Staff Mothers, Bad Weather and a Convenient NATO Base:

Last month the Central Icelandic Bank announced that software exports had hit the 4 billion ISK mark in 2004. These statistics show that software development is now one of the fastest growing industries in Iceland. The trade now accounts for over 1.2% of the total export revenue every year, but the industry remains relatively unknown to those outside of the sector.

Software houses first started emerging in the 60s, with small companies being founded to provide services to the existing fishing industries. This was on a small scale, and not the software design as we know it today. It wasn’t until Iceland’s key strategic potential during the Cold War period had been realized that the modern software market emerged. Due to its prime position in the North Atlantic, NATO and the US began to utilize the island’s geography for its air defence systems. This allowed for the appearance of software enterprises, providing their services and created the IADS (Icelandic Air Defence System).

Now firmly established, the sector made no significant advances until the 90s. Then, with the boom in personal computers and the advancement of the “digital age” the Icelandic government was quick to see the potential of the new technology, encouraging the sale of computer-related products by placing low tariffs on their importation, a foresight which brought computers to homes and offices and revolutionized Iceland. There are now over 100,000 computers for a population of nearly 300,000. This average of one out of every three individuals owning a computer has made the country one of the most IT-literate societies in the world. With the increase in availability and exposure to modern technology, Icelanders are one of the most advanced and highly-skilled people in the digital marketplace.

From 1990 to present day there has been a 1200% increase in the revenue of export from software. There are over 130 different software houses in Iceland, providing services to such fields as: mobile technology, fishing, medical software, telecommunications, aviation and transport, with a number of them attaining the highest industry standard of ISO 9001 (an official gold seal in the industry). At the turn of the new century, Iceland, like the rest of the world, suffered from the hype and subsequent collapse of the internet bubble, with investors worldwide being put off from investing in technology as a consequence. The software scene here has recovered considerably since this, due to the strength it has in its product base of goods and services. Many companies produce single-purpose pieces of software that are well conceived and in demand in specific markets, thus creating many lucrative niches.

Post Bubble

An Icelandic software company that emerged unscathed from the internet bubble and has developed its own niche is CCP. It is a gaming software developer that was formed in 1997 by Reynir Harðarson, currently producing the online game Eve for the world market.

In 2004 CCP exported 600 million ISK, making up a large part of the export trade of software. CCP inhabits a large traditional Icelandic building in downtown Reykjavík, nestled in between the famous watering hole of Sirkus and other low brow shops. It is good to see a technology company deciding to use and work with the existing architecture around them, rather than building a drab, cubic blot on the landscape. This choice, over the drab, cubic office buildings in the less expensive industrial areas outside of the city preferred by most upstarts, subtly reflects on the company’s conscious decision over recent years to blend into their surroundings, avoiding press attention and focusing solely upon the work in hand.

The staff at CCP are so focused on their work that they practically make their office their second home. Hilmar V Pétursson (CEO) says unlike all other software made in Iceland, Eve is “more of a service than a product,” the game is online 24 hours a day, with up to 13,000 people playing at any given moment (a world record), with staff working around the clock to supply this service. At the office there is table football, fridges stocked with goodies, relaxation areas, even a fully working kitchen and dining area. Pétursson explains that the company works as a “family unit, doing every job with passion. The people here eat, sleep and breath CCP,” with all the staff getting together about twice a week to have dinner in the office– one staff member’s mother cooks for all of them and has been dubbed the “mother of CCP”.

It is of no wonder that with this relaxed and home-like set up that CCP manages to extract the best creative juices from their programmers and artists. Looking at some of the illustrations from the game, it would be hard to deny the complexity and ingenuity that is being delivered is at a very high level; it is one of the more elaborate pieces of software that has been produced in Iceland with staff spending unfathomable amounts of time on development.

Pétursson believes that a strong reason for the success of his company is down to the integration between staff working here, being able to bounce ideas of each other. But then he acknowledges a key advantage Iceland has: he claims the harsh weather to be the “strongest factor” in allowing long periods of concentration on software. He claims that in Iceland, people must take “inside jobs, thus interest in computers is high; as a consequence we have a highly-skilled workforce for computer related jobs.”

Pétursson points out that the government has not made it easy in the past for software companies to start-up. He believes that “Iceland is quite far behind countries like Canada and the UK, which support game and software development to a much higher degree.”

A lack of government support seems to have stunted the growth of the industry in the past; with the Icelandic government falling behind countries like the UK, Denmark and the US in their investment in the industry, but in January of this year the samtök iðnaðarins (Icelandic trade council) and the upplýsingatæknifyrirtækja (council for software) took a big step toward releasing the true potential of software, holding a conference to discuss the future prospects for the industry. Prime Minister Halldór Ásgrímsson attended together with Frans Clemmesen, head of the Danish Department of Science and Technology, and top industry guru’s. Clemmesen explained that the long-term investment that Denmark had made in the sector led to software now being his biggest export and that the potential also existed in Iceland for such growth.

Using the Danish model as an example, it is believed that software can now become the “þriðja stoðin” (third pillar) of the Icelandic export economy by 2010 behind fishing and banking, producing more revenue, jobs and increasing foreign investment into the country

The climate and preconditions seem to be right for the software industry, with the increased support of the government and the constant supply of highly skilled IT individuals, there is a strong possibility that the software industry will propel Iceland to be known world-wide as the “digital island.”

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For more information on Eve online, log on to www.eve.is.