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ICT Cluster Strategic Plan

2005 – 2008

Prepared by Stuart Webb, ICT Cluster Manager

with the support of the ICT Cluster Executive Group on behalf of the ICT Cluster Opportunity Group

April 2005

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Executive Summary “Digital Foundry of the World”. This is the vision for the ICT Cluster developed by the ICT Cluster Opportunity Group (COG). This bold and aspirational vision reflects the intention of the COG to develop a world leading capability in ICT technologies in the region and reflects the ambitious spirit of the West Midlands Economic Strategy to become world-class by 2010. ICT is important to the West Midlands for two reasons: first, output from firms within the sector accounts for a significant proportion of regional output; and second, as an enabling set of technologies, ICT supports almost all sectors of the economy. Hence, the creation of a dynamic and successful ICT Cluster in the West Midlands will have a substantial knock-on benefit for the regional economy as a whole. The ICT Cluster has identified four strategic directions: to create a networked business community; to manage the transition from manufacturing to services; to focus on a small number of sub sectors in which there are particular strengths in the region; and to exploit the strong knowledge base in the region’s Universities. This strategy forms the basis for the existing 6 funded projects and is the framework against which new projects are being developed and assessed. See the ICT cluster website www.wmictcluster.org Funding is required to support the activities of 6 Task Groups reporting to the COG which promote the development of the cluster. These involve some 50 people from the industry and partner organisations and address the key areas of Data and Intelligence; Marketing and Communications; Innovation; Work Force Development; Public Sector Procurement and Export. Planned projects already approved by the COG awaiting funding are: Regional ICT Directory & Strategic Analysis to provide data and intelligence on the cluster, West Midlands Mobile & Wireless to exploit expertise in these technologies in the region’s Universities and an ICT Supplier Standard Pilot to develop an accreditation scheme for ICT businesses which could be adopted nationally following the success of the pilot in the West Midlands. These projects form the basis for the core of the plan. Reserve projects, funding for which is not available in this plan are: West Midland’s ICT Hub to provide a single point of reference for ICT information to businesses and show case the region, Centre for Integrated Photonics extending the photonics cluster and New Sub Clusters in sensors and telematics. These are concepts under development which have yet to be approved by the COG.

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Summary Market Analysis & SWOT Information and Communications Technology (ICT) is important to the West Midlands for two reasons: first, output from firms within the sector accounts for a significant proportion of regional output; and second, as an enabling set of technologies, ICT supports almost all sectors of the economy. Hence, the creation of a dynamic and successful ICT Cluster in the West Midlands will have a substantial knock-on benefit for the regional economy as a whole. The ICT Cluster is focused on the economic development of the vertical market of the region’s ICT industry. It is not focused on the applications of ICT across all industry sectors – this is the horizontal market focus of the ICT Team addressing issues such as broadband connectivity and e-business adoption. Mapping of the ICT Cluster was conducted in the first quarter of 2003 by SQW, economic development consultants, as part of a consultation process to develop and implement a strategy for the cluster. A full report of the mapping and SWOT analysis is available on both the AWM website and also the ICT Cluster website www.wmictcluster.org A SWOT summary based on SQW data is given in Appendix 3. From SQW’s analysis the ICT industry employs some 57,000 people in 3,000 firms the majority of which are located in the south east of the region as illustrated below.

The mapping identified Computer and IT services as by far the largest sub sector with 10% share of the UK output and a location quotient (LQ) of 1.0 is in line with a service sector supplying its own regional market. Telecommunications with a 30% share (and an LQ of 5.7) is a regional strength reflecting the significant proportion of the UK’s telecommunications manufacturing and supply activity in the region. A summary by

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sub sector is given in the table below. Employment, output and calculated output location quotient for the West Midlands ICT Sector in 2002

Employment Output

£M Share of

UK output %

Location Quotient (output)

