Centre of excellence

Over the past 50 years, Cambridge has emerged as the UK’s leading technology hub. But can that success be repeated elsewhere, and how long might it last?

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Centre of excellence

It is not always easy for a son to escape the shadow of his father, especially when the father in question is Charles Darwin, whose theory of evolution has been described as “the single best idea anyone has ever had”.

But Darwin’s fifth son, Horace, deserves some acknowledgement in his own right, at least from the UK’s IT sector. According to Sir Leszek Borysiewicz, vice chancellor of the University of Cambridge, Horace Darwin and colleagues laid the blueprint for turning scientific breakthroughs into commercial technologies when they founded the Cambridge Scientific Instrument Company in 1881.

That blueprint has been adopted and advanced in the Cambridge area to such an extent that the university city is now arguably the heart and the brain of the UK’s IT sector.

Admittedly, the potential that was suggested by the Cambridge Scientific Instrument Company lay dormant for almost a century. It was only the adoption of the model by Cambridge graduates Tim Eiloart and David Southward in 1960 that “put the brains of Cambridge University at the disposal of the problems of British industry”, Borysiewicz told the recent Cambridge Phenomenon conference.

The result was Cambridge Consultants, a technology development and consultancy company that now employs more than 300 people across the globe.

Further impetus was added in the 1970s, when Trinity College founded the Cambridge Science Park to provide office and research space for budding technology companies. From those foundations, companies of global renown such as software maker Autonomy, which has a market cap of £3.6 billion, the £620 million wireless technology firm Cambridge Silicon Radio and the £4.8 billion chip designer ARM Holdings have since emerged.

Those industry heavyweights are today joined in the Cambridge cluster by diverse start-ups that range from Hypertag, a maker of RFID-like tagging devices to Emotion AI, a computer animation company, and Transversal, a customer support software maker.

The impact of the Cambridge cluster is felt in every IT department in the country today, according to Richard Holway, the chairman of analyst firm TechMarketView, and not just because technology from such providers as ARM and Autonomy has been so widely adopted.

Having a successful technology industry has a multitude of benefits for the country – not least in the tax revenues it brings in – says Holway. Vitally, it creates a healthy career path for computer science graduates, the steady stream of which is essential in ensuring that our enterprises have ready access to those business-critical skills. “There isn’t an IT director working today that would be here without those entry-level opportunities,” says Holway. And the more openings there are, the more likely it is that the brightest and best youngsters will see IT as a sound career choice.

Why Cambridge?

So why has the cluster in Cambridge survived and thrived while others, such as the Silicon Corridor, which sprang up alongside the M4, have withered on the vine?

“I don’t see that Autonomy could have started anywhere else [than Cambridge],” says Mike Lynch, the company’s CEO and founder.

Lynch’s own entrepreneurial spirit took root in his university digs. There, his roommate had what at the time was a most unusual hobby. “He was into computer programming, writing this obscure language, C, for the BBC Micro,” says Lynch. “It got me hooked.”

When he eventually decided to launch his own company, the availability of some basic services was critical to its early success. The ability to rent a single office room at St John’s Innovation Centre, for example, allowed the fledgling Autonomy to present an aura of professionalism.

“It’s pretty difficult for software start-ups to convince potential customers that it’s safe to go with them,” says Lynch. “We were lucky. Our room had a stock cupboard, on which we hung a sign saying ‘Authorised personnel only’. We simply told visitors that our army of software engineers was behind the door.”

Also helpful was a nurturing and optimistic environment, he recalls. “Naivety is important – it allows seedlings to develop, for people with ideas to create companies,” says Lynch. When you have experience, you know how difficult it is to create a successful business. “If we’d all had MBAs, we would probably not have [started Autonomy] at all,” he says.

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Warren East, CEO of chip designer and Cambridge success story ARM Holdings, also pays tribute to the city’s “nurturing culture”. He adds that when the company was first spun out of Acorn Computers in 1990, not being a Silicon Valley-based processor company helped ARM stand out, although it was not wholly beneficial.

As companies such as Autonomy and ARM Holdings grew, the Cambridge cluster itself started to gain critical mass. By becoming a hotbed for UK technology development, it became a choice location for talented computer scientists to head towards to study.

Critically, their success has encouraged Cambridge students to believe that their ideas can be transformed into successful businesses, says Dr Davin Yap, chief executive of indexing technology maker Transversal. “As a student, when you look around, you can’t help but be encouraged by the success of others,” he says.

