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Free trade agreement between the EU and the US


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Free trade talks between the EU and the US is a game changer likely to have major impact on ICT. The Transatlantic Trade and Investment Partnership between the two economic superpowers was initiated 13 February 2013 and is currently in negotiations. Once an agreement is reached – and there is little doubt this will happen – demand for SaaS solutions, platforms, trading solutions and BI systems capable of treating both economic regions as a single entity as far as reporting and output is concerned is expected to increase dramatically. The opportunity is there, but capitalizing on it requires overcoming weaknesses present at both sides that are mostly of cultural nature.

Technologically, there is little difference between EU and US ICTs. How they approach the issue of developing solutions, however, is almost inverse. EU ICTs tend to begin on the architecture with focus on delivering robust solutions that have great structural integrity. US ICTs tend to look first at market needs and what can be sold before assembling a solution (often using bits and pieces from other sources) that will capture market share quickly. It can be argued that the reason why the EU has fewer internationally recognized software brands than the US is the availability of public funds through EC programs such as the Seventh Framework Programme (FP 7) (and soon Horizon 2020) that do not require ICTs to project any return on the investment (ROI). In the US, the Small Business Administration (SBA) provides loans that need to be repaid and the newly established Accelerating Market-Driven Partnerships (AMP) initiative is more of a VC-type funding mechanism that outright grants. In short, EU ICTs are not expected to generate any ROI while US ICTs are forced to. Which one is more likely to develop a highly marketable product?

In light of the free trade agreement, EU ICTs are in danger of being overrun by US market-driven solutions. There is, however, a weakness in the US structure that the EU can and should explore and it ties directly to the funding mechanisms of the US. In return for capital, US ICTs must either give away part of their businesses to investors or use it as collateral in order to secure a loan. For small firms, this can become growth inhibiting. So, as the EU funding mechanism keeps ICT ownership intact, US firms should consider relocating all or part of their business to the EU to become eligible for the type of capital injections provided. By attracting US firms (Malta’s income tax incentive is noteworthy), the EU will gain considerable knowledge in how to deliver cost effective solutions aimed toward the mass markets; an area where there is a lot of room for improvement as EU customer service often leaves much to be desired. In return, US firms become exposed to challenges that are far beyond what they encounter in the home market – EU’s languages and currencies – which helps them develop superior solutions that will work anywhere.

For ICT investors, the scenario offers considerable opportunities. For US investors, investing in EU ICTs that can be merged or partnered with US ICTs already in the portfolio is strategically sound. The inverse situation applies to EU investors. In order to capitalize on the emerging opportunity, ICTs from both sides of the Atlantic will be brought closer together; it will not be enough to focus on the home market. There are other benefits for US ICTs, one of which is the EU’s giant open data repositories. Most US data is privately generated and therefore privately held. EU’ s Open Data environment is a digital goldmine that EU ICTs have so far proved rather unsuccessful in monetizing. The arrival of the US ICTs will change that.

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