ELECTRONICS: Computers & peripherals 3114 234 3 0.4

Office equipment 1132 85 20 2.8

Industrial equipment & instrumentation 2948 221 5 0.7

Communications & radar 316 24 <1 <0.1

Telecommunications 8942 671 30 5.7

Consumer products 1792 134 8 1.0

Components 6531 490 8 1.0

Total Electronics 24775 1859 6.3 0.8

SERVICES & SOFTWARE:

Computer & IT services 22114 1437 10 1.0

Telecom services (inc. Internet) 5801 377 2 0.3

Software products & creative digital 3794 285 4 0.5

Total Services & Software 31709 2099 4.8 0.50

TOTAL ICT 56484 3958 5.4 0.62

The Location Quotient (LQ) is used to assess the ratio of a region’s share of an industry compared to the national economy’s share where 1 = the national average

In terms of growth rate in the 3-year period to 2000, based on ONS data, the West Midlands ICT sector grew at a slower rate than the national ICT sector (4.1% compared with 6.1% CAGR). However the growth in the number of firms in the sector was slightly higher than the national growth rate (7.7% compared with 7.3% CAGR). Overall the region’s ICT sector is comparable with that in the North West but falls behind Scotland and the South East. This represents an opportunity to attract ICT businesses from the South East to an area with a lower cost base and to build on the region’s strengths particularly in innovation. Some of the key assets in the region are listed opposite. The SQW study identified that the region has critical mass required for the ICT cluster to develop in terms of the resources of people, land, property, infrastructure knowledge, money and external business expertise, with positive signs of clustering behaviour in the key areas of networking, innovation and skills.

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Vision “Digital Foundry of the World”. This is the vision for the West Midlands ICT Cluster developed by the ICT COG. This phrase reflects the aspirational intent of the COG to develop a world leading capability in ICT technologies. In the same way that the region has been known historically as the workshop or foundry of the world in manufacturing industry, the COG desires to enable the region to become renowned for it’s R&D and innovation in the digital industries. It is recognised that this is a bold vision statement, which the more cynically minded will have no difficulty in criticising when comparing the West Midlands with Silicon Valley or indeed with other regions of the UK. However unless we adopt a bold and aspirational vision we will not achieve our potential. This vision for the ICT industry is entirely consistent with the vision for the region set out in the West Midlands Economic Strategy to become world-class by 2010 and reflects the ambitious spirit of that vision. To support this vision the ICT COG has developed its own mission statement as being “To develop a cluster of ICT businesses and partners to bring economic advantage to the region.” The COG seeks to achieve this mission recognising that as well as being innovative and competitive the Cluster must become self directing and mutually supporting to continue to operate beyond the period of public sector intervention. In support of this vision the region has a wealth of intellectual expertise in its Universities and research centres. At Birmingham University both Computer Science and Electronic & Electrical Engineering scored 5 in the 2001 Research Assessment Exercise. Warwick University achieved a grade 5 in Computer sciences and 5* in applied mathematics, statistics and operational research. There is also recognised expertise in photonics at Aston University and in e-learning at the University of Wolverhampton. QinetiQ is an important research centre for ICT with particular strengths in microsystems, sensors and photonics. To move from the current position summarised above towards the achievement of the vision the COG has adopted the strategic framework developed by SQW in consultation with partners and the ICT industry. This is described below and is also available on both the AWM website and the ICT Cluster website www.wmictcluster.org

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Objectives The ICT Cluster has identified four strategic directions: to create a networked business community; to manage the transition from manufacturing to services; to focus on a small number of sub sectors in which there are particular strengths in the region; and to exploit the strong knowledge base in the region’s Universities. These strategic directions are supported by three strategic enablers that cut across all four directions: the development of hard and soft infrastructure; the collation and dissemination of data and intelligence; and the promotion of active links to other sectors. This strategy forms the basis for the existing funded projects and is the framework against which new projects are being developed and assessed.

The strategic plan is based on continuing to support the existing 6 regional projects. These being:

• The West Midlands IT Association, WMita (www.wmita.co.uk) to support the ICT SME community in the region.

• A technology demonstrator, iCentrum (www.icentrum.co.uk) to help ICT SMEs

utilize the latest ICT technology in their products and services.

