Standing out from the crowd: the rise and rise of digital hubs

Digital hubs are springing up around the world, with many attaching ‘silicon’ as a prefix as they compete for companies from the ever-expanding tech sector. The roll call of locations that host these tech clusters includes cities that have traditionally been homes to innovation, as well as newer developing market locations.

According to David Ferguson, founder and CEO of Edinburgh-based Nucleus Financial group, Scotland’s capital city is a good location for fintech companies. “The financial services side of the city is well served by universities and established industry. There’s a lot of knowledge in the city when we try to attract staff. And from a technology side, there’s a rich heritage of innovation,” he says. “When companies like Skyscanner were growing enormously quickly, at times we found it hard to find developers, but generally it’s been fairly straightforward to find people because the talent pools are reasonably deep.”

Putting the e in Estonia

Estonia has also become a hotbed of digital innovation, even being branded ‘eEstonia’ because of its flourishing eSociety, which is supported by a proactive ICT sector and a lively start-up scene. Well-known names with strong connections to Estonia include tech giant Skype.

According to the Estonian Investment Agency, growth areas in the country include cyber security centres, security software development, defence software and systems integration, and mobile and wireless security.

Meanwhile, emerging markets such as Kenya, Nigeria, South Africa, India, Chile and Colombia have also been making headway with the development of digital hubs. Aubrey Hruby, co-founder of Africa Expert Network and co-author of The Next Africa, says Nairobi’s emergence on the digital scene is a result of both investment in infrastructure (such as broadband technology and undersea fibre optic cables) and the success of Kenya’s brand as a source of digital innovation.

“Anyone in the world who wants to know about mobile banking and mobile currency comes to Kenya. Being a leader in that area allows for a lot of innovation because [mobile money transfer platform] M-Pesa becomes a platform for other innovations,” she adds.

Proximity counts

Being part of a bigger tech scene is important for companies looking to grow and to collaborate. For example, MasterCard has a facility in Ireland that has developed out of its purchase of Orbiscom in 2009. “It’s a good place because there are a lot of other tech companies there, so the market is deep in tech knowledge with a young population that has those skills,” says Ann Cairns, president of international markets at MasterCard. “I don’t think tax matters to us as much as having the right mix and breadth of people.”

Mr Ferguson agrees. “Being close to other businesses has played out very positively for us. We’ve tried to create a very attractive proposition for our people in terms of the way we work and the culture in the office so we would hope to be net winners,” he says. “Equally, it’s good to be part of a slightly bigger pool, especially if you want to attract people from overseas or outside the local area. It’s quite good that they know that if they come to Edinburgh there are other companies they can be part of.”

In Kenya, tech firms, venture capital funds and impact investors are also looking to build their presence and collaborate. “IBM has a research lab in Nairobi and is doing some very interesting work,” says Ms Hruby. “Uber, Google and Microsoft all have a significant presence here too. There’s more building out on the start-up side. So you really have the beginnings of a competitive cluster around start-ups and venture capital firms. While Kenya is building up a more traditional venture capital industry, Nigeria has deep pockets when it comes to friends and family who can fund their friends’ start-ups.”

Academic importance

Links to academic institutions are also an important part of the mix. Katie Gallagher, managing director of Manchester Digital, an independent trade association for digital businesses in the north-west of England, says: “Manchester’s three universities are well placed to serve the digital businesses located here. Between them they produce high numbers of students with relevant skills; we just need to keep hold of more of them. There are some excellent research projects under way in all the institutions. However, there is still work to do to convey their specialisms to potential investors into the region on how the research coming out of these organisations can benefit them.”

Mark Newlands, head of technology and creative industries at Scottish Development International, adds: “Scotland has taken a combined organic and strategic approach to digital clusters. Abertay University has just celebrated 20 years of offering computer gaming courses. The university was a key strategic driver in helping to create the digital cluster in Dundee, which is now home to players such as Rockstar North, developer of video game Grand Theft Auto.

“It was a strategic choice by Abertay University to develop this course, but the skills and talent were drawn to Dundee as a result, so organic growth has followed. There’s been some really groundbreaking design work coming out of the city and, of course, this success has now spread to Edinburgh’s digital tech cluster.”

The right tools

Governments are also supporting the development of digital hubs in a number of ways, such as investment in innovation centres and the development of digital infrastructure. For Ms Hruby, the Kenyan ICT ministry’s investment in fibre optic cable was seminal. She says: “Sometimes governments just need to get out of the way – and that’s what they did in Kenya. They left a lot of the innovation that happened around M-Pesa to be in a kind of grey space.”

Soft factors such as desirability of location have helped many digital hubs to grow. “Edinburgh is a great place to live,” says Mr Ferguson. “It has great infrastructure for a small city, a great cultural heritage and quality of life. It’s more affordable than London and is pretty well connected via rail and air.”

Ms Hruby agrees about the value of soft factors. “You can fly in and out of Nairobi fairly easily. Kenyans are very open to new things – not all cultures have that openness to newness. It’s an open society. It’s not as closed as, say, Ethiopia, which is taking a very different development strategy than Kenya. And it’s a nicer place to live than Lagos for many people. That’s the added value.”