Because Cambridge continues to attract students with a love of technology, there is a ready supply of talented computer scientists that can be tapped. That helps to explain why Autonomy, which derives the majority of its revenue from the US, has remained headquartered there, says Lynch. “It’s been pretty consistent that, even as we grow across the globe, about 40% of our intake comes from Cambridge.”

That talent pool has also helped attract technology businesses that started elsewhere to establish bases in close proximity to the Cambridge cluster, such as Microsoft, which opted to site its first European research labs in Cambridge. And the University of Cambridge’s computer centre is the only non-US institution to attract funding from Google’s Focused Research Awards.

Of course, technology smarts are rarely enough to guarantee commercial success. Start-ups also need access to venture capital and people with marketing skills to ensure that their firms have the liquidity to thrive and the wherewithal to promote themselves, says Herman Hauser, the founder of Acorn Computers and, latterly, co-founder of Amadeus Capital Partners, a venture capital firm focused on technology start-ups.

Here, a successful cluster creates a virtuous circle: the early success that Cambridge enjoyed attracted venture firms and people with marketing skills – both essential elements to turning brilliant ideas into sustainable businesses, Hauser says.

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A burning question is whether the success of the Cambridge technology cluster and, more dramatically, California’s Silicon Valley can be replicated elsewhere. Prime minister David Cameron hopes so – he recently confirmed that £200 million would be invested in the coming years in creating new technology hubs.

This is something that governments around the world have tried time and again: a recent high-profile example is Russia, where authorities are pitching the small town of Skolkovo, near Moscow, as the country’s new technology cluster. But in most places, success has been limited.

According to TechMarketView’s Holway, creating a vibrant technology hub is especially difficult in a country that already has one: “You have to accept that if you have a successful cluster in one place, other areas won’t have that focus. The cluster makes it difficult for others to succeed.”

He argues that while there are some essential elements in creating a cluster – such as world-class education institutes to produce a stream of brilliant computer scientists and a culture of entrepreneurialism – it is the combined, network effects of all these features that creates the bedrock for a successful cluster.

And even the best, most hard-working visionaries need a certain degree of luck to succeed, adds ARM’s East: “To create a success story is absolutely about the people, their vision and some very hard work.” However, there are plenty examples that have had all of those ingredients but have not succeeded, he says.

While Cambridge’s bid to become a technology hub has been broadly successful, the longevity of that success remains a thorny issue. There is no guarantee that, once established, a cluster will necessarily sustain itself perpetually. Here the lessons from Silicon Valley seem apposite. Many of the Valley’s venture funds are broadening their scope so that in recent times much of the funding – along with the talent – has poured into green technology.

As yet, however, that has not resulted in a new breed of Valley-based world-changers. Tesla, the maker of electric sports cars, is probably the closest company to creating the Valley buzz that today surrounds the likes of Google and Facebook or that once defined companies such as Oracle and Microsoft.

In Cambridge, there is a burgeoning biotech community sitting alongside the information technology start-ups, which may offer another avenue for technology entrepreneurs. But there is a palpable disappointment from some in the Cambridge community that there have not been more and bigger success stories to talk of.

“One thing Cambridge companies in the past haven’t done is plan for resilience,” says Lynch. When the economy turned south, he says, for many start-ups it was a case of shut up or sell up.

Indeed, selling up can sometimes appear to be the British way, Holway laments. The Cambridge cluster has produced some of the UK’s brightest and best IT companies, but it has not produced a true technology titan to rival Silicon Valley’s biggest names. “I think some British entrepreneurs have worked hard to create a £1 million company, but then sold up rather than having the drive to build a £1 billion or £10 billion company,” he says.

Difference of opinion

Not everyone agrees with that analysis. When comparing UK-based or Cambridge-founded companies against the best of Silicon Valley, you need to accept that the size of the potential market in the US opens up a route for start-ups to grow faster, says Transversal’s Yap. “I don’t think it’s true to say that business leaders in the UK lack ambition. But breaking into the US market when you’re not based there is certainly a challenge,” he says.

Holway questions whether Cambridge is best placed to support what he believes will be the next generations of IT success stories, namely social media companies. “They are emerging in London’s West End,” he says.

But Holway, a long-time supporter of the UK technology industry, adds that it does not matter where in the country technology innovation takes place. What is important is that it is happening here at all.

“Today, the unemployment rate for computer science graduates is about 17%, the highest for any degree course,” he says. “If there is no career path for these graduates, if there are no entry-level jobs, then there will not be a next generation of managers to take on the IT director and CIO jobs in the future.

“The creation of successful UK technology firms is something that should concern anyone with an interest in IT.”