• The photonics cluster (www.photonicscluster-uk.org) which enables businesses to access and adopt photonics technologies which make use of the transmission of light and radiant energy, the success of which now attracts interest from outside the West Midlands to this sub cluster.

• OpenAdvantage, (www.openadvantage.org) the West Midlands Open Source

Solutions Centre, a collaboration between the University of Central England, the National Business to Business Centre at Warwick University and the National Computing Centre to promote and encourage the take up of Open Source software.

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• The Centre of Excellence for Research in Computational Intelligence and Applications (www.cercia.ac.uk) based on the international expertise in this field in the computer science department of Birmingham University.

• The IT Futures Centre (www.initiativeitsolutions.co.uk) at Wolverhampton

University which provides consultancy, training and support to SMEs in high growth sectors.

These projects map on to the strategy as shown below.

The financial data associated with these existing projects is given in Appendix 1. The critical success factors in cluster development of networking, innovation and skills are addressed through Task Groups reporting to the COG. There are 6 task groups involving some 50 people from the industry and partner organisations focused on Data and Intelligence; Marketing and Communications; Innovation; Work force development; Public sector procurement; Export. As the ICT Cluster is focused on development of the region’s ICT industry rather than the applications of ICT across all market sectors there is little synergy between the activities of the Cluster and Regeneration Zones. In contrast High Technology Corridors have a high density of ICT businesses, particularly in Coventry Solihull & Warwickshire and the Central Technology Belt where the focus is on exploiting the innovation and technology base in the corridors and developing infrastructure for the industry. The Clusters are all potential users of ICT and are thus of interest to the ICT supplier community. The New Media Cluster in particular is dependent on ICT technology as are niche areas within Medical Technologies and high tech applications in other Clusters. The Professional Services Cluster also supports the ICT Cluster.

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Action Programme The action programme assumes that the level of resourcing available to the COG in the Cluster Executive Group (CEG) will continue at current levels throughout the duration of the plan. No allowance has been made within this plan for the staff costs associated with the employment of the AWM cluster manger or operational support required for the cluster manager at AWM. However the COG has made prudent budget provision for the costs of the staff currently employed via the Business Link, Learning & Skills Council and West Midlands Higher Education Authority in supporting the Cluster. In the event that these positions can be funded via other means this funding will be available to support other ICT Cluster projects. The following list of proposed projects and initiatives is presented in priority sequence. The corresponding financial data against each project is given in Appendix 2.

1. COG CEG and Task Group Support. In order for the COG and CEG to function effectively a budget is required for critical support activities of the CEG such as the regional annual cluster conference and support for the ICT cluster website as well as the work of the Task Groups reporting into the COG. There are currently 6 Task Groups covering: Data and Intelligence; Marketing and Communications; Innovation; Work Force Development; Public Sector Procurement; Export. In total there are some 50 people involved in the work of the COG, CEG and Task Groups contributing to the development of the ICT Cluster. Networking, innovation and skills are the focus of the Marketing & Communications, Innovation and Work Force Development Task Groups respectively. Data & Intelligence provides the information upon which interventions can be targeted. Public Sector Procurement builds upon the work of the OGC pilot in the region and Export works in collaboration with UKTI to promote opportunities in new markets. This is a strategic investment with no direct Tier 3 outputs, but is essential for the COG and CEG to operate and communicate effectively with the ICT industry and other organisations.

2. Regional ICT Directory & Strategic Analysis. This addresses the need for

better data to guide public sector intervention and directly addresses the data and intelligence strategic enabler. This 5 year project would enable a directory of the region’s ICT businesses to be compiled, maintained and surveyed to track trends and assess needs in the region. This strategic investment is regarded as being of the highest priority by the COG. Coventry & Warwickshire LSC are acting as the applicant on behalf of the COG and CEG.

