Building blocks of a knowledge economy

22 Dec 2004

As general manager of Hewlett-Packard (HP) Ireland, Martin Murphy (pictured) commands a sales, marketing and services workforce of 450 people in what is easily the largest hardware and IT services business in the country.

Murphy has steered HP Ireland through the troublesome aftermath of the largest merger in the history of the IT industry — the US$16bn merger between HP and Compaq — and this year the hardware sales wing of HP in Ireland is estimated to have grown sales 46pc from €188m last year to €275m this year. The company’s services operation is also estimated to have performed well during 2004, ratcheting up sales by 40pc from €120m last year to €168m this year.

“I decided last year that I wanted HP to be the biggest IT sales and services operation in Ireland and I feel we’ve achieved that ambition,” says Murphy. “This is down to the fact that we have the breadth, capacity and product offering to do so.”

Across the IT industry currently there is a feeling that fortunes have improved, but Murphy is a little more reserved. “There is a consolidation taking place across the whole IT industry and in Ireland HP, IBM and Dell would be the dominant players. I would be cautiously optimistic because any growth we’ve achieved has been damn hard work and because the business we are in is so competitive. Our vision for the next two to three years, however, is to have a HP appliance in every home, school and business in Ireland,” he adds.

Murphy’s belief in the consumer market, he says, is driven by the existence of an increasingly tech-savvy population that initially has been created through awareness of mobile issues and lately by demand for broadband. “Aspirations for broadband will drive the consumer market in the years ahead. On the corporate front, we envisage considerable growth in telecoms, multinational spend and Government decentralisation.” On the latter point, Murphy anticipates strong Government spend not only on the ongoing decentralisation of Government departments but also on health and education during 2005.

As HP is one of the top three PC manufacturers in the world, I put it to Murphy that the recent sale of IBM’s PC manufacturing division to Chinese manufacturer Lenovo must have sent shockwaves through the industry — especially since IBM practically created the PC business with the introduction of the first such device in 1981. Murphy’s view on the deal provides a useful insight into the selling process of the IT industry and he hints that IBM may be throwing the baby out with the bath water. “Lenovo’s key challenge will be re-establishing the brand. From an IT firm’s point of view, having a PC division creates opportunities. The desktop business is an extremely important part of the industry because it is all-pervasive. Broad awareness and need for desktop devices is normally the first step to building relationships. Times are changing, however, and our industry is moving increasingly towards managed services,” he notes.

On the latter point Murphy believes HP has succeeded in establishing a competitive edge as IT outsourcing becomes an increasingly common activity. In 2002, HP secured the €600m contract to handle all of the Bank of Ireland’s IT needs on an outsourced basis and last year the company leased Metromedia’s 60,000sq ft data centre in Citywest, which was one of the first casualties of the data centre massacre of 2001. “When people were exiting the data centre business we saw a major opportunity. We believe the Irish business market is now ready for managed services and decided to put a lot of investment into this area. As a result we have established a leadership position in this particular segment. You would be surprised how many established Irish companies, mostly household names, are choosing to go down the road of outsourcing and managed services. This is a considerable opportunity for us,” he adds.

The strategy of outsourcing lends itself perfectly to the Government’s plans for decentralisation, which, Murphy believes, will be an important facet of the Irish economy in the years ahead. “There is no question that it will play a crucial role in the spread of prosperity as well as infrastructure to the regions,” he says. “Decentralisation will require state-of-the-art infrastructure to support it and gives the Government the opportunity to look at its technology capability and drive towards shared services. There are huge productivity gains that can be made through the smart use of ICT.”

Ireland’s ambitions to be a knowledge economy and a leader in the world of ICT, Murphy thinks, are laudable but hollow in light of poor broadband and PC penetration in this country. “The next big challenge for Government is to drive productivity in the knowledge economy. Key to that strategy is putting a PC in every home. At 42pc, PC penetration in Ireland is very low compared with the 75pc average in the US.”

In terms of PC penetration, Murphy believes Ireland lags behind the Nordic countries, the UK and the US and this issue must be addressed by the present Government in the form of better broadband infrastructure and tax breaks for PC buyers. “If you want to get the best out of the economy, you’ve got to create the right environment. Key to this is putting a PC in every home,” he says.

Murphy concludes: “If Ireland can continue to grow its emphasis on ICT and participate in the knowledge economy, we are going to create the right environment where we will be a nation fit for jobs that are further up the value chain. We should be looking at the building blocks of the knowledge economy — such as more PCs and broadband — instead of constantly negotiating the roadblocks.”

By John Kennedy