff capability
for individuals, schools and HEIs with and productivity.
the support and backing from Central • Industry should work proactively with
Government. the HEIs to develop suitable education
• Initial pilot studies must be conducted and training packages for SMEs that
to devise the best support networks and would provide relevant education
strategies that bring together industry whilst simultaneously offering a means
and academia with the support of the for connecting industry and academia
Government for a radical reform of ICT together in a meaningful way.
teaching across the Key Stages 2 • e-skills UK should re-evaluate the
and 3 through GCSE and A-level to business licensing model for the ITMB
58 university entry. degree so that it is attractive to HEIs,
• Industry and academia should develop rather than a financial disincentive as
a system of mentoring and supporting it is at present.
a continued education programme • Academia should examine undergraduate
for school teachers for the subject and postgraduate provision and provide
of Computing. flexible mechanisms to ensure courses
• Implementation policies for taking are easily updated without over-
the recommendations of the Leitch burdensome and slow internal
Report forward for Computing should accreditation processes.
be devised in concert with industry
and academia and not in isolation
from Central Government.
 Developing the Future | Phase 2-07

SUMMARY Where these partnerships have IT graduates are now

Research shows that the skills required by been developed the report shows that
recruitment and subsequent employment
in demand across
the IT and software development industry
are changing, and the growing Knowledge for students is high. the whole Knowledge
Economy in the UK and overseas is Changes to the future demography of Economy and not just
also demanding employees with a the country will mean that we need to within the IT sector,
similar range of skills to those required develop a range of strategies to ensure
by the IT industry.
so competition to
more students are equipped with the
While prospects look good for new entrants skills needed for the industry; these recruit employees
to the IT industry, research shows that will have to address an increasingly with professional
many IT graduates are not entering the ageing population as well as a reduction business and technical
industry itself, but are gaining employment in birth rate.
knowledge is fierce.
in other sectors. The stark figures are IT has an accelerated development
that in 2005 only 42% of IT graduates profile when compared to other sectors.
in employment worked within the IT sector New technology is produced at a cycle
(within 6 months of graduating), only 4,829 of approximately 18 months. Degrees on
graduates out of a total population the other hand can take between one
of 15,930. and two years to develop and accredit;
IT graduates are now in demand across with a delivery time of three years, the
the whole Knowledge Economy and not outputs from the HE sector are typically
just within the IT sector, so competition 4-5 years out of date by the time the
to recruit employees with professional first cohort has graduated. Unfortunately 59
business and technical knowledge is fierce. some degrees in HEIs have not been
As the IT sector grows, the existing skills radically overhauled since their creation
shortfall of IT professionals will become and are in fact much more dated that
more acute. this figure suggests.

The report shows that there are ways

in which the industry can work to support
the development of the skills that it
requires. Undergraduate student numbers
are not falling as disastrously as
predicted, and in fact there are areas of
recruitment which see signs of growth.
It is vital that the IT industry is proactive
in working closely in partnership with
academia to develop courses and
programmes of study which offer
students the chance to develop
appropriate professional skills and
find relevant subsequent employment.
the future 61
 How Today’s Teenage Kicks Will Turn Into
Tomorrow’s Best Business Practices
B Y M AT T L O C K E