3. CEG HEI & Innovation Role. Innovation is key to the development of the

cluster. As the current contract with the West Midlands Higher Education Authority for the Cluster Innovation Manager expires at the end of March 2005 the COG have agreed to finance this role continuing on a 0.5 FTE basis in 2005/06. During 2005/06 the COG will review the resource requirements of the CEG in the light of a review of vision and strategy for the cluster.

4. CEG Resourcing. The COG have made budget provision for 3 FTE posts in

Business Link, Learning & Skills Council and Higher Education in 2006/07 & 2007/08 pending the review of CEG resourcing in 2005/06.

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5. West Midlands Mobile & Wireless. This regional project led by Staffordshire University is a consortium of 5 Universities working together to promote the exploitation of wireless and mobile technologies. This proposal resulted from the public consultations in the first quarter of 2003 and a sub regional (CSW) proposal by one of the Universities was deferred in order to develop this regional collaborative bid. This project is a good fit with the strategy in that as well as exploiting the knowledge muscle of the region’s Universities it also represents a new targeted sub cluster building upon the region’s strengths in telecommunications.

6. ICT Supplier Standard Pilot. This project led by the National Computing

Centre has been approved by AWM and is ready to be contracted. It addresses the community of interest strategic direction and the need for ICT businesses to be accredited by an external body as being competent to deliver their particular type of product or service. This would add value to the existing supplier community represented by WMita and would also be the pilot for a national scheme which would give the region first mover advantage.

7. National RFID. The use of Radio Frequency Identification (RFID) and other

tagging technologies for tracking the movements of goods and people is rapidly gaining widespread usage. The UK trade association AIM UK Ltd has proposed a national RFID centre with support from the regional RDAs. This makes budget provision for a regional contribution to such a national centre in 2006/07 and 2007/08. The development of the regional infrastructure to support RFID technologies will be provided for within the West Midlands Mobile & Wireless project.

8. Vision & Strategy Support. The COG are engaged in a review of vision and

strategy for the cluster building on the “Digital Foundry of the World” and developing the action plan required to realise this vision. This funding will enable this work to be developed and implemented.

In addition the following projects have been discussed at concept stage and have yet to be formally presented for approval but are included as reserve projects in the plan for which funding is not currently identified:-

9. West Midlands ICT Hub. This concept has emerged from discussions with the leaders of the 6 existing ICT cluster funded projects and their desire to work closer together for mutual benefit and for the development of the Cluster. The Hub would be a single point of reference for information on ICT in the West Midlands covering both the vertical and horizontal markets - a business information centre for ICT which worked in collaboration with other public sector partners. The hub is seen primarily as being for the benefit of the region, not the funded projects, resulting in the promotion of inward investment, increasing the market opportunity for the ICT suppliers in the region to sell to the end user community, better access to and use of ICT by the end user community. The hub would seek to signpost all ICT projects not just those funded by AWM and could also provide a link to the provision of e-business adoption. This would require a strategic investment from AWM and others from the private sector in order to realise the vision of being the digital foundry of the world and would address all three of the strategic enablers.

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10. Centre for Integrated Photonics (CIP). The CIP which is based in the EEDA region has developed from what historically was BT’s national research centre. The expertise in the Photonics Research Group at Aston University from which the Photonics Cluster has developed has drawn heavily upon the expertise at the CIP. Discussions have been held with EEDA to enable the West Midlands to continue to benefit from this expertise. This would further extend the work of the photonics cluster for the benefit of its members and the applications of photonics technologies to industry in the region.

11. New targeted sub-clusters based on expertise in sensors, sensor systems and

also in telematics applications in medical technologies and smart buildings are proposed. Strategic commissioning of projects in these areas is planned.

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Budget & Business Case The total costs of the existing funded projects and the projects proposed in the above action programme are given in the following summary table. Fuller details are given in Appendices 1 & 2 for existing projects and new projects respectively.

