WE can probably take it as read by now that Scotland punches way above its weight when it comes to tech. How long can this continue? That, doubtless, all depends on certain key factors. 

A thriving tech sector does not happen all on its own. It needs money, infrastructure, academic effort, government support and, above all, an environment that nurtures and brings on talent. 

It also needs talented entrepreneurs, even if many of them acquire their skills on the job, as it were.

Taking a step back and looking at the last four decades, what is blindingly clear is that in the early days of the Scottish software and technology renaissance, achieving scale was a serious stumbling block. Today, the statistics suggest that Scotland is doing a lot better in this respect.  

Put differently, our technology sector used to be a sort of outsourced R&D function for large overseas companies, mostly but not exclusively in the US. Start-ups would get going, turn into interesting fledgling enterprises, then get bought up and disappear, with not much by way of jobs or revenue accruing to the Scottish economy. Things are now encouragingly different. 

Take the findings from April 2023’s Northern Tech Awards in Edinburgh. In 2022, although markets were roiled by the Russian invasion of Ukraine, which itself came hot on the heels of a not-so-rapid exit from a two year long, global pandemic, the northern and Scottish tech sector still showed average growth rates that eclipsed all previous years. 

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Speaking at the time, Javed Huq, GP Bull’s executive director, noted that the overall performance of the tech sector was the highest yet recorded. In his words, this demonstrated the resilience of the entrepreneurs responsible for building these companies. 

The Scottish Government has gone out of its way to nurture the tech sector and has put in place many of the structures required to foster hi-tech start-ups. We have accelerators, early-stage funding support, mentoring and much else that is needed. 

So what is left as an impediment to future growth? The main and enduring problem facing the sector, according to Karen Meechan, CEO of Scotland’s tech trade body, Scotland IS, is the chronic skills shortage faced by Scotland’s IT companies. 

Commenting on the results of the Scottish Technology Industry Survey for 2023, Meechan emphasised that Scotland urgently needs to solve the skills gap plaguing the industry. 

Last month, Meechan warned that the chronic skills shortage in Scotland’s tech sector threatens the sustainability of the country’s IT and software growth trajectory. 
She pointed out that there are currently over 130,000 tech job vacancies in the UK at the moment.

“The problem is that these are the most attractive jobs, but the hardest to fill. Often, tech jobs are highly paid but also highly skilled. This requires a long-term view incorporating education, training, re-skilling and up-skilling. It requires the entire sector to attract people to what will undoubtedly become a jewel in Scotland’s economic crown in the years ahead,” she noted. 

On the plus side, Meechan argues that there is plenty of evidence that the Scottish tech sector is maturing. The start-up community still makes up a very significant percentage of the country’s software sector, with 42% of companies in the Scottish Technology Industry Survey reporting a turnover of below a quarter of a million.

However, she points out, the number of companies turning over beyond £1 million is up significantly, from 19 per cent last year to 31 per cent in 2023. That is a huge increase.

The big accountancy firms generally regard the £1m turnover mark as a very significant milestone in a company’s life. These firms also regard the £3m and £5m marks as additional hurdles that a company needs to get beyond in order to flourish – but one step at a time!

It is also significant that the Scottish Government has recently appointed a ‘Chief Entrepreneur’ to advise them  on the thorny issue of how to drive entrepreneurialism and accelerate the country’s economic growth. 

Mark Logan, the new Chief Entrepreneur’s brief extends to all sectors, not just to the tech sector, but he comes to the job having authored the 2020 Scottish Technology Ecosystem Review, at the request of the Scottish Government. He is also the former Chief Operating Officer of Skyscanner, one of the most successful of Scotland’s IT companies. 

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Mark Logan, the Scottish Government’s new Chief Entrepreneur, is tasked with accelerating economic growth 


Interestingly, in his 2020 review, Logan points out that technology ecosystems are supposed to support and nurture technology businesses from the early start-up phase all the way through to what he calls ‘fully scaled maturity’. 

This last point gets us back to looking at what it takes to get start-ups past the £1m turnover mark. 

Back then, Logan argued that technology ecosystems exist in one of two states. 
“The preferred state is where the ecosystem has passed through a ‘tipping point’ in its development. This is the point where there is a critical mass of viable start-ups and scale-ups.”

When this point is reached, he argued, things have achieved a state that is self-sustaining. Scotland in 2020 had not yet reached that stage, he noted, and it probably still has not, even with all the progress that has been made.

However, Scotland’s IT sector can certainly demonstrate tremendous strides in vital key technology fields such as cyber security, AI, machine learning, big data and computer games.

In so many instances this comes down to either tremendous research by academics in some of Scotland’s top institutions, or to bright students coming through best-in-class courses, or through sheer entrepreneurial and tech brilliance. 

Often, of course, it is a combination of all of these. One of the most striking examples of this has been the way a 1997 decision by some academics at Abertay University in Dundee, to create courses in video games programming, finished up creating a world-class community of games generating companies across the city.

As Abertay’s School of Design and Informatics notes, when the university first conceived of offering courses in games development, the smartphone apps that many of today’s students are now designing, were not vaguely on the agenda. Over time, the university has seen a massive investment in teaching and infrastructure facilities. 

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Abertay University's School of Design and Informatics birthed a community of successful video game designers

The aim, now as ever, is to ensure that graduates have the best education possible, along with internships and strong links to the City’s games companies and development teams. Other universities are strong in fields such as cyber security, database development, machine learning and AI. 

With all this infrastructure, allied to strong financing initiatives and the backing of the Scottish government, the future of Scotland’s IT sector looks bright.