Technology & Start-Ups - Cyprus Profile

Technology & Start-Ups

A Digital Revolution

A number of drivers have helped kick Cyprus’ ICT sector into the future. A return to strong economic growth, renewed confidence and the fast pace of technology development have prompted both the private and public sectors to take their tech plans to the next level, and forge ahead quite literally at the speed of light.

Thanks to its established status as a thriving international business centre with global connections, Cyprus has long had an advanced communications infrastructure in place to support business. However, development and investment in the sector has been accelerating and the country is undergoing a digital revolution filtering through both the private and public sectors. Creating more efficient e-solutions across all sectors is a key goal to achieve the country’s aim to attract more tech business and investment into Information and Communications Technology (ICT) is on an upward trajectory.

Boost in Tech Investment

Promoting a digital economy and developing secure and efficient global communication networks to support international business has always been high on the agenda for Cyprus, and with the improved economic climate development, spending is finally up again. The biggest spender by far on IT in Cyprus is the financial sector, followed by the telecoms providers and the public service, where tendered projects are generally lengthy processes for successful bidders.

However, the public sphere has taken the digital transformation challenge by the horns and is planning a widespread roll-out of e-solutions for various public services – offering new opportunities for companies competent in executing these types of projects. Recognising that the ICT industry is a catalyst to increase productivity and economic growth, Cyprus’ digital strategy is in line with the Digital Agenda for Europe and promotes the use of ICT in all sectors of the economy. Information for 550 government services is already available online and Cyprus ranks in fourth place in the EU as far as progress in making government services available to the public is concerned. Spending on IT, excluding telecoms, grew by 7.7% and reached over €190 million, while the IT services segment increased to around €89 million in value in 2016, representing year-on-year growth of 8.1%.

Support and training services form the largest primary market in Cyprus, followed by project and outsourcing services. There is currently big demand for support services and skills training in ICT, especially as communications move to 3rd Platform technologies, such as mobile, cloud and big data systems, and with businesses scrambling to stay ahead of the game to remain competitive. Cloud solutions are beginning to gain some traction in Cyprus. Three of the main providers, Cyta, MTN, and Cablenet offer cloud telephony services, which are primarily used by small to medium sized businesses. However, 2018 saw MTN operations bought by Monaco Telecom S.A. for €260 million and it remains to be seen what direction the Monegasque company will take the provider in the future.

Services and software are expected to be the top-performing segments of the Cypriot IT market in the coming years, due to continuing demand for quality end-to-end solutions that focus on enhanced user experience. Innovation and specialisation will certainly be key elements to succeed in the Cypriot market, which is rapidly embracing the digital transformation culture and mindset.

ICT is a serious growth area for Cyprus and a sector that is seeing active support from the government who recently provided €15 million in funding for the island’s leading ICT institution, matching the sum it had secured from the EU’s Horizon 2020 programme. The University of Cyprus’ KIOS Research and Innovation Centre of Excellence, in collaboration with Imperial College London, conducts multidisciplinary work that focuses on the monitoring, control, security and management of ‘critical infrastructure systems’. These include large-scale, complex systems and networks such as power, energy, water and transportation systems, telecommunication networks, and emergency management and response systems.

Growing Tech Business

Cyprus is already home to a number of international ICT companies from the US, Europe, Russia, Australia and many other countries, running their regional headquarters from the island and servicing clients in Europe, the Middle East and North Africa, and beyond. Innovative start-ups have also started to spring up and Cyprus is certainly being noticed outside its borders. The country’s status as a solid international business centre, coupled with its competitive Intellectual Property (IP) regime – which offers the highest standard of IP protection with significant tax advantages – is yet another pull factor for companies, as protecting intellectual property rights is a cornerstone of any tech business.

An increasing number of technology companies are also choosing to locate their operations in Cyprus because of its cost-effective services, favourable tax and business environment, as well as its skilled workforce. The island’s capital, Nicosia, has been identified as the future centre for ICT and research and development. The local universities provide excellent bachelor and masters programmes in computer sciences and technology, consistently producing tech-savvy candidates to join the ranks of some of the world’s leading ICT companies. For example, the University of Nicosia (UNIC) broke new ground in university adoption of blockchain technology and was the first in the world to offer a full academic career in blockchain (MSc in Digital Currency).

Several major international ICT companies have long operated regional headquarters in Cyprus, using the island as a hub for software development, system integration, testing services, R&D activities, project management, marketing and sales. Among these are NCR, an America-based world leader in consumer transaction solutions, including ATM teller machines, and AMDOCS, a leading multinational so ware and services provider to global communications and media companies. Others who have their global headquarters in Cyprus include 3CX and Wargaming, one of the world’s most popular and profitable publishers of video games, as well as Viber, an online communications program that competes with Skype. Viber’s success in Cyprus is a good advertisement for the island as it seeks to attract more tech entrepreneurs. Viber was started in 2010 by a team of foreign nationals who needed a place within the EU that had favourable taxation, so they set up in Cyprus with headquarters in Limassol. Viber grew rapidly and in 2014 was bought by the Japanese e-commerce giant Rakuten for US$900 million.