The business world is about to go through We identified a few generic communities Far better to not try and own the IP,
a major shift from centres of excellence to that we wanted to build conversations with – and instead encourage a collaborative
networks of excellence. Corporate Peers, Academics, Indies and Lead conversation about how you can make
Users – and tried to think about the dynamics something actually happen. To do that,
Five years ago, we still lived in a world where
of each community. The projects we designed you need people to drop their defences
the best way to ensure competitive advantage
were very different as a result. and actually trust you not to rip them off.
was by centralising investment and resources
Keep the lawyers to one side until you’ve
in a way that still happens in sectors such as As with any information gathering process,
got something that you can actually build.
the pharmaceutical industry. For example, listening is a crucial skill. By engaging and
about five years ago, when I was at the BBC, supporting a community of interested At the BBC, we ran workshops where we
we signed a three-year contract with the MIT developers, we found out about trends within asked the participants to sign a contract that
Media Lab in Dublin, giving the BBC access the industry. When handling independents, said they owned all the IP on the ideas they
to MIT’s research and ideas. But it was already it pays to ask strategic questions and do develop over the five-day workshop. But we
becoming obvious that this sought-after half-day sessions to establish what we also asked for a 90-day ‘first look’ clause
knowledge had already escaped the narrow want from proposals, so that people aren’t that means they could only talk to us about
confines of any single research institution. pitching into a vacuum. developing it for that period after the end of
The writing was on the wall, or rather on the the Lab. After that, or if we decided earlier
The internet may enable your organisation to
web, as even then researchers at that level that we were not interested, the team were
reach everyone, but it is important to remember
were posting blogs on the internet discussing free to take their idea anywhere else.
that not all the people who might have good
the latest concepts.
ideas for your company are the same. The last thing to remember is that Open
Therefore, about three years ago, Tom A strategy for starting different kinds of Innovation is an evolving process. The speed
Loosemore and I developed an open innovation conversation about innovation with different of this evolution is likely to increase sharply
strategy for new media. This was in recognition communities is crucial. Does a group within the next few years as the so-called
of the amount of informal projects we were you want to reach already have existing ‘MySpace’ generation start to enter the
seeing out there that used BBC content as mailing lists, meetings, social media sites? workplace. Just as previous generations of
a base. As a result of this, we started a series Do they prefer to be approached via email? teenagers defined themselves through cars,
of experiments. The first lesson we learned Blog posts? Conferences? record album covers and, most recently, mobile
about running open innovation projects of this phones and music players, today’s teens are
This new way of building a network of
nature is that once you’ve opened the door, using social networking to establish their
excellence is not just some empty hippie
you can’t close it again afterwards. identities. In doing so, they are forming lifetime
liberation rhetoric, it is a crucial element
habits that will soon spread to the workplace.
It might seem obvious, but the world outside in increasing the speed of bringing
your organisation isn’t one homogenous blob. products to market. Security is also a Used to communicating and planning together
The web is just a small sub-sector of this world, central consideration. Most projects online in gaming as well as on social networking
and that, in turn, isn’t one homogenous blob have elements that are public and in sites such as FaceBook and MySpace, younger
either. It’s easy to just stick an invite for ideas full view, and some that are private. people will expect to develop projects in a
online, but it’s a pretty crude way of starting a For example, many entrepreneurs are similar way when they enter the business
conversation, and leaves you open to getting understandably wary of submitting ideas world in a few short years time.
crude responses back. to an open forum. It is important that
Matt Locke, www.test.org.uk, former head
participants retain all the intellectual
of innovation BBC New Media.
property (IP) on their ideas as this
also encourages open discussion.
62

“Just as previous generations of teenagers defined

themselves through cars, record album covers and,
most recently, mobile phones and music players,
today’s teens are using social networking to
establish their identities.”
MATT LOCKE, FORMER HEAD OF INNOVATION, BBC NEW MEDIA
The future of software
based technologies is
transformational with
massive potential to
drive significant growth
and prosperity in the
UK economy.

63
 Developing the Future | Phase 2-07

Futures
E M E R G I N G T E C H N O LO G I E S

We are entering a new age where challenges and potential of computer

computing and software technology science and computing in scientific
start to fulfil the vision of the great research in the next 15 years.
science visionaries such as Arthur C
With new discoveries comes complexity
Clarke70 and Isaac Asimov, with new
and we are generating vast amounts
advances pushing the boundaries of
of information or data plus the need to
human knowledge. Much of what seemed
analyse or process data, more rapidly
impossible or even improbable only
than before is what differentiates the
10 years ago is now a reality.
new scientific discovery process from
In the recent report ‘Towards 2020 previous generations. Both in science
Science’,33 an international expert group and business, the need to analyse and
was brought together to produce a new operate huge data stores in near
vision and roadmap of the evolution, real-time is essential for success.

Most drugs that are developed today are To locate the regions on the genes and
in fact discovered. Very few are actually to determine where these bio-molecules
designed or specifically synthesised. (RNAi) attach themselves, or indeed to
But what if we could design small understand if there is only one specific
molecules to switch genes on or off place that the molecules do act as
at will, to stimulate the production of switches, researchers need to trawl
proteins or reduce them, to control through the entire humane genome,
the mechanisms of our biological looking for exact pattern matches.
processes directly? They need to interrogate the genome
database repeatedly, demanding answers
Some recent research, currently being
rapidly, modifying their molecular designs,
validated by many independent groups
undertaking additional experiments
around the world, has stumbled across
and asking additional questions.
an unexpected mechanism that might
be used to switch on genes. In order This process of interrogation requires
to do this, small fragments of biological dealing with complexity and speed, utilising
molecules called RNA (specifically RNAi) new computing technology to provide the
64 can be designed to locate specific means for answering questions rapidly,
sections of the human genome, acting for undertaking searches and refining the
as switches that operate at the source ideas prior to any physical experiments
of protein production. These molecules being carried out. Without this new
can be designed to locate and act as a computing technology it would not be
switch to the gene that might, for example, feasible to ask the questions, to search
be an anti-cancer gene. for the sections on the human genome
and to rapidly redesign experiments.