Total AWM/ERDF AWM/ERDF V.F.M

Title of Project or initiative Lead Partner Spend £’000

Spend £’000

Spend £’000

Y/S

2005/08 2005/08 2005/06

Photonics Cluster Birmingham Technology 1,192 722 370

Y

IT Futures University of Wolverhampton 1,144 1,046 591

Y

iCentrum Birmingham Technology 936 437 189

Y

WMita West Midlands IT Association 233 53 53

Y

CERCIA University of Birmingham 1,829 1,445 737

Y

OpenAdvantage

University of Central England 2,194 2,236 1,471

Y

Existing Contracted Projects Sub Total £’000 7,528 5,939 3,411

Y

CEG, COG & Task Group Support

AWM 600 600 200

S

Regional ICT Directory & Strategic Analysis

Coventry & Warwickshire LSC 173 173 91

S

CEG HEI Innovation Role AWM 35 35 35 S CEG Resourcing 420 420 S

West Midlands Mobile & Wireless Staffordshire University 2,569 1,959 1,004

Y

ICT Supplier Standard Pilot

National Computing Centre 1,965 1,453 359

Y

National RFID TBA 100 100 S Vision & Strategy Support TBA 240 240 80 S Planned Projects Sub Total £’000 6,102 4,980 1,769

Y

Existing Contracted and Planned Projects Totals £’000 13,630 10,919 5,180

Y

West Midlands ICT Hub TBA 1,207 795 200 S

Centre for Integrated Photonics Birmingham Technology 982 982 327

Y

New targeted sub clusters TBA 800 500 Y Reserve Projects Sub-Total £’000 2,989 2,277 527

Y

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Measurement The West Midlands Economic Strategy and Action Plan 2004 - 2010, Delivering Advantage, forecasts changes in productivity and employment by 2010 for each industry sector without any cluster activity. For ICT by 2010 an increase of 24% in productivity and 5% in employment is forecast. The additional contribution made to these forecasts by the activities described in this plan is not easily measured, indeed many external factors outside the scope of the plan will affect the performance of the sector. AWM have mandated that clusters be measured by Key Performance Indictors (KPIs) at both the project and the cluster level. These KPIs are not designed to measure the performance of the sector as a whole, but reflect the sphere of influence of the COG and their executive agency the CEG. In addition to the project KPIs, the definition of which relate to standard AWM definitions of project outputs two cluster KPIs have been mandated across all clusters. These are the number of networking events and the number of companies active in clustering initiatives. Projects may contribute to the cluster KPIs as well as non funded activity carried out by the CEG or others working on behalf of the COG/CEG to develop and extend the cluster. Each cluster has also been invited to define 2 additional cluster specific KPIs over and above those mandated by AWM. For ICT the COG have selected the number of identifiable sub clusters recognised by the COG and the number of innovations developed by the ICT cluster as additional KPIs. The number of identifiable sub clusters recognised by the COG is an indicator of the success of the strategy in developing new sub clusters such as photonics. Innovation is recognised as key to the development of the cluster and the number of innovations resulting from projects assisting in the development of new products and services within the sphere of influence of the COG /CEG is an indicator of innovation activity. From the cluster KPIs each COG has also been invited to specify the two indictors which the COG regards as the most important for their cluster. For ICT the indicators chosen are the number of companies active in clustering and the number of innovations. The mechanisms for measuring, monitoring and reporting of KPIs is primarily through the contract management of existing and planned funded projects. For the 4 Cluster KPIs these will be supplemented by additional non funded activity carried out by the CEG which they will be required to record. Both project and cluster KPIs will be monitored and reported on a quarterly basis.

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A summary of the KPIs is given below. Cluster KPIs Summary of definition Responsibility Number of networking events

Count of publicised events with >10 attendees from at least 4 businesses

Contract managers for projects supplemented by CEG activity

Number companies active in clustering initiatives

Count of number of companies actively participating in cluster initiatives

Contract managers for projects supplemented by CEG activity

Number of sub clusters Number of identifiable sub clusters involving at least 20 companies and with an agreed development strategy within influence of COG.

Cluster Manager

Number of innovations Number of innovative new products or services (new to the company assisted) developed by the ICT cluster within influence of COG.

