IT landscape in France
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Hardware and Software 
 

French providers of IT services are quite successful, both in their own domestic market and in the wider European market. The number of new companies in the IT sector has increased dramatically in 2000, to 10 777 from 8 155 in 1999 and 7 663 in 1998. 74% of these companies have been created in computing services.
 

Domestic market for hardware

The overall IT industry has increased 15.4 % in 2000. Equipment industry for communication (radio, TV, telecom) is the fastest growing sector with an increase of 33.7 % in 2000 compared to 1999. Demand is particularly high for hardware such as digital TVs and mobile phones. Computing equipment does not progress as fast, with + 9.9 % in 2000 compared to + 15 % in 1999.
PCs sales were 3.9 millions units in 2000, that is + 4 % compared to 1999. However, PCs sales to home users progress slowly, with only + 1.7 % in 2000.
Source: Tableau de bord de l’innovation, DiGITIP
 

Hardware manufacturing

France is the second largest European producer in terms of manufacturing of computers, peripherals and telecommunication equipment, with more than 17 % of total European production. Indeed, France’s geographic location and relatively low manufacturing labor costs make it a very attractive choice for hardware and peripherals companies.
American PC manufacturers hold a strong share of the French market, holding eight out of the country’s top 10 companies.

According to French magazine 01 Informatique, a relatively small number of Internet start-ups are among the largest 500 French computer firms. Instead, the leading firms – in terms of turn-over – are those that provide Internet access (the “pipes”) and services associated with it. The five top companies in this category are: France Telecom, Cegetel, IBM France, HP France and Compaq France. These firms have earned $34 billion in 2000, which represents 43 % of the income generated by all 500 companies.
The year 2000 witnessed a shift in the dominance of traditional computer manufacturing firms, such as IBM, Compaq, and Bull, to that of telecommunication firms such as Cegetel, Bouygues, Nokia and Ericsson.
French computer manufacturer, Bull, was Europe’s third largest in 1999 and a number of foreign companies such as IBM and Dell have chosen sites in France as European headquarters. However, Bull, once the pride of French independent computing industry, is now facing a risk of bankruptcy (see the Bull case below). In 1999 the five largest suppliers of hardware in France were IBM, Bull, Compaq-Digital, Hewlett-Packard and ICL.
Companies with the fastest growth are small or medium-sized and provide Internet-related products and services.

20 largest IT firms in France
Rank Company Turnover 99 
(in million Francs)		 Growth rate 99/98
1  France Telecom 154,949 5.62
2  Cegetel   26,896 41.88
3 IBM France  21,360 7.05
4  Hewlett Packard France 10,980 2.8
5  Compaq France  8,600 13.16
6  Bouygues Telecom 8,500  123.68
7  Bull  8,448 -0.69
8  Cap Gemini France 7,350 18.21
9  CHS 7,300 4.29
10  Intel corporation  6,230 12.01
11  Matra Nortel communications  6,129 1.74
12  Nokia France 6,124   24.51
13  Ericsson 5,400 17.39
14  Ingram Micro  5,300  32.5
15  Tech Data  5,000 11.11
16  ECS Europe computer system  4,900 29.97
17  Atos 4,786 12.88
18  Microsoft France 4,485  15
19  Dell computer  3,960 39.98
20  NEC computer France  3,931 38.05
Source: US Department of Commerce
 

The large majority of the French hardware market is now in the hands of foreign companies. According to H. Nohara and E. Verdier, the Bull company has for long represented the French "national champion policy", that was commercially very protective and financially advantageous. It involved the payment of subsidies on such a scale that it became vey difficult for new firms to enter the market. This monopolistic policy concentrated limited resources on a single targeted firm, preventing others to compete and creating a lack of adaptability to the market. Indeed, Bull remained a general producer centered on mainframe systems and neglected the rise of microcomputers.
Recently, the company has benefited from a government aid of 100 millions euros in 2001 and the French state still owns 16.3% of its capital. The number of employees have decreased from 18 000 to 10 000 in one year. The company will probably be sold in parts and Bull will concentrate only on the server market and maintenance of its current computers.
 

Software development

Contrarily to the hardware sector, French sofware still shows a degree of competitiveness and is quite successful, especially in the area of IT services and consultancy. Performance is good in software services based around system integration and the development of applications. Its relative success at the European level can be explained by the role of consultants/strategists in IT integration within the firms. In particular, large firms created subsidiary companies out of their own IT divisions, hiring out IT personel on a daily basis. Also, new cutting-edge software firms were created by the expansion of public-sector research centers in high-tech areas such as artifical intelligence, software tools and so forth.
The software industry adapted to increased competition by concentrations and mergers, gerater specialization and a considerable degree of internationalization.
Source: "Sources of resilience in the computer and software industries in France", Industry and Innovation, Sydney, Aug 2001; Hiroatsu Nohara, Eric Verdier

In 2001, 440 companies are operating in software and computing services in France, employing 180 000 persons. Revenues of software and computing services were 21.4 billion Euros in 2001, with a 13.5 % increase from 2000. The leading sectors are CRM, SCM, outsourcing, embedded software and information systems security. Among European countries, France and Spain have the highest growth rates, followed by UK, Italy, Benelux around 10 %, and Germany and Northern Europe countries around 5 %. This is mainly due to the lag of the IT sector in France and to the moderate “Dot.com bubble”.
Source: Syntec informatique In spite of the crisis affecting the new economy, a remarkable number of French Internet start-ups continue to do well. According to a 1999 survey of 84 start-ups, about half displayed a growth rate of more than 100 percent and only 22 percent had negative growth. Moreover, their rate of survival remains higher than the national average of 50 percent for all firms in France. The only challenge experienced by three-fourth of these organizations remains to obtain the capital necessary for their development. The two principal causes of bankruptcy among start-ups are lack of capital, often due to an inexperienced management team, and payment delays by major clients.
Source: US Department of Commerce


Sources

Sources of resilience in the computer and software industries in France, Industry and Innovation, Sydney, Aug 2001; Hiroatsu Nohara, Eric Verdier
Syntec
US Foreign trade office

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