GENERAL PROPOSALS TO BOOST COMPETITIVENESS, GROWTH …

30 March 2005

INFORMATION AND COMMUNICATION TECHNOLOGIES

AT THE HEART OF THE KNOWLEDGE SOCIETY

GENERAL PROPOSALS

TO BOOST COMPETITIVENESS, GROWTH AND EMPLOYMENT

Presented by: Mr Alain Bravo President, Réseau National de Recherche en Télécommunications (RNRT) Managing Director, SUPÉLEC (electricity and IT engineering school) Mr Gérard Roucairol President, Réseau National de Recherche et d'Innovation en Technologies Logicielles (RNTL) Vice-President R&D, Bull Mr Jean-Charles Hourcade Vice-President Audiovisual and Multimedia Research and Innovation (RIAM), Thomson Mr Jean Mounet President, Syntec Informatique (union of software developers and publishers) Managing Director, Sopra Group Mr Jean-Pierre Corniou Chairman, Club Informatique des Grandes Entreprises Françaises (CIGREF) Vice-President Information Systems, Renault

Members of the Strategic Advisory Board on Information Technologies (CSTI) And: Mr Gérard Matheron Micro-electronics Developments for European Applications (MEDEA+) Mr Jean-Patrice Savereux Union des Syndicats de l’Industrie des Technologies de l’Information, de la Communication et des Services Associés (Alliance TICS)

Centre de traduction Minéfi – n° 1587EN, 17-08-05

COMMUNICATION AND INFORMATION TECHNOLOGIES

AT THE HEART OF ECONOMIC COMPETITIVENESS

________

INTRODUCTION

INNOVATIVE TECHNOLOGIES:

NEW OPPORTUNITIES WHICH CALL FOR NEW SOLUTIONS

Conseil stratégique des technologies de l’information - http://www.csti.pm.gouv.fr 1

Historically, France has built a technological leadership position

In the second half of the 20th century, France built a remarkable position in the automotive, energy, transport, aviation, space, telecommunications and other industries on the back of the technologies emerging at the time. During this period France laid the basis for its future engines of economic growth. Its businesses have become world leaders thanks to their capacity to adapt to new trends, particularly the globalisation of competition and the formation of a European area.

France - and Europe – are no longer as committed to technology-driven competition

It is unanimously agreed that the innovative technologies emerging at the end of the 20th century have already led to new issues in the present decade, particularly the communication and information technologies and biotechnology. However, these technologies also demand adjustments as the rules of the industrial society underpinning France's success in the past have changed and therefore require adaptation to such new factors as globalisation of trade; knowledge sharing, transfer and protection conditions; relocation.

Clearly, France and Europe are not yet providing the resources needed to grasp the opportunities offered by these technologies.

From 1995 onwards a gap began to grow between France and Europe, on the one hand, and the United States and Asia (Japan, Korea, Taiwan and now also China and India), on the other.

While the initiatives taken recently by both France and Europe reflect the will to stay in the race for access to these technologies, they fall short of what is needed to deal successfully with the challenges ahead. French policies remain limited to infrastructures (currently ADSL). While this is positive, it is only part of the effort required to build a fully-fledged ICT market and industry. The European aims are relevant and have been on the Lisbon agenda since 2000 but concrete actions continue to hang fire.

Yet innovative technologies affect important economic concerns:

Innovative technologies are nevertheless a major source of new stakes, which are already beginning to affect the structure of our economy:

• they lift the competitiveness and growth of the entire economy; • they create jobs with high value added; • they are a vector of scientific dissemination and industrial

independence; • they are a major source of attraction for the scientific and technical

elite because they offer stimulating prospects; • they are part of the model of society because they help structure

contact between people; • lastly, they help maintain national independence because they are

increasingly included in applications with both civilian and military uses (dual technologies).


France and Europe have the strengths needed to seize remaining opportunities

The accelerating introduction of new technologies and the resulting upheavals in the industrial landscape regularly offer windows of opportunity to change established scientific, technological and industrial rankings. For example, the tigers of Asia (Korea and Taiwan) and now India and especially China are clearly showing how a carefully targeted strategy can be used to join the leading major countries. In the software sector, for instance, freeware provides an opportunity for Europe and Asia to challenge the dominant position built by the United States in the 90s.