Contract managers for projects supplemented by CEG activity

Project KPIs New businesses created Standard RDA definition Contract managers for

projects Jobs (created and safeguarded)

Standard RDA definition Contract managers for projects

Skills including training accreditation

Standard RDA definition Contract managers for projects

Businesses assisted Standard RDA definition Contract managers for projects

Businesses supported by engagement in new collaborations with UK knowledge base

Standard RDA definition Contract managers for projects

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Appendices Appendix 1 – Summary of Legally Contracted Projects 2004-2008 Appendix 2 – List of Proposed projects and initiatives 2005/08 Appendix 3 – ICT Combined SWOT (Ref: SQW 02/03)

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Title of project or initiative Lead Forecast Total AWM/ERDF spend £'000 Value for TotalsPartner 2004/05 2005/06 2006/07 2007/08 Money

Photonics Cluster Birmingham Technology 390 370 352 Y 1112IT Futures University of Wolverhampton 1739 591 455 Y 2786iCentrum Birmingham Technology 292 189 146 102 Y 729WMita West Midlands IT Association 217 53 Y 270CERCIA University of Birmingham 587 737 709 Y 2033OpenAdvantage University of Central England 1543 1471 765 Y 3779Holt Court Business Incubator Birmingham Technology 155 Y 155Totals 4924 3410 2427 102 Y 10863

Appendix 1 - Summary of legally contracted cluster projects 2004-08

This table refers to the total AWM expenditure, single pot and ERDF, in legally contracted cluster projects during the current and future three financial years. The Value For Money column calls for only a Yes or No, to signify whether the project or initiative satisfies the benchmark costs in Appendix 3 of the guidance notes.

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Title of project or initiative Priority Lead Indicative 3 Year Costs £'000 2005/08 V.F.M.Partner

Total Capital Revenue ERDF* PrivateOther Public Capital Revenue Total ERDF* Capital Revenue Total ERDF* Capital Revenue Total ERDF*

Yes/ Strategic

COG, CEG & Task Group Support 1 AWM 600 11 589 200 200 11 204 215 185 185 S

Regional ICT Directory & Strategic Analysis 2

Coventry & Warwick LSC 173 173 91 91 40 40 42 42 S

CEG, HEI & Innovation Role 3 AWM 35 35 35 35 SCEG Resourcing 4 AWM 420 420 210 210 210 210 S

West Midlands Mobile & Wireless 5Staff'shire University 2570 624 1013 322 510 100 624 245 869 135 553 553 132 215 215 54 Y

ICT Supplier Standard Pilot 6

National Computing Centre 1965 47 1122 284 320 191 24 265 289 70 12 456 468 111 11 401 412 104 Y

National RFID 7 TBA 100 100 50 50 50 50 SVision & Strategy Support 8 TBA 240 240 80 80 80 80 80 80 S

Cluster Plan TOTAL 6103 682 3693 607 830 291 648 916 1564 205 23 1594 1617 243 11 1183 1194 158

Reserve Projects**West Midlands ICT Hub 9 TBA 1208 795 413 200 200 285 285 310 310

Centre for Integrated Photonics 10Birmingham Technology 983 909 74 302 302 25 303 303 25 303 303 25

New Targeted Sub Clusters 11 TBA 800 500 300 200 200 300 300Reserve Total 2990 0 2204 74 300 413 0 502 502 25 0 788 788 25 0 913 913 25

* ERDF administered by AWM through the Cluster Action Plan only. ERDF funds are subject to availability and eligibility. (ERDF obtained directly from GOWM is counted as public match funding).** Reserve projects will only go ahead if funded by agencies other than AWM, or if they substitute activity in the original cluster plan and therefore can be achieved within the original budget.

