Estonia has an aura of the digitally advanced public sector. Heck, we have even managed to digitalise the afterlife! But what is the value to Estonian IT companies and their exports?
I was able to speak to two main players in the sector, Datel and Guardtime, about how Estonian historical developments support entering new markets, how cooperation with the public sector creates unbeatable references, and how teaming up is a key to entering new markets.
Top 3 export markets
These factors seem to be working. In 2005, Estonian IT export combined was only 0,9% of its GDP, below the EU average. By 2019, it had soared to over 3,2%, and although it took a hit as many other sectors because of the COVID-19, the graphs are turning upwards again.
According to a recent international survey, Finland, the USA, and Germany are among the top three markets for Estonian exporters. Still, companies are selling to as diverse markets as Israel and Kongo.
Public sector as a driver for private sector
I have written earlier how the Estonian IT success story in the ’90s was based on functional networks between the public and private sectors. Many of the companies that partnered with state agencies to develop digital services and solutions are also among the top exporters of their know-how. Hence, for them, the Estonian state is both a long-time development partner and a reference client.
Silver Kelk is Business Development Manager at Guardtime, a company started by a couple of Tallinn-based cryptographs in 2007. They are primarily focused on exporting cloud data integrity solutions. He has numerous accounts of using their long-time cooperation as a reference for entering export markets.
“We started developing our blockchain solutions for the Estonian public sector already in 2008, and it was up and functional in 2012. So, while many of our competitors have developed their blockchain solutions to the level of proof-of-concept, we can showcase ten years of working experience. I could say this is pretty unique in the world,” said Mr. Kelk.
Estonian history as the certificate for companies
In a way, we can say that Estonian history is certificating our companies. Rapid digitalisation in the 1990s, a wave of cyberattacks in the 2000s, and digital success stories in the 2010s reach broader audiences. More than a decade of functioning public services in the areas of digital security, geoinformatics, authentication, healthcare, and so on gives quality assurance no PR campaign can achieve.
For example, Mr. Kelk recalls his experience: “The fact that in 2007, our infrastructure was targeted by a wave of cyberattacks and this was the reason why our top mathematicians and cryptographs were approached to protect our digital public sector, and that we managed to build the most secure public sector digital security system, is a strong “business card.”
Exporting technology 7 years into the future
It is interesting to note that having too advanced technology has its obvious drawbacks. Sometimes companies need to take a step back and plan. Aimo Kõva, Business Development Manager at AS Datel, said, company has a long history of developing geoinformation systems for the Estonian Land Bureau, Roads Authority, Rescue Board, and other public services.
In April 2018, AS Datel launched its satellite-based remote sensing service, Sille.space, which can detect in the real-time ground and infrastructure shifts and subsidences of up to 1-millimetre. Mr. Kõva recounts an experience of a successful pitch to a potential client… with an unexpected twist.
“After the presentation, everyone was thrilled. We loved it, the client said, and we’re going to need it… but we don’t have the necessary infrastructure to build it now. We hope to get there in 7 years. So, we had to think with them how to get there,” Mr. Kõva says.
Even the afterlife is digitalised
Many other Estonian IT companies have similar stories. An iconic example is the web-based cemetery system Haudi developed by Estonian company Spin Tek. Whenever they present their portfolio of solutions for city management in Europe or elsewhere, there is always a wave of murmur in the crowd when they talk about Haudi: “Estonians have digitalised the afterlife…. “
More often, though, Estonian forward-looking vision is an asset. For example, Mr. Kelk describes how the broader application of digitalisation, especially cloud-based data management, creates a broader need for reliable data.
“As value chains and partnerships are becoming increasingly complex, the data integrity required just recently by innovators such as Estonian public sector or US defence sector is reaching broader audiences of enterprises,” Mr. Kelk says.
Similar developments from niches to broader markets are seen in many other sectors as digitalisation accelerates globally.
Teaming up for a bigger impact
When talking about practical steps, both Datel and Guardtime stressed the importance of partnerships in entering new markets. Teaming up helps to tap into local knowledge, it creates synergies between different specialisations and makes it easier for clients to find what they need.
Estonian companies like Datel and Guradtime have grown extensive partnerships in many countries.
“We value companies that know their clients and speak the language – in the literal sense and more broadly,” Mr. Kelk explains. “Finding partners also allows for both to bring out their strengths because, in our case, you don’t even need to trust Guardtime as a brand; the trust comes from our state-of-the-art cryptography. With this, we can create value horisontally.”
Still, it often takes longer to establish trust in other countries, let alone in different continents. Political climate (my conversation partners recount Trump’s “America First” era) also plays a role. Therefore, short-term partnerships are a valuable tool for balancing long-term plans.
Estonian public sector developments are agile
Estonian public sector developments are produced following agile development principles (see, for example, our article here). Therefore, the public procurement system supports the specialisation of companies. While this corresponds to high standards of domestic products, it requires teaming up for securing all-in-one developments. Both Mr. Kelk and Mr. Kõva agree that this creates opportunities for smaller Estonian companies to participate in large-scale consortiums. Projects allow for stability and risk management.
“The quality of Estonian companies is known and valued, and they can contribute to their specific field,” Mr. Kõva suggests. Mr. Kelk adds: “From our experience in the defence sector, we know that while no Estonian company can contract to develop a whole tank, it can produce a vital component to it that is top-of-the-line. While projects last 1-2 years, very often, already during these projects the consortium is preparing next ventures.”
Collaboration under the Estonian ICT Cluster is a widely used platform to enter new markets collaboratively. Doris Põld, the CEO of the Estonian Association of Information Technology and Telecommunications, the organisation that coordinates the cluster, explains: “In our cluster, Estonian IT companies operate on a one-stop-shop logic, offering strategy consulting, change management, and IT development for creating working e-solutions.“
For example, the Estonian ICT Cluster is one of the key partners of the Estonian Pavilion in Dubai EXPO 2020. The main storyline of the Estonian presence at the EXPO is the story of our digital society.
Thus, Estonian aura, history – and size – all influence companies’ exports.
See original article here.