How Luxembourg is playing to become a technology hub

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A few weeks ago I gave the keynote at the IT Nation Golden i Gala and Awards and earlier in the day ran a CIO workshop on Creating the Organisation of the Future.

In my brief time in Luxembourg I learned about some of the many things that are happening in the tech scene in nation. As a tiny country of half a million people, it has the highest GDP per capita in the world, currently based primarily on its strong financial services industry, facilitated by its strong banking secrecy laws. Luxembourg is the second largest funds management market in the world after the US. However an economy dependent on financial services is not necessarily the best position to be today. As such the government and business sectors are seeking to build Luxembourg into a technology hub, with ICT named by the government as the third of five pillars for national development.

Luxembourg has already used its advantageous tax structures to attract companies such as Skype, and the European arms of Amazon and Apple’s iTunes. Apparently value-added tax revenue from iTunes’ European base in Luxembourg accounts for 3% of the Luxembourg government’s revenues. However that will very likely disappear in 2015 with the harmonization of EU taxes, so the country needs to look to more sustainable advantages.

Investment in a lattice of optical fiber connections from Luxembourg to other European hubs provides one of the highest levels of connectivity in the EU, and has helped to attract many large gaming companies such Zynga and OnLive, for which the low ping time to much of Western Europe adds to the allure of the friendly tax regime.

Very interestingly, PwC has set up its Accelerator in Luxembourg, its only initiative of the kind globally. This was no doubt driven by the initiative of local partners, but provides a central, attractive EU base where local and global startups can develop swiftly. The PwC Accelerator brings together diverse external communities to grow companies, including the investors that are intrinsic to the Luxembourg economy.

One of the major opportunities and directions for Luxembourg is cloud offerings, with interesting players such as LuxCloud, which won the EuroCloud Best Cloud Service award last year.

In particular, there is an opportunity to parlay Luxembourg’s traditional strength as a financial haven into the data space, becoming a secure, confidential data haven protected by a stable government. As data moves into the cloud, there will be increased demand to reside data in the right locations. While Luxembourg’s membership of the EU gives constraints, it also gives strengths as a data hub.

It will be interesting to see how well Luxembourg continues to build itself as a technology hub, drawing on its traditional strengths.