Foot NotesCOG, CEG & Task Group Support Likely to continue beyond 2007/08, although end date cannot yet be confirmed. End date to be estimated by next Corporate Plan issue together with refinement of annual expenditure. Regional ICT Directory & Strategic Analysis Continues for a further two years, with an associated Revenue expenditure of £ 43k and £ 70k respectively. Total additional Revenue expenditure thus £ 114k. West Midlands Mobile & WirelessICT Supplier Standard Pilot

Single Pot Single Pot Single Pot Single Pot

Single Pot Revenue and ERD, beyond 2005-2008, is £ 640k and £ 34k respectively. Final end date to be agreed by relevant parties, ERDF spend by end of 2008 calendar year.Single Pot Revenue and ERD, beyond 2005-2008, is £ 571k and £ 67k respectively. Final end date to be agreed by relevant parties, ERDF spend by end of 2008 calendar year.

AWM cost (Single Pot + ERDF) £'000 2005 - 2008 2005/6 2006/7 2007/8

Appendix 2 - List of proposed projects and initiatives 2005/08

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Appendix 3 - ICT Combined SWOT (Ref: SQW 02/03)

Strengths Weaknesses

• Growing sector, but CAGR les than national average (4.12% comparing with a national GB average of 6.10%) • Growth rates in specific sub-sectors are better than national average (computers and instruments manufacturing, data processing and database management) • Locations of critical mass – West Midlands Conurbation concentrates the majority of firms of the sector (37%), CSW, WTTC, N Staffordshire • Computer and IT Services account for 56% of total number of companies, Telecoms and Software cover another 29% in total • Few but important large companies (AT & T, NTL, Celestica, Marconi, Maxell, Logica, Ricoh, QinetiQ) • Customer base:

The automotive and engineering “magnet” The public sector as a customer The National B2B centre

• Networking activity – eg WMITA • Good supply of graduates to regional businesses (Warwick in particular) • High volume of computing students e.g. at Staffordshire • 2 Centres of Vocational Excellence in e-skills • Competitive labour costs of the South East (potential threat) • Vibrant urban centres attract young people • High levels of staff loyalty and positive work

ethic in places • Significant science park & incubation facilities (6 technology Parks and 8 science parks across the region) • High priority given to broadband in the Regional ICT strategy; good Broadband connectivity coverage in the urban areas and existing initiatives to address market failure in the rural areas of the West Midlands • Excellent transportation network via road rail and air (Birmingham International Airport, geo-central location) • Quality of life & lack of congestion in parts - e.g. CSW & Telford • Low real estate costs compared with national average • Birmingham – 24/7 city • No. and spread of HEIs (12) • RAE 5s & 5* in Birmingham & Warwick, computer science & engineering • QinetiQ in Malvern (PhD level staff) • The Learning Lab and e-learning • Design centres (Jaguar/Rover Premier automotive group, MIRA) • Kodak distance learning lab • Professional services (legal and accountancy) in Birmingham • Readily available business support and

• Underweight in both hardware & software sectors overall • Computer and IT services, the largest single sub-sector, is underweight nationally • Overweight in vulnerable sectors • Domination of small firms (94% of total firm base with less than 50 employees). • The average size of firms fell in the last four years • Some difficulties selling into the local market, as firms are not sophisticated in requiring ICT • Poor links between firms, weak networks between private and public sector and not strongly developed regional partnerships • Low level of spin out and ICT take up regionally • Low decision-making autonomy – lack of ‘HQ function’ • Lack of entrepreneurial spirit • Culture: can be untrusting • Poor image of the West Midlands results in poor recruitment and retention figures (18% of firms report a lack of qualified personnel) • Parochialism (labour markets not geographically mobile) • Difficulties finding people at project management levels • Poor university/industry links with regard to

recruitment • Science park facilities not well focused on particular sectors • Lack of second stage accommodation & smaller office spaces on flexible leasing terms • ‘lumpy’ broadband provision • Divisions created by M6 and the East West divide • The big names in ICT research are outside the region / UK • Weak university – company links within the sector • HEI offering not well connected and joined up • The West Midlands does not attract investment on par with other regions in the UK (8% of total VC investment, comparing with 46% in the South East) • Lack of early growth equity provision for SMEs in the region (of a value up to £250K) • Lack of loan finance for SMEs for small loans up to £40K for working capital expenditure and start-up • Business support is not easy to access by the sector, and is not sufficiently tailored to the needs of ICT businesses • Equity finance is not adequately developed, with business angel activity generally lower than traditional Venture Capital investment • VC investment in the West Midlands is declining, while the total venture capital investment in the UK is increasing