33 Towards 2020 Science – Microsoft Research UK 2006

http://research.microsoft.com/towards2020science/
background_overview.htm
70 The Arthur C Clarke Foundation – see www.clarkefoundation.org
 Developing the Future | Phase 2-07

There are experiments now generating research that will drive society forward
vast quantities of data: the projects at (see sections on Innovation & Education
the Sanger Institute near Cambridge, for specific recommendations and also
UK, store over 150 terabytes of genomic the initial introduction that provides the
data and clusters of computers totalling data on the contribution to UK GDP).
2.5 teraflops of processing power.
The problem is not one of obtaining data, EMERGING TECHNOLOGIES
but one of processing such vast quantities
Web Services are operations that users
of information rapidly. How can billions of
access via the internet through a well-
data items be searched and manipulated
defined interface, independent of where
in an acceptable time-period?
the service is executed. It is estimated
The answer to this question lies in novel that worldwide spending on web services-
computer architectures that are vastly based software projects will reach $11
different from traditional computers. billion by 2008, compared to $1.1 billion
For example, we are using networks of in 2003;71 a growth factor of 10 over a “Bringing together
ordinary computers to develop ever more five-year period. The conclusion we draw
sophisticated parallel and grid systems to here, is that the financial future for service
advances in data
try and accelerate our scientific discovery based software technologies is massive. management, analysis,
process. Many of these are being used
For most of the 20th century, computing knowledge discovery
now on climate prediction models and
medical research.
power was driven by Moore’s law – and visualisation could
as the number of transistors on a chip
change the way in
doubled more-or-less every 18 months
INDUSTRIAL R&D AND PURE this was translated into a doubling of which some science
RESEARCH computational throughput, producing is carried out.”
Research into new computing technologies faster machines more capable from one
ANDREW HERBERT,
can be divided into two equally important generation to the next. Now, in 2007 it MANAGING DIRECTOR OF MICROSOFT
categories: industry based research and is becoming clear that such growth has RESEARCH, UK. MICROSOFT
pure research. The former, industry led, physical limitations. DISTINGUISHED ENGINEER
is typically geared towards advancement of
But although individual computers
products and services (often termed R&D)
may not get much faster, we will see
to develop new, usable technologies
the development of parallel computers,
that can transform our lives in society
with multiple processing elements on one
65
immediately or in the near future.
piece of silicon or within one integrated
The second, pure research, is unfettered circuit package (what is termed multi-core
exploration into sciences that could computer architectures). Many of the new
radically transform human knowledge or types of machine are now on the shelves
understanding; all of which may have no ready to buy today. Typically they contain
immediate financial return. Like previous two to four computing cores, but in
research in physics and electronics that future we will see the next generation
led to the development of the transistor of computers delivering many orders of
and ultimately the modern computer, magnitude more processing power than
much of today’s computing research could we have seen to date. Multi-core machines
change our lives drastically in the future, will be the norm within the next twelve
in twenty, fifty or a hundred years from now. months. From a programming point of
view this will require a paradigm shift away
Both aspects of research are equally
from the current sequential approaches
important and Government investment
to software design to one that exploits
and support for each is required if we are
a parallel approach to computation.
to accelerate the development of usable