France and Europe have many strengths to achieve this, including: - the European Economic Area, whose economic weight is similar to that of the United States, allowing it to influence the market provided it makes its weight felt in a consistent, unified way;

- a scientific and technical intellectual potential visible in both new and more mature technologies, thanks to globally recognised academic excellence.

Developing a new framework for action to overcome cultural barriers

France and to a large extent Europe definitely seem to lack the desire and ambition needed to make the most of new technologies. Institutional and cultural barriers are crippling the development of innovative technologies. The example of a few European countries (Netherlands and Scandinavia) shows that these stumbling blocks are not fatal and can be overcome if the political will exists and is clearly expressed and translated into concrete action.

The challenge for France and Europe is therefore to organise themselves rapidly in order to overcome these stumbling blocks and seize opportunities in areas where they still have recognised strengths to avoid being sidelined in the global arena. But they will first have to show the will to do so.

If France and Europe want to generate a strong momentum in this area, they must rapidly cast off their shackles. In the short term, this will require a pragmatic framework for action geared to innovative technologies.

This framework could gradually be made more refined and elaborate and if possible extended to other areas.


1. France needs to develop new rules for a public incentive and support policy

intended to revitalise the fabric of innovative businesses

France no longer has a clearly defined industrial policy. The kind of concept prevailing in the 60s and 70s has definitely become obsolete in the new economic world order governed by the WTO and the EU. However, it has not been replaced by any other conceptual and institutional idea. The entrepreneurial initiative and free competition which have taken the place of policy are somewhat naïve compared with American and Asian practices.

Innovative technologies tend to emerge in industrial

greenfields or at least in fragile sectors. An efficient, dense and fully balanced industrial fabric requires innovative businesses. These are created by transferring research results and by nursing start-ups until they have the size and international exposure needed to be fully competitive on the market and to finance their own research and development.

The excellent report published by the Richelieu Committee,

"Vers un Small Business Act européen ?" ["Towards a European Small Business Act?"], argues convincingly that "competitiveness in today's environment" is driven just as much by a vital pool of large SMEs and "large companies" (i.e. companies with 250 to 5,000 employees) as by the existence of a few very national or even European champions. Such large companies are the backbone of the American industry. Their vitality drives the competitiveness of the US economy. The lack of such companies is the weakness of Europe and especially France. This observation is particularly true for innovative technologies.

France urgently needs a government policy to provide the

incentives and support required to revitalise the fabric of innovative businesses. While we must continue to pay attention to the few national champions already on various international podiums (France Telecom, Alcatel, Thomson, Thalès, Sagem, etc.), this policy should be intended to restore the fabric of businesses capable of achieving the semi-finals or finals (by analogy with the Olympic Games) in all critically important innovative technologies and to make sure there are enough of such businesses. The priorities of such a policy should be:

- increasing incentives and support for the creation of innovative

businesses, based on research results; - providing incentives and support allowing an adequate number of

start-ups to grow to full size, i.e. to benefit from international exposure and to have the commercial and financial critical mass needed to play independently in the "major league".

Support of this kind can take different forms, as witness the

support provided by the US Federal Government and by the most aggressive Asian countries. The before-mentioned report of the Richelieu Committee sets out key proposals for such a policy.

France must rapidly lay the groundwork for a medium-term policy

intended to restore a fabric of innovative businesses and to form a dense, balanced and competitive base of large SMEs or medium to large-size companies capable of playing in the "global major league".


This objective would be served fully by implementing the Richelieu Committee's proposals for key innovative technologies, particularly information and communication technologies.

France should endeavour to reach a European consensus on this approach.

Certain signs seem to show that the soil is ready for such an idea. It is important to make this an urgent priority and to use a highly pragmatic approach.

2. France needs to stimulate the European area in partnership with a few pioneering countries

The formation of a European area of Nation States is in itself a formidable opportunity to create an economic and industrial lever. However, it seems to make decision-making processes and the launch of coordinated policies unnecessarily complex and cumbersome. Yet in the recent past several initiatives (ITEA and MEDEA as part of the intergovernmental EUREKA programme) have shown their undoubted effectiveness. However, instead of sparking other initiatives, these efforts appear to have lost their momentum and even to be declining. Innovative technologies tend to compress time. Every one to two years, major technological developments reveal new areas of innovation. Every five to ten years, genuine revolutions generate an entirely new industrial and economic landscape. Time is therefore an essential factor if we want to seize such new opportunities and exploit them economically and industrially.