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potential funding • IT sector one of the most successful sectors at attracting investment in the West Midlands, but it only receives 16% of total IT sector investment • The average deal size is increasing, reaching £ 3 million, calling for a more comprehensive business support structure • High level of demand for the venture Capital funds (Advantage Technology Fund and Creative Advantage Fund) that have recently closed •

• There is a lack of understanding of the potential finance options, especially among SMEs • Links between banks and service providers in the region are not fully developed

Opportunities Threats

• Individual promising growth areas & pockets of clustering behaviour, within the broad sub-sectors • Exploit the RTF diversification and modernisation initiatives • Initiate the strategic involvement of the existing base of large firms in the development of a clustering behaviour • Link embryonic firms on science parks with one another and with external networks (Warwick Software Cluster, Coventry Laser Group) • Develop accreditation regimes to maximise small firm prospects • Establish links between Universities and industry (e.g. in Telford, Fujitsu has an arrangement with Wolverhampton University to recruit IT and electronics graduates) • Opportunity to attract high calibre candidates into local SMEs due to the downsizing of big firms • Pull factors to young people inc. quality of life and leisure offering • Promotion of Science and Technology to young people (e.g. SATRO) • New initiatives in training and skills provision,

e.g. launch of on-line ICT skills assessment tool

• Major development projects in the West Midlands (the development of Birmingham city centre is one of the largest urban development projects in Europe) • Additional wider infrastructure, e.g. M6 Toll Rd, proposed new runway in Rugby • Better, more focused use of science parks to encourage clustering, company spin-out and subsequent growth • Science park & incubation space expansion • Addressing the issues of second stage space and flexible leasing terms • MidMAN network links six of the regions

Universities and can be used to transfer knowledge to the surrounding SME base

• The high-technology corridors projects –eg proposed National centre for Microsystems & Nanotechnology • Thematic areas: Design (inc. modeling & simulation) microsystems, sensors, photonics • Spin-out from QinetiQ – derive more value • Creation of a dedicated IT university from Warwick and Coventry , with major investment in ICT and software departments • Develop a national telecommunications centre of excellence based on Aston and Birmingham Universities expertise

• Dependence on automotive • Globalisation and international competition • The decline of the telecoms sector and the Marconi crisis • Out migration of firms • Introvert character of the sector (in the CSW corridor, 12% of companies export over 50% of sales) • The leak of quality graduates in London and the South East • The lack of proper contact between the local business base and Universities for recruitment purposes • Lack of management maturity and a strategic approach on behalf of small firms • Other sectors seen as more attractive for

careers • Weaker access to transatlantic markets than eg Manchester or the South East • Ineffective broadband roll-out • Ongoing congestion is a major constraint • End of Objective 2 funding in 2006 • Research Assessment Exercise (RAE) driven funding • Relatively weak Government and University R&D. • Regional failure to mach R&D intensities achieved by the best performing UK and international competitor economies • Competitor regions also pursuing ‘new’ ICT disciplines - NW, Scotland and South East • Lack of ‘big science’ (i.e. major new funded research projects or facilities) – sector will get left behind globally over time • Difficulties in tendering for Public Sector contracts – regional companies may lose out to competitors • Not responding quickly enough to change • The region’s business support structure is not adequate to meet the needs of early growth businesses seeking larger scale investments

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• Movement of investment away from traditional industries and towards IT and high technology sectors • Regional Venture Capital Fund to target the technology sector and close the existing equity gap for up to £250K • Linking existing provision with local firms in need of finance (through the Universities) • Exploit growing financial services presence in Birmingham to be near the front of the VC queue • Regional e-portal to coordinate financial services for SMEs • Establishment of a Regional Finance Forum