Klas Persson, President at Sigma Technology Development, reflects on innovations and challenges of the service sector. Photo credit: Csaba Molnár
At the same time, we live in quite challenging times. One of the biggest challenges is without a doubt a huge skills shortage. There is a tremendous need for electronics and software engineers. In Gothenburg alone, we could recruit 100 new integrated systems engineers immediately, and the situation is similar in our other business locations. The shortage creates increased competition for the skills that exist, which drives up pay. In the long term, this will lead to a reduction of Sweden’s competitive edge, especially when the skills shortage also limits the possibilities for doing work in Sweden.
No less challenging is recruiting people with the right skills. Our customers need to move away from bringing in consultants, who work on the customers’ own premises, and instead assign whole projects to consultancy companies. The consultancies can bring in skills from other countries and make use of the right level of skills for the job – they do not need to have the most experienced and knowledgeable consultants doing simple tasks. This means that employees have more challenging tasks that allow them to develop, while the cost to our customers is optimized. We can also move some of the work to other countries, where we can make the best use of our combined skills, and not just those available locally.
Sweden aims to be one of the world’s leading countries for research and innovation, which is supported by both the current and previous governments. However, the increasing international competition adds its difficulties for Sweden to reach this aim.
When it comes to the service sector, it does not have the same opportunity to benefit from research support funds as companies in the production sector do. Although the majority of the highly trained skill base is today located in the consultancy sector, the support in its current form is aimed purely at the production sector. This means that Sweden misses a wide range of potential inventions and services. Unfortunately, we are trapped in an old-fashioned view about who should be developing tomorrow’s products and services. On a country level, we are strong on services, but we must become even stronger.
Our progressive income taxation system, which leads to high tax rates on high incomes, also makes it attractive for individuals to start their own business. Smaller companies with less time and capital have fewer opportunities to invest in innovation. Therefore, the country’s fiscal policy also contributes to fewer opportunities for innovation in the service sector.
As service providers, we essentially earn money through time. We sell an hour’s work and have an hourly cost. If the pay rise outstrips the corresponding increase in our fees, we face a lingering death, and this has been the case for a long time. The sector has responded to this by increasing the number of employees accountable to each manager. This also means fewer opportunities to create room for innovation.
One possible answer to this problem is, of course, to move part of the development to cheaper countries, thus keeping costs down. Another route is to charge per the delivered project instead of focusing on the number of hours worked on a project. This creates opportunities for us as suppliers to find more efficient working methods. One of the strengths we have as a consultancy company is our capability to adapt to changes in society and in our customers’ companies – this is something that makes working in this sector so exciting.
President at Sigma Technology Development
The original interview in Swedish was given to Industry Review magazine (Branschöversikten).