The concept of "groups of pioneers" seems particularly relevant for

innovative technologies: concrete, focused multilateral initiatives would make it possible to exploit the undeniable strengths of European countries with the strongest commitment to innovative technologies.

France needs to play an active role in order to give substance to such multilateral initiatives. In every country, institutional players, research hubs and industrial players with areas of excellence need to be closely involved.

Obviously, this kind of approach is not intended to create a two-speed Europe. It should merely be a way to accelerate and stimulate initiatives, which must in any case remain open and gradually merge into an overall Community approach.

3. Institutional simplification is needed

Innovative technologies are widely disseminated in French institutional structures. As a result, public policies reflect specific


angles: research, higher education, economy, industry, impact on society, Europe, etc. Within this general framework, these technologies are treated the same as more mature technologies. This may cause neglect when they require particularly close attention and top priority for the new issues brought in their wake:

- the novelty of highly complex new technologies and their far-reaching economic, industrial and social impact call for greater understanding and therefore closer strategic and communication analysis on the part of political, research and industrial decision-makers and technological and economic experts;

- the speed of developments changing the environment - continually shifting borders between technologies and reshaping the industrial base - calls for exceptionally consistent and rapid development and implementation of government strategies.

The need for a coherent and responsive sector can only be filled by a

simplified governance structure for innovative technologies which uses all public instruments.

The transfer of research results to the industry must be considered an overall process, including research, higher education, innovation, business creation and growth of businesses to maturity.



COMMUNICATION AND INFORMATION TECHNOLOGIES

AT THE HEART OF ECONOMIC COMPETITIVENESS

________

USING INFORMATION AND COMMUNICATION TECHNOLOGIES (ICTs) TO

REMAIN A LEADING COMPETITOR IN THE GLOBAL ECONOMY

MEASURES TO REVIVE AN AMBITIOUS GOAL

FOR FRANCE AND EUROPE



PART ONE

ICTs ARE A POWERFUL LEVER TO RAISE PRODUCTIVITY AND STRENGTHEN COMPETITIVENESS IN ALL SECTORS OF THE ECONOMY. THEY ARE ALSO A FULLY-FLEDGED GROWTH INDUSTRY.

ICTs are at the heart of economic development in industrialised countries

The link between the economic performance of the major industrialised countries and continuous and coherent investment in information technologies can be seen all over the world.

This link is considered largely responsible for the exceptional productivity gains of the American economy, which improved by 2.43% during the period from 1995 to 2002, compared with 0.88% for France. One of the obvious consequences of this is that the North-American economy recovers with vigour and speed.

During this same period, investment in ICTs accounted for 50 to 60% of American capital expenditure, versus 10 to 15% in France.

The impact of information technologies on economic results reflects the combined effect of two key factors:

ICTs leverage the productivity and competitiveness of all economic sectors by driving the development and implementation of new usages.

ICTs not only generate new products and services but also transform organisations and processes. Such changes are not limited to optimisation of the existing situation. Generally, they involve an radical overhaul.

Moreover, in today's environment such transformations

exceed a company's internal framework. They affect all relations between a company and its main partners (customers, suppliers, etc.). Thus ICTs generate new and different business models which are more productive and therefore a source of economic value.

Potentially, almost all economic sectors are concerned.

ICTs are levers of competitiveness for businesses in general

and have the potential to generate entirely new activities and new markets.



ICTs are therefore one of the few sources of new jobs capable

of offsetting the decline in employment in more traditional industrial sectors and so allowing France to maintain a positive employment balance. Services, research and innovation, which are a major component of ICTs, are less vulnerable to relocation and must therefore be pushed.

The industrial sector of ICTs (hardware and services) lifts economic performance and growth.

The industrial challenges sparked by competition for global leadership in the ICT sector are both a lever of growth - the ICT sector already accounts for 10% of American GDP, compared with about 7% for France - and a powerful magnet for high value-added jobs, particularly scientific and technical jobs in the research and development sectors.

Even more than the relocation of manufacturing jobs, this is the focus of competition between developed countries - or rather regions of the developed world. The competition was recently joined by such emerging powers as China and India. Its outcome is critical. In our opinion, the market still seems to harbour opportunities for Europe and, within Europe, France. However, time will play against us if we do not rapidly show a strong determination to grasp these opportunities.

