The French IT industry, like those of most other European countries, has come under intense technological competition from the USA. The industry's supply structure is dominated by the presence of American firms within France, both in the production of computers and the editing of software packages. Yet France has a strong advance in specific sectors and offers a dynamic environment.
 

Strengths
 

• France has a significant advance on other industrialized countries in products and services, such as smart cards and cell phones, which are all exported. The strongest sectors are smart cards, encryption software, e-commerce software, electronic games, digital television. The wireless technology is more sophisticated and user-friendly than in the US. Concerning smart cards, three French companies (Gemplus, Schlumberger, and Bull) produce more than two-thirds of the world's smart cards, a $12 billion business set to explode.

• French strenghts can also be found in IT services based around systems integration and the development of applications. Indeed, French software houses are managing to resist the American pressure not only with their captive market (an important public sector), but also with their quaility of service based on cognitive and local proximity to their clients. They are thus able to accumulate specific competences linked to their particular environment: for example, certain French software houses excel in scientific calculation or production of state-of-the-art software, because of their proximity to the areospace and nuclear industry. This user-producer relationship is fundamental in the IT sector.

• France has a numerous and highly-qualified labor force in IT, at all levels of qualifications. The French higher education system has been able to increase its supply ofcomputer engineers without compromising the quality of its training

• E-administration. The French government  has successfully developed online admistrative services for taxes and health care. A portal for all administrative websites has been launched, that lead the way for online activity.

• Capital flows. With the creation of two public mutual funds and the New market, the IT sector has been given the opportunity to finance innovating activities, especially for small companies.

• Dynamic, innovative start-ups. In 2000 and 2001, many dot.coms have been created to develop content and e-commerce activities. Recent consolidation in ISPs and telecom services and cross-border mergers have reinforced the private sector.

 
• Customized contents. To attract French people to the Internet and to develop e-commerce, French companies need to develop adapted content, products and services that correspond to the French culture. Many brick and mortar retail companies have started to put catalogues online, and major newspapers are offering online subscriptions that strengthen competition for US companies. The development of high-speed connections will put pressure on development of specific contents.

• Integrated environment. With European regulations on all sorts of IT issues, for example on the third-generation cell-phone,  France IT sector is well integrated in a broader environment that expand its market potential. With the circulation of the Euro dating January 2002, the market will expand still further.

Weaknesses
 

• Regulation. French heavy regulations regarding labor market or financial markets, can sometimes prevent new businesses to develop. The labor market is said to be sclerotic, as it very difficult lo lay-off workers, and the law on the 35 hours per week has added another constraint. However, limited-duration contracts have increased and there is more flexibility in the labor market. France would also need to bring more competition to increase installation of high-speed network, to low down prices ans to improve marketing efforts. Finally, heavy regulation is said to cause a scarcity of venture capitalism and lack of entrepreneurship.

• Lack of mobility of researchers between public sector and firms.

• Dependency on hardware. The failure of French hardware companies result in dependency of French companies and households to foreign suppliers. It can be a problem if hardware such as PC are sold bundled with software that prevent French software companies to sell their products to a mass market.

• Slow Internet penetration. France is still behind other European countries in Internet penetration and e-commerce. It is now catching up but there are still barriers that prevent a mass-market penetration, such as the presence of the Minitel, slow Internet access lines, lack of computer equipement at home.

• Digital divide. A digital divide among educated, high-income, young people and older, low-educated, low income people prevents Internet access to all French households. There is also a geographic divide between Paris, large French cities and IT centers, and remote regions that don't benefit from the expansion of the networks or public equipment.

Despite its relative backwardness in some IT indicators, France can be considered as one of the leading country in the IT world. The country now needs to avoid regulations that limit what people can do, and should focus on creating an environment in which innovative people can prosper.

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