International giants such as MicrosoftSAP, Oracle and IBM have been on the ground, supporting Cyprus’ tech evolution for many years, but there is room for further development and growth in the sector. A new arrival in Cyprus is Whipper, a ‘chat and play’ gamified digital messaging platform aimed at millennials, which opened its headquarters in Limassol in June 2017. Its founding team includes executives, investors and advisors from Netflix, Riot Games, Amazon, Swiftkey, Expedia, and Viber. The number of fintech and regtech firms, such as Spotware Systems and Point Nine, is also growing and taking advantage of Cyprus as a gateway into and out of the EU for various corporate services.

Developing Start-Ups

In addition to catering to global ICT giants, Cyprus offers financial incentives for innovative small and medium-sized enterprises (SMEs) and start-ups launching on the island. With the rise of business angels and venture capitalists looking to invest risk capital in exchange for equity in promising ideas and products with high market potential, Cyprus has created a new Start-Up Visa scheme to attract more international talent from non-EU countries to launch innovative ventures in, and from, Cyprus. Approved applicants will initially get the right to live and work in Cyprus for at least a year, and if successful in creating jobs, the visas can be extended indefinitely. So far, most interest has come from the Middle East, and given Cyprus’ proximity to the area it makes the island an attractive option for innovators from the region to stay close to home while working in a competitive and business-friendly environment that offers closer access to EU markets. The scheme is also likely to appeal to Russians due to the long-standing bilateral and business relationships of the two countries. In March 2018, Cyprus signed a memorandum of cooperation in Moscow with the management of the Skolkovo Innovation Centre, a tech hub near Moscow that is home to hundreds of start-ups and some 30,000 researchers. These are all moves in the right direction to develop a more dynamic tech landscape, and Cyprus is making inroads.

Start-up accelerators like the Cyprus Business Angels Network (CYBAN), Cypriot Enterprise Link, Chrysalis Leap and Repower Cyprus have all boosted the environment, along with events such as Hack Cyprus Hackathons, the Clean Launchpad Competition, as well as Startup Weekend and Startup Live. Home-grown talent and a burgeoning tech landscape have already launched some inspirational success stories, such as the development by a local company, SportScientia, which has created a ‘smart insole’, after lengthy trials at the University of Nicosia. The insole uses sensors and motion arrays to measure and monitor weight distribution, movement and gait analysis, and the company is now preparing for a full-scale world-wide launch from Cyprus in 2018. In late 2017, a new research centre on interactive media, smart systems and emerging technologies (RISE) was inaugurated in Nicosia. The project is a joint venture between the three public universities – University of Cyprus, Cyprus University of Technology, and the Open University of Cyprus – the Municipality of Nicosia, and two international partners, the Max Planck Institute for Informatics (Germany) and University College London (UK).

An Innovation Hub

A new initiative by regulating authority the Cyprus Securities and Exchange Commission (CySEC) is set to further enhance the landscape for financial services and e-solutions. In 2018, CySEC announced it will establish an Innovation Hub to address and explore the rise of fintech and regtech developments. The aim of the Hub will be a place where both supervised and non-supervised entities in innovative or new industries will have ongoing access to the authority in order to better understand and implement their regulatory requirements. This is a welcome move that will support information and knowledge exchange in the industry as well as the development of new solutions for the financial services sector. The Hub, which is expected to be operational in September 2018, will also allow the regulator to better consult with the private sector on the risks and benefits of new investment products and platforms. With increasing demand from start-up fintech companies, hedge funds and other financial services players, Cyprus is also gaining momentum in the cryptocurrency and blockchain arena. With a surge in the number of pioneering blockchain start-ups and a government supporting digital currency and infrastructure, the talent in this sector is positioning Cyprus as an ideal location for blockchain and cryptocurrency initiatives.

Riding the Tech Wave

With its strategic geographical location and established framework for technology and research initiatives, Cyprus is well equipped to tackle these challenges, and to see substantial growth in the coming years. The country has always been known for its skilled workforce when it comes to attracting new businesses, especially in the financial services sector, and educational institutions are stepping up to do their part in ensuring this key asset remains an advantage in the future. Both the Cyprus University of Technology and the University of Cyprus are providing increasing numbers of highly qualified graduates to meet the sector’s growing demand, while the Cyprus Institute – a world-class research establishment – is engaged in several ground-breaking and technologically innovative projects.

More recently in 2018, an agreement for a €8.2m donation to build a new Technical Education Institute in Limassol was signed in Nicosia between Cyprus and the Absolute Charitable Trust Organisation, rubber-stamped by the island’s President. Also, in terms of skills development, IT has now become the most preferred area of study for secondary-school students, reflecting how young people see growing opportunities in the sector. Modernising public administration through electronic services is a top priority, as is connecting Cyprus with high-speed networks to create a more sophisticated infrastructure and cost-effective services. Digital entrepreneurship is an objective that goes hand in hand with this and is a move by the government to help businesses increase their productivity and become more competitive on both a domestic and international scale – and to ensure Cyprus stays on top of its game in the years to come.

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September 2018

Cooperation Partners