The American and Asian examples reveal determined political support for ICTs

The entire US economy is boosted by the ICT industry and the unprecedented growth of ICTs in most economic sectors. This shows in America's exclusive domination of almost all ICT segments (except telecommunications, in which Europe still holds significant positions): electronic components (INTEL, despite the positions of STM, Infineon and Philips), IT hardware (IBM, Sun, HP, Dell, etc.), software (Microsoft, IBM Global Services, Sun, HP, BEA, Oracle, Peoplesoft, with the notable exception of SAP), services (IBM, CSC, EDS, etc. with a few significant European exceptions, such as CAP Gemini, Atos Origin, etc. ).

This dominant position is the result of a vision which is widely agreed and shared by the government and civil society: the Federal Government, the US States, research institutions and businesses share a strong commitment to transform and strengthen America's economic and industrial leadership with the help of ICTs.



This rising spiral is carefully maintained by American federal policy, using: • defence budgets, such as the DARPA programmes, which direct the development of dual technologies with both civilian and military applications; • major programmes culminating in innovative usages for the entire society, such as the National Health Care and homeland security initiatives, • technological research programmes: nanotechnologies, supercomputers, Power Grid Computing, etc.

In Asia, both the traditional powers (Japan, Korea and Taiwan)

and the newly emerging powers (China and India) have set up government structures to keep a close eye on the development of the ICT sector, generally a Ministry of Communication and Information Technologies, which coordinates research, higher education, innovation and industrial development policies.

These countries grant high priority to investment in ICTs. Their goal is no longer just to take advantage of low local labour costs by mastering manufacturing and assembly technologies with low value added but to establish themselves as global powers in the most critical high value-added technologies (microprocessors, nanotechnologies, software, etc.).

Like several major Asian countries, the United States has made

the development of this sector a key priority of economic policy, as witness the importance of this sector in general policy statements and in major multiannual economic development plans.

Ambitious, coherent, forward-looking policies in France and Europe must provide room for communication and information technologies. This is one of the keys to economic growth and competitiveness, scientific and cultural influence and industrial strength in the global arena. In France, the ICT sector needs to be declared a national priority. This priority must be reflected in a message designed to rally the stakeholders and in actions which are consistent with this message. It needs to be pushed by the public authorities and the main economic players in this area. Unreserved commitment calls for a positive message which speaks to both the imagination and the heart. This was done successfully in the space sector but has yet to be achieved in the ICT industry.

It will probably be necessary to focus on the development of a European model which would be slightly different from the American concept and to highlight new ICT usages in the service of people and society.



PART TWO

SIMPLIFIED GOVERNANCE IS ESSENTIAL FOR A CONSISTENT AND FAST APPROACH TO ICTs. THE GOVERNANCE PROCESS NEEDS TO INVOLVE ALL PLAYERS. The fragmentation of the French and European environment calls for institutional simplification and unification

The basic principles of our analysis are explained in the introduction. They apply fully to the information technologies. It is especially important to be able to make the research / innovation / business creation / industrial development process work as one highly integrated process which can be adjusted almost immediately to market developments.

Looked at in this light, the institutional landscape is

Balkanised. The public authorities, the research communities and the industry do not have enough agreement on a vision, nor do they cooperate sufficiently on implementation conditions. As a result, convergence between national policies and European policy continues to lag.

France will have to initiate an institutional reorganisation, which it needs in any case, and promote such a reorganisation at a European level in partnership with a few other countries.

Two urgent measures are proposed to make the new governance process a reality:

We need to implement a cooperative governance system based upon an intense, continuous dialogue between the authorities, the research community and the industry. The system needs to be based upon a shared vision of strategic analysis and objectives. This work must also contribute to the emergence of a European vision.



The CGTI and the CSTI could be a key instrument to kindle the

dialogue needed to develop a coherent, responsive overall strategic vision, under or in conjunction with the institutional authority for information technologies referred to above.

Research measures to broaden the role of national research

networks will be discussed below. Within this framework, public responsibility for ICT governance needs to be clearly identified. Streamlined, timely action will require the organisation of a single body with responsibility for all of the government's IT missions. The brief of this body will need to include every aspect of research and of support for innovation, business creation and industrial development. It will need access to all instruments available for public intervention in these areas.

This body may take the form of a ministerial department. A semi-public body (agency, office or other) with a board of directors made up of government representatives may nevertheless appear more judicious since it offers the following advantages:

- independence and stability vis-à-vis changes in government;

- highly flexible and fast implementation of decisions;

- more flexible recourse to different financing methods.

