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October 4, 2005 5:52 pm

Oslo has become the new Palo Alto

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The US West Coast has long been the place to be if you are a software developer or an information technology entrepreneur – but perhaps not for much longer.

The growing influence of regions such as Scandinavia has been highlighted by recent developments.

Last month, eBay, the US online auctions giant, paid an astonishing $2.6bn for Skype, the Luxembourg-based internet telephony start-up, which develops its software in Estonia.

The big US vendors have long seen a huge opportunity in IP telephony. But it was the tiny Skype, the brainchild of two unassuming Scandinavians, that finally found it.

Their business plan sidesteps the mainstream industry and, like Kazaa – their previous venture – uses “disruptive” technology and word-of-mouth marketing to build a loyal following among 55m PC owners.

Another disruptive technology is open source and many key open source developments have taken place outside the US.

Linus Torvalds invented Linux at the University of Helsinki. Two of the most popular Linux distributions were created by European companies.

MySQL, the leading open source database program, was the brainchild of two Swedes and a Finn.

Not to be left out, three Asian companies are now working on Asianux, a version of Linux that will be compatible with the Japanese, Chinese and Korean languages.

The mainstream software industry continues to be centred on California’s Silicon Valley and Washington state, Microsoft’s home. But much of the innovation is happening elsewhere.

That is because, in the internet age, location is becoming less relevant for software companies.

“The key thing is the people you have working for you not where you are located,” says Jon von Tetzchner, chief executive and co-founder of Opera Software based in Oslo, Norway, which has just released a free version of its well-liked PC browser.

Opera’s main business is embedded browsers for mobile phones – a market that US software vendors were slow to spot, he says.

However, Mr von Tetzchner now plans to take on Microsoft in the PC browser market, as he believes the software giant has grown complacent. “Microsoft has not worked on its browser for five years and that is because of the monopoly it enjoys,” he says

Last month, Opera changed its business model and made its PC browser free. Mr von Tetzchner hopes the move will encourage many more people to experience one of Norway’s less traditional exports.

“People used to ask us why we started a company in Norway making software of all things,” he says.

But after 10 years, Mr von Tetzchner has no plans to move and he says the company has few problems attracting top talent to Oslo, where it employs 150 developers of many nationalities.

The centre of gravity for innovation in the software industry appears to be shifting eastwards – even at Google, which is often seen as a textbook case for the advantages of a Silicon Valley location and education.

In the company’s annual programming competition, held last month, the top three prizes went to students in Poland, the Netherlands and Russia.

■It can be tough choosing the right global location for an outsourcing partner, given the growing number of contenders.

NeoIT, a US consultancy, claims to have the answer and its latest report ranks countries by their attractiveness for outsourcing based on a number of factors.

No surprise to see that India and Canada are the two most attractive destinations and the trend to outsource IT or business process functions to these countries is well established.

But the real eye-opener is finding China and Poland – third and fourth respectively – are placed ahead of Ireland by NeoIT.

China ranks highly in IT outsourcing because of its low costs and large pool of skilled labour, says the consultancy.

Indian software companies know this already: Infosys, one of the biggest, has just announced it will build two software development centres in China employing 6,000 engineers.

NeoIT says China is less attractive as a business pro-cess outsourcing destination, however, because of poor English skills.

Global Village will report regularly on technology news from around the world.

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