Scotland’s tech sector is thriving, but we must think long-term about skills shortage - Karen Meechan

Tech companies are often seen as young start-ups who push boundaries and figure out ways to make things happen. Their founders do not fear failure and are constantly testing, learning, adapting and innovating. The start-up community often embodies our perceptions of tech, since it is by definition, an agent of change.

The Scottish tech sector is maturing, according to our growing body of evidence. The start-up community still makes up a big part of our annual survey – some 42 per cent of companies report a turnover below £250,000. The number of larger tech companies in Scotland is up, but this is pretty much the same every year. In fact, the number of companies pushing past the magic £1 million-plus turnover bracket has sharply increased from 19 per cent in 2022 to 31 per cent in 2023.

It is encouraging to see this trend. Companies are consolidating their financial stability and establishing themselves as long-term contributors to the economy, signalling a steadying and maturing of the sector. Pushing past £1m in sales likely means they have also employed more people, adopted more fulsome employment practices, and started thinking about long-term growth.

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The sector is now exporting more than ever before. Are there any other industries in Scotland that have nearly nine out of ten members selling outside the country? Now is the time to support the tech sector in Scotland while it's good and there's plenty of opportunity.

Karen Meechan is CEO of ScotlandISKaren Meechan is CEO of ScotlandIS
Karen Meechan is CEO of ScotlandIS

Three things are driving this growth.

Cyber security in business is advancing internationally. As cybercrime is rampant, it is just a matter of when, not if, your company will be hit with a ransomware attack. In exchange for a cut of the proceeds, criminal gangs are outsourcing ransomware attacks to organised crime outfits ("Ransomware-as-a-Service" or RaaS). Business operations can be severely affected by these attacks, so protecting against them is a top priority for lots of companies.

In addition, both AI and data are largely untapped opportunities for business transformation. Our sector really stands to benefit from data analytics and artificial intelligence when they are combined, with 88 per cent of our members saying it is where the growth is. In the coming decade, helping companies harness data and use AI will completely change how businesses operate.

Our ecosystem has seen many new start-ups join, but we're also seeing more companies consistently scaling than in previous times. With scale comes opportunity and capability. More resources can be diverted to research and development; to marketing and sales; to innovation and leadership. We would once look like an inverted pyramid, with an ever-declining number of organisations reporting large sales volumes. Now, there is a considerable central stratum in that pyramid as more and more companies successfully consolidate their income, protect their profits and re-invest into their businesses. They are attracting more mature forms of debt and becoming partners to many of the established sectors in our economy.

There are more than 130,000 tech job vacancies in the UK at the momentThere are more than 130,000 tech job vacancies in the UK at the moment
There are more than 130,000 tech job vacancies in the UK at the moment

If this all sounds like a rosy picture, do not be fooled.

The chronic skills shortage in Scotland’s tech sector threatens the sustainability of this growth trajectory. There are over 130,000 tech job vacancies in the UK at the moment, and the problem is that they are the most attractive jobs to offer, 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.

Karen Meechan is CEO of ScotlandIS

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