The missions of this body would cover the following aspects:

- strategic intelligence; this forms the basis for participatory reflection intended to bring about a shared vision and proposals for the government's ICT policy;

- continuous and objective reassessment of results and tactical readjustments;

- management of an open dialogue with public and private economic players and initiatives to stimulate discussions on these issues with European authorities and the international community.

- rapid implementation of a public policy in conjunction with the economic players.



The missions of this body could focus on the following three objectives:

- supporting and developing usages for information technologies in the business community, particularly usages which generate competitiveness and economic value;

- supporting and developing usages for information technologies in government, particularly usages which help improve the efficiency of the administration and public services;

- supporting and developing the industrial segment of the IT sector by driving a research policy culminating in academic excellence and the formation of an industrial fabric with a strong global position in the most innovative and the most critical segments.


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PART THREE

ICTs ARE A POWERFUL SOURCE OF TRANSFORMATION OF THE INDUSTRIAL BASE AND SERVICES AND CALL FOR THE INVENTION OF NEW MODELS OF COOPERATION BETWEEN ECONOMIC PLAYERS.

The benefits expected from ICTs will require a radical transformation of cooperation and trading systems between economic players.

The use of ICTs generates productivity and competitiveness. However, this value creation is not the automatic result of investment in ICTs. It is driven by the reorganisation of production processes on the back of real-time circulation and processing of information. Such reorganisation is not limited to internal processes but embraces all relations and exchanges between a company and its partners.

Analysis of innovative practices - including those used by French players, who are still the exception - highlights many areas where such practices can create value. Examples of new practices generated by ICTs include: personalised real-time relations with suppliers and customers at the sales and production end, cooperative design and development of new products, immediate application of market information on suppliers and stock management at the distribution end, and real-time fleet management at the logistics end.

France and Europe are lagging well behind the United States and some sectors have taken the transformation process further than others.

The internet bubble should not make us forget the emergence

of innovative and profitable activities driven by the benefits offered by the ICTs, including online banking, teleassistance and private credit (cards). But whereas more than 50% of US capital expenditure is earmarked for ICTs, generally accompanied by sector-wide analysis of new value-creation models, ICTs account for only 10% of French capital expenditure, generally only to make structural adjustments in existing models.

Sector performances show a relation between investment in ICTs and productivity. Results improve when such investments are backed by a determined effort to reorganise the production processes.



Transformation of the industrial and services base calls for shared standards (business model)

Business leaders need a clear strategic vision to make the

most of these new opportunities, whether the goal is to transform brick-and-mortar sectors or the creation of new markets. They need to share their vision with their sector partners. Innovations sparked by the use of ICTs generally involve relations between businesses, sometimes entailing a radical overhaul of the business model, which can only be effective when implemented by all stakeholders.

Dell, a major PC vendor, is a case in point. Dell's entire

production process is driven by orders. Suppliers are immediately notified so they can manufacture and deliver their parts to Dell. Dell assembles the PC and delivers it to the customer in less than a week. This just-in-time sourcing process is maintained by very rapid circulation of information. The component stock is divided by ten while there are no stocks of PCs or unsold products. Suppliers benefit from these advantages and can therefore offer lower prices to Dell. Dell does not raise its margins but gains market share. It has overtaken all rivals to become the sector leader.

Such practices involve networks of human resources. ICTs

allow these resources to interact continually according to original patterns based upon concerted analysis and actions within each company in conjunction with the main economic partners.

The SCC – Supply-Chain Council - provides another example of the way in which these transformations become part of the economic fabric. Based in North America, this non-profit organisation recruits members all over the world, including a number of Fortune 500 Companies as well as universities, government organisations and a few specialised consultants. Its purpose is precisely to develop and promote a universal benchmark model for logistics operations in order to optimise logistics relations between economic players in all sectors.



The development and implementation of these new models requires understanding of common strategic, economic and management issues.

The development and appropriation of such models

necessarily requires an understanding of what is going on elsewhere in the world (economic intelligence) but must also factor in French and European realities, inter alia calling for adjustment of imported standard models.

This is the kind of reflection needed to nurse "local" discovery, to make the most of the ICTs and so to match or even exceed the results achieved in other areas of the world.

