Silicon Valley looks to Europe for brighter outlook

LONDON — You know Silicon Valley companies have endured some stormy weather over the past several years when they show up in London looking for brighter skies. But that was the mood when a host of California’s IT companies gathered with potential European investors and partners at the ninth annual Cal-IT Europe Forum on Monday.

Although the dot-com shakeup is behind them, California’s IT companies, which arguably were at the epicenter of the quake, are still coping with lingering effects, such as a lack of confidence and investment in the industry.

“The last four years have been some of the most difficult for those in the industry,” said Eric Benahamou, chairman of 3Com Corp. and PalmOne Inc. during a keynote address. “But optimism is starting to rise … a new kind of sober optimism.”

Perhaps this sober optimism is why Silicon Valley startups and old hats are looking anew to Europe, where they see markets made up of more practical and cautious customers.

“European customers are more focused on return on investment, more risk averse, and have a higher propensity to do lots and lots of pilots,” Lee Roberts, chairman and chief executive of content management provider FileNet Corp., said in a panel discussion focused on the buying differences between U.S. and European customers. His colleagues on the panel agreed.

While a more conservative European buying attitude may not generate the unbridled enthusiasm that marked the dot-com heyday, many industry experts in attendance believe that a more cautious approach is better for the industry because it reduces the amount of hype around technology, and makes companies focus more on providing solid products and reliable services.

What’s more, European companies are more open to trying new, foreign technologies and stick with a technology once they have invested in it, the panelists said.

“U.S. buyers are much more promiscuous,” said Allyson Stewart-Allen, director of International Marketing Partners Ltd.

But to break the European market and court its more fickle buyers, U.S. tech companies have to show their commitment by establishing a local presence and partners, the panelists said.

“You have to have people here and a genuine investment into infrastructure,” said William Archer, president of AT&T Corp. for Europe, the Middle East and Africa, who moved to Europe 10 months ago to solidify his company’s presence in the region.

For companies willing to set sensible targets and make a commitment to new markets, there does appear to be reason for renewed optimism in the growth of the IT sector, industry experts said. However, another sobering element of this market turnaround is that it’s not for everyone.

“This is not the case where a common tide will raise all boats,” said Benhamou. He predicted that sectors such as security, storage, smart phones, the convergence of voice, data and video and wireless local area networks would drive the market.

Benhamou added that he believes that the industry is in the first cyclical upgrade cycle since Y2K, which will help a wide array of tech businesses.

Barry Sedlik sure hopes so. As California’s undersecretary and senior advisor for the Economic Development, Business, Transport and Housing Agency, Sedlik is partly responsible for kick-starting the state’s IT industry.

“One of the things we are most concerned with is the competitiveness of California’s IT industry,” Sedlik said. “Despite the success they have had in the past, tech companies in California face some daunting challenges.”

While the administration of California Governor Arnold Schwarzenegger is working on removing obstacles such as bureaucratic red tape, outside investment is being more than welcomed, he said.

“Please take a look at the companies here today and buy their stuff. It will certainly help our tax revenues in the future,” Sedlik told forum attendees. His plea come after mentioning California’s fiscal woes more than six times in a 20-minute speech, prompting the moderator to suggest that a tin be passed around for donations to the state.

Although experts are predicting a turnaround, some IT industry players, particularly from California, are apparently still shaken from the dotcom bubble burst.

“Losses loom larger than gains … so we are not as optimistic as we should be,” explained Benhamou. “But if we could take a step back and look at where we came from we would feel a lot better today than we do.”

The Cal-IT Europe Forum runs through Tuesday in London.