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Five reasons to launch an IT business in Switzerland

At its very center, Europe is building an alternative to the famous Silicon Valley. The investor community has already named Switzerland "The Silicon Alps". It’s here where hundreds of ICT start-ups are born each year, many of which have been successful in closing major rounds of investment and are growing into global players. What is it that fuels such explosive IT growth in Switzerland, and how does the country support its nascent innovative business?

Cables in a data center
Secure data centers are a key factor for IT companies when setting up offices in Switzerland.

Information technology has long been one of Switzerland’s strengths (see Factsheet on the Swiss ICT sector). Back in the 1950’s, the Swiss Federal Institute of Technology in Zurich (ETH Zurich) developed algorithms for computing machines and was the first European university to build its own programmable computer. In 1989, Tim Berners-Lee, working for the European Organization for Nuclear Research in Geneva (CERN), suggested a principle for hypertext document publication that formed the groundwork for the World Wide Web. In 2003, the Swiss Federal Institute of Technology in Lausanne (EPFL) came up with Scala, a programming language that is regarded by many as a successor to Java. IT products have also found their way into other sectors. "IT continues to be part and parcel of innovative solutions developed in the Swiss ecosystem. In addition, know-how permeates many sectors such as: manufacturing, healthcare, pharmaceuticals and financial services," says Geraldine Mortby, ICT sector expert at Switzerland Global Enterprise.

Proximity to major research institutions

Since 2000, the neighbourhood of Bodensee and the canton of Zurich have become densely populated by IT companies, causing global hi-tech giants such as IBM (who launched their first research center in Switzerland back in 1956), Google, Microsoft, HP, Yandex and many others to gravitate towards the Swiss Federal Institute of Technology Zurich. These companies built their research facilities near the universities as proximity to the major research institutions opened access to the best ideas and talent, whereas university labs could be used for their own research work. The presence of international corporations spurred capital flows and the creation of new jobs, followed by robust growth of small and medium-sized businesses to service the needs of large corporates. According to the official data, the Swiss ICT sector currently includes over 18,000 companies employing more than 145,000 people.

The Swiss divide their ICT cluster into two sub-clusters: Seven western cantons (Geneva, Valais, Vaud, Fribourg, Bern, Neuchatel, and Jura) constitute one sub-cluster with Alp ICT, a startup accelerator for tech companies in Switzerland, at its head. IT companies are particularly active in Bern, Geneva and Lausanne. The second sub-cluster is based in the north-east, in Zurich. This is where Google, Disney, IBM, Evernote and Kayak have their labs and research units. Canton authorities and specialized industry organizations are also closely involved in building connections between all cluster members and in accelerating business.

What are the advantages of running an IT business in the ICT cluster?

Reason 1. Proximity to manufacturing centers

Machine-building, engineering, financial services, medical equipment, pharmaceuticals, i.e. sectors where ICT has high application relevance, are among the most rapidly growing in Switzerland. Experts say that computerization in these sectors is coming to the fore as the key trend. Plants are installing computer technologies in view of the forthcoming era of Industry 4.0. Mobile wearable devices are becoming ubiquitous in healthcare. Banks and financial organizations are making colossal investments into data protection and cryptocurrencies. In practice, this translates into the establishment of a wide domestic market for IT products and services in Switzerland. Working with major companies may help an up-and-coming start-up to go global. Companies in the ICT cluster specialize mainly in robotics, cryptocurrencies and data protection. The latter is of special stature. In 2016, Switzerland adopted digitalswitzerland, a national strategy that places great emphasis on creating optimum conditions for the future of Switzerland as a digital location, for example improving data centers. Switzerland now has 62 data centers (plus proprietary centers of large corporates, such as UBS or telecom operator Swisscom), where organizations from around the world store their data. This opens great opportunities for any business working in data protection.

Reason 2. Access to the best IT talent

Proximity to the major educational institutions in Europe (of which the most prominent are ETH Zurich and EPFL) fuels an ongoing influx of highly skilled IT talent. In recent years, universities have specifically tailored their curricula to the needs of IT. In 2013 alone, the canton of Zurich offered about 40 training courses and programmes on data protection, mobile services and applications, artificial intellect and other subjects. University graduates are highly skilled experts who speak several languages, have expertise in international cooperation and a clear vision of how to translate an idea into a profitable business product.

Reason 3. R&D grants

Business and science in Switzerland work very well together. The CTI (Commission for Technology and Innovation) funds up to 50% of R&D costs of joint projects between companies and education establishments. Companies using lab equipment, HR and technology retain title to R&D products. Joint projects between IT companies and universities go far beyond IT. As an example, in 2011 IBM and ETH launched the Binnig and Rohrer Nanotechnology Centre for Fundamental Research in Nanotechnology and Photonics. Demand for IT developments is also supported by the largest international EU research projects, such as CERN and the Human Brain Project (both Geneva-based). The Human Brain Project has a budget of 1.3 billion US dollars (till 2023).

Reason 4. A fertile ground for start-ups

According to statistics, almost 900 ICT start-ups are launched in Switzerland every year. Switzerland also welcomes foreign entrepreneurs and their projects at early stages, provided that they have secured financing for themselves or maintain operations. “The close collaboration between Universities and Enterprise produces high quality of talent with an impressive record of entrepreneurship,” says Mortby. Colleges offer a so-called hothouse environment for start-ups and spin-offs: in addition to grants, each major education establishment all kinds of business incubators, accelerators and powerful technology transfer programmes has in place that help to transform a promising idea or development into a commercial product. For example, Unitectra, a programme in place at the universities of Basel, Zurich and Bern, protects and manages intellectual property, commercializes business strategies, conducts talks on licensing, searches and selects business partners. among many other things. Every year, Unitectra and ETH-Transfer (a similar programme) help several dozens of start-ups to reach the stage where their products or service can be monetized. For instance, in 2013 Vizago, a company established by students from Basel University, commercialized a software product that transforms flat two-dimensional photographs into a 3D projection. With Unitectra, this software has been put to use in games, medical technologies and retail. For more information on business support infrastructure please go to Chapter 14 of our Handbook for Investors.

Reason 5. Business networking

“Specialised industry associations and organizations, such as, ICT Switzerland, Swiss ICT, Swiss Made Software, Alp ICT, Asut and the Swiss Finance and Techology Association facilitate a dynamic ecosystem for tech companies. Government initiatives, like digitalswitzerland, have been created to facilitate the exchange of business ideas and best practice within the IT sector," explains Mortby. The point of these programmes is to help companies, whatever their size and experience, to network and identify business partners. Associations, such as Alp ICT, also hold regular events to promote IT – for example, Lift, an annual conference in Geneva that has been compared in terms of stature with the World Economic Forum in Davos. They also arrange meetings between entrepreneurs, venture funds and business angels, helping cluster companies to raise investment capital.

For additional information about various aspects of doing business in Switzerland, please refer to our Handbook for Investors or contact representatives of our Swiss Business Hubs

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