The stakeholders need to dialogue and agree on new usages

in order to create value. This kind of dialogue is not limited to institutional discussions. It requires genuine efforts to define, explain and assume ownership of a new way of "working together" using new tools. This is the level where the cultural change to an "intelligence society" takes place.

Three urgent measures will be needed to bring about and stimulate these transformations: A sector-oriented management system should be organised which is designed to promote the emergence of new cooperation methods (business models) in key sectors. This needs to be helped by the institutional framework. Such models will arise from the innovative use of ICTs and will be a new source of competitiveness and economic value.

In practice, this initiative would take the form of sector-based discussion panels whose members would include managers with hands-on experience, trade organisations, researchers and economic intelligence experts. Such temporary structures would notably be used to share a vision on the innovations expected from ICTs and to determine the impact of public policies in this area.

Such discussions would have to be accompanied by continuous

analysis and research, particularly in the following areas: • ICT dissemination and appropriation conditions; • value creation through innovative usages; • link between innovation and strategy as a result of ICTs.

This work would also have to factor in the efforts and results of international organisations and thus fit in with the general drive to develop, adapt and try out new models.



The conviction that the competitiveness and growth fostered by ICTs generate some of the highest returns on investment should be clearly signalled by offering tax breaks on ICT investments. Such measures must primarily focus on investment in innovative usages.

For example, these measures could take the form of: - tax rebates, - tax credits by including experiments with innovative usages in research.

Lastly, the development of new usages must be helped specifically by a few exemplary "flagship" programmes focusing on innovative usages which benefit society as a whole. Such programmes are an essential complement to the "technological" research programmes mentioned in the next chapter since they put them in the service of usages considered a priority by society. They must therefore focus primarily and significantly on the innovation of contents, all too often overlooked in the recent past, and not just on integration of technologies. At the same time, such programmes provide examples of concrete ways in which technological innovation can bring about transformation in the service of people and citizens, society, culture and the economy. They will primarily concern sectors where the convergence of the fragmentary interests of many players deserves to be stimulated and helped by government action. Currently, there is nearly unanimous agreement on the following themes : - security and protection of privacy; - health, - education and access to culture, - the communicating home.



PART FOUR RESEARCH AND INNOVATION EFFORTS NEED TO BE STEPPED UP AND FOCUSED IN ORDER TO STIMULATE THE INDUSTRIAL AND ECONOMIC ACTIVITY OF THE ICT SECTOR Research and innovation are one of the driving forces of the ICT sector In order to stimulate demand for new products and to maintain

the market share of such products in a rapidly changing economy ICT businesses need to invest significant sums in R&D. Frequently, companies earmark 10 to 15% of sales for R&D.

Research is a critical lever to stimulate and build up the ICT industry. It must closely reflect market potential and value creation. Thus, it must be added to the overall innovation process, which embraces and closely coordinates research, industrial development and alignment with the needs of the market.

It is urgently important to restore research and innovation in ICTs and to strengthen the involvement of public bodies and the business community.

As a percent of GDP, the US and Japanese research budget for ICTs is well above the French budget and the European budget in general. The gap is much wider in this area than in overall research. This observation shows a dramatic lack of focus on research in the ICT sector despite the fact that ICT research is one of the engines of economic and industrial growth.

The second significant observation is that the French business community does not consume an adequate proportion of research appropriations. Aside from the figure itself, this is due to a lack of interaction between the public and private research communities.

The United States is showing how cross-fertilisation between

academic research and industrial development leads to both academic excellence and a dynamic, market-driven industry, in turn driving a rising spiral by allowing businesses to reinvest a large part of their financial resources in R&D.



France and Europe need a similar rising spiral, for which all of

the following measures will be necessary.

France's total R&D budget for ICT needs to be raised from € 5 bn in 2003 to € 8 bn in 2006. The first significant step will have to be made in 2005. This would raise the weight of these technologies to one-quarter of the total R&D budget, the same as the proportion observed in the United States. Private capacity to finance ICT research remains structurally limited. The budget out to 2006 will therefore have to be divided in roughly equal proportions between public and private finance, i.e. an increase of € 1.5 bn for both financing sources.

The following three types of measures could generate an additional € 1.5 bn in public finance:

• adjustment of public research appropriations in order to restore the weight of ICTs in the overall research budget;

• a larger government budget to show the government's commitment to a sector with potential benefits for the economy and growth;

• the arrangement of loans (EIB, financial institutions) or even the development of more innovative mechanisms to attract private investors (e.g. like the SOFICAs in Canada). These would also have to express the conviction of the entire national community that this is an essential investment for the future likely to generate high economic returns.

