Digital acorns grow well

Jul 15 2009 by Herb Kim, The Journal

IN today's digital world you don’t need to be in the USA to succeed. Digital business can make some very serious money, regardless of where it is.

One doesn’t have to search long to find proof.

Just take a look at the list of the top 250 businesses. There, near the top, is Sage. It led the way in showing how successful and profitable digital technology can be. And it did so not from Silicon Valley, but from the North East.

Sage, of course, is one of only a handful of entries in the top 250 for digital technology businesses, which is largely down to the typical make-up of these companies.

Most digital firms, from London to Alnwick, are services-based. On average these are much smaller than product-based businesses. Many are one-to-three-person operations offering contract services, and are not as likely to make turnovers which run into tens of millions.

Even so, there are already a number of start-ups and small companies that could hit the big time – and quickly, too. Gateshead’s Ethicalsuperstore.com, for example, has grown from a small start-up to a £6.5m turnover company in just two-and-a-half years.

It’s now the UK’s largest ethical online retailer in a market worth £34bn in the UK alone.

And this market is continuing to grow, a survey by the Co-operative Bank suggests.

Add to that the fact that online retail in general is on the up – it is still showing double figure growth – and it seems feasible that Ethicalsuperstore.com could find itself among the region’s top businesses.

Other promising prospects include the likes of QuickTV, an award-winning start-up working with online video, the Broadband Computer Company, about to launch a new kind of computer onto the market, and Scott Logic, which provides software services to some of the world’s largest financial institutions.

And I know local venture funds are investing in many more too young to be discussed yet.

But it is in the North East’s video games sector that the most exciting developments can be expected.

Two of the world’s biggest games companies – Ubisoft and Midway – have significant operations within just a few miles of the Angel of the North. And a new online game being advanced at Gateshead-based Eutechnyx, the UK’s largest independent developer, could be the biggest thing to come out of the North East since the arrival of Sage.

Everyone usually quotes an American example so I’m happy to look at the Chinese market. Five years ago there was no such thing as an online games market in China. Today it is already worth $2.5bn and likely to grow to $9bn by 2013. Most of the successes there are from new start-up companies.

In the North East, Eutechnyx is developing its first online game with tremendous potential. It is a massively multiplayer online community, involving all the greats of the auto world. It has huge potential.

The future, then, continues to look bright for the North East’s digital industries. What’s exciting is how broadband and broadband-based software tools are enabling people with new ideas to bring them to market from anywhere in the world much faster than even three years ago.

The North East acorns have been planted into the broadband infrastructure and they are germinating nicely.

Herb Kim is chief executive of Codeworks.