71 Leavitt N., 2004, ‘Are Web Services Ready to Deliver?’.

IEEE Computer, 37(11), 14-18
 Developing the Future | Phase 2-07

From the new Web 2.0 systems the Within the next few years, such haptic Today much of this scientific processing is
current web service enables towards the devices will find their way into multi-media done using home-brew software or simple
next generation, including the semantic systems, games technology and sports spreadsheets. There is a tremendous
web, we shall see an increase in the training systems. opportunity to exploit Online Analytical
development and use of peer-to-peer Processing (OLAP) add-ons to modern
computing, enabling the construction REVOLUTION IN SCIENTIFIC database engines. These allow for the
of distributed systems without any INVESTIGATION construction of ‘data cubes’ serving
centralised control or hierarchical as replicas of pre-computed, multi-
A revolution is taking place in the scientific
organisation. These will scale up to dimensional aggregations of information.
method of: “hypothesise, design and run
large systems and use the fact that These facilitate data analysis from
the experiment and then subsequently
there are multiple machines, cooperating multiple perspectives.
analyse the results” – in some instances
with one another, to build in fault tolerance.
this is being replaced by “hypothesise Bringing together advances in data
Should one or even several machines be
and look up answer in a database,” management, analysis, knowledge discovery
removed from the network (or indeed
says Andrew Herbert, Managing Director and visualisation could change the way
fail completely) the system will adapt to
of Microsoft Research in the UK. Herbert in which some science is carried out.
the event and continue to operate as if
adds: “Databases are an essential part of Herbert goes on to say that “such changes
nothing had occurred.
the infrastructure of science: they may empower the individual scientist; we can
This technology will be integrated into contain raw data, results of analyses or envisage a truly smart (electronic) lab
the new mixed or multi-media computing simulations or the results of the notebook. Such a device would unlock
and communications channels that are organisation of data.” access to data and make it extremely
just emerging.72 Rapid advances in easy to analyse, discover, visualise and
A major issue is the distribution of data.
distributing video on demand, integrating publish new phenomena.”
It has long been known that it is expensive
voice with other forms of interaction
or impossible to move large amounts
and communication to provide novel INTELLIGENT SCIENTIFIC AND
of data. Traditionally, queries have been
and exciting interactive experiences BUSINESS COMMUNICATION
optimised for small numbers of databases,
in entertainment are among some of
but how do we optimise queries for say a The worldwide web was invented for
the latest ideas that will use these
network of several million environmental publishing and communication. In future,
technologies.
sensors or massive amounts of online information will be transformed for
We are also witnessing the emergence information? How do we explore the data visualisation for an individual, determined
of haptic devices, that allow sensory from the Human Genome Project or the by personal preferences. Online pages
feedback to the human from the computer, LHC particle accelerator at CERN, the will be generated at the moment they
66 in areas such as surgery. This new European organisation for nuclear research? are requested allowing customisation
technology allows surgeons to practice according to a particular time and place.
Herbert says: “Attempting to solve the
high risk surgical procedures in a virtual The reader’s access device could be a
problems of scientific management
world. Operating on a brain, learning smart phone, electronic paper, a personal
by building large centralised archival
the procedures and techniques in a computer or richly equipped collaboration
repositories is both dangerous and
virtual world with sensory feedback to environment.
unworkable. New distributed data sources
the hands holding the scalpel emulates
are required and these in turn present Computational approaches to systems
what would be experienced when operating
their own challenges.” biology may also help address the
on a patient.
challenge of finding sustainable forms
of energy, for example from bio-energy
crops with near carbon neutrality if grown,
harvested and converted efficiently
with predictable performance.

72 See www.skinkers.com for an example of current sophisticated

peer-to-peer solutions
 Developing the Future | Phase 2-07

Understanding the large-scale structure SUMMARY

of the universe requires that data from The 21st century presents some of the
surveys are compared to models which most important questions, challenges and
predict the distribution of galaxies. opportunities in human history. Some
There is great potential for tools that have solutions in scientific advance
steer computation, fit models and (eg. health). Others require political
automate data analysis to improve or economic solutions (eg. poverty).
our knowledge of the universe. Some require significant scientific
advance in order to provide the evidence
RECOMMENDATIONS: necessary to make economic and political
• A curriculum review of teaching decisions (eg. our environment).
computing and ICT in schools is required. Computing is changing the way we work
We need to find ways to inspire young and live enabling new discoveries in almost
people in computing in order to generate every field of knowledge, creating massive
new recruits into the industry. opportunities for global collaboration,
• The IT sector needs to communicate and at the core of most business practices
technological developments and their and operations. The future of software
implications to the youth sector in based technologies is transformational
particular in an attempt to generate with massive potential to drive significant
interest and enthusiasm. growth and prosperity in the UK economy.

• The Government needs to radically The impact of Web 2.0 on the way that
review computing skills with a view companies sell goods and services to
to future requirements. the public will be even greater than the
changes already wrought in sectors
• The development elite within the IT such as travel and entertainment.
sector and those who truly understand The convergence of computing and
the scientific basis of emerging telecoms will continue to allow consumers
technologies need to collaborate in order increasingly to determine the nature of
to advise and guide on the development the products and services on offer.
of the skills agenda for the growing
computing sector. It is not reasonable
to expect those who do not understand 67
the fundamental technology within the
sector and how it can be applied and
developed to be able to forecast and
develop a skills and education
programme which will feed through
to the sector in the future.
68
The views and opinions contained in this report are the authors’ own and, except where indicated otherwise, do not necessarily reflect or
represent those of Microsoft Corporation or its affiliates. Reference in the report to any products or services, other than those of Microsoft
Corporation, shall not constitute or imply any endorsement by Microsoft Corporation or its affiliates. While Microsoft Corporation has made
reasonable efforts to ensure that the content of the report is accurate, Microsoft Corporation and its affiliates cannot assume legal liability
for any errors or omissions and exclude all such liability to the fullest extent permitted by law.
© 2007 Microsoft Corporation and its licensors. All rights reserved.

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