It is vital to earmark the increase in public research appropriations primarily for innovation. This increase must therefore be allocated mostly to cooperative research and innovation, i.e. initiatives carried out and run by businesses in partnership with public and university laboratories. In return for government support for corporate R&D, the beneficiaries would have to agree to contribute to the financing of such programmes (on a one-for-one basis) in order to cover the contemplated additional private finance (€ 1.5 bn).



At the same time, part (€ 250 m) of the additional public finance of € 1.5 bn would have to be reserved for a few initiatives intended specifically to tweak public/corporate leverage, to support mechanisms for transferring research results to innovative programmes designed to create industrial and economic value and to contribute to the efforts already mentioned on page 4, which are intended to stimulate and support the creation of a profitable and competitive fabric of large SMEs and mid-size and large companies.

• contribution to the organisation of a European Software Technologies Institute (see below),

• specific financing of activities to transfer research results to the industry,

• assistance with the creation of innovative businesses,

• assistance with the development of SMEs with a large potential. In conclusion, such an effort would only come into its own if accompanied by a similar effort at European level, at least on the part of a few major countries particularly concerned by the same issues (Germany, Great Britain, Netherlands, Sweden, Finland).

The European Community could show its support for this aim by paying the financial charges on EIB loans to help overall ICT research. Most of the efforts will need to be earmarked for a few carefully identified and selected key research and innovation priorities, which would have to reflect agreement among the stakeholders.

Not only is the level of the current ICT R&D budget too low, it is also dispersed and even scattered, which blunts its impact. The result is a mass of relatively small-sized research projects and the almost total absence of coordinated, long-term major programmes on critical themes (with the exception of ITEA and MEDEA, both effective examples at European level). In-depth strategic analysis would allow us to identify critical research themes and major research programmes for the future.

The RNRT, RNTL and RIAM research networks have

prepared a first outline. This list could be finalised and a more precise and detailed definition could be developed in the next few months.

We need to work out a list with a limited number of major research and innovation themes on which to focus most of the multiannual budget and the joint efforts of public and private centres of excellence (see overleaf).



The proposed approach will be underpinned by a vision of the

future of ICT in France and Europe which is shared by the authorities (responsible for organising and supervising its framework), by public and higher education institutions and by sector-based companies. Their shared vision must cover both the strategy (impact on the economy and independence) and more operational aspects connected with the technical and economic realities of the ICT sector (level of research budget, priorities and major research programmes).

The research networks (RNRT, RNTL, RIAM) form the backbone for the close collaboration needed between public and private players to steer this shared vision. Their role must be strengthened and extended to all areas of ICT research, in line with the drive to give them more complementary missions as convergence approaches maturity.

The national research networks (RNRT, RNTL, RIAM, RNMT, RNTS) are genuine crossroads for reflection between the stakeholders. They are effective organisations to give concrete shape to cooperative research and innovation. Their role and their action instruments must therefore be bolstered and extended. Critical mass has become indispensable to reach a recognised level of excellence in the international arena. The research teams of public organisations and businesses will have to work together in order to reach critical mass. The first important step in this direction is provided by the concept of a regional competitiveness hub. This idea needs to be extended at national level by organising cooperation between hubs working on the same themes. Multilateral cooperation initiatives at European level need to align with the European concept of "centres of excellence" proposed by the European Commissioner for Research.

These hubs need to be able to count on both public and private research teams to build cooperation and a common culture. The centres of excellence of our universities - whether focusing on science and technology or on the economic and human sciences, which are also of critical importance for ICTs - should be involved more closely in common programmes.

In addition to identification of priority research themes (discussed above), we recommend proposing a first list of theme-based hubs at regional, national and European level capable of forming a core with critical mass and compatible with the need for excellence, i.e. competitiveness hubs.




Integration, interoperability and standardisation are basic ICT concepts at the crossroads between the research and corporate communities. The organisation of integration, interoperability and standardisation platforms at a European scale is essential to reach significant weight in the global market. The creation of a European Software Technologies Institute and of a European microtechnology and nanotechnology integration centre would be the most urgent initiative in critical areas.

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GENERAL PROPOSALS TO BOOST COMPETITIVENESS, GROWTH …