European nations see digital economy as a sure route out of economic crisis

20 Aug 2009

With one of Europe’s youngest populations, Ireland’s digital natives could have the most to gain

AS France and Germany are already emergeing from recession, nations the world over agree that a new economic order is becoming visible, the cornerstones of which will be digital communications and content.

Nearly every country in Europe, including Ireland, has unveiled some form of digital readiness plan. But some are more advanced and more tangible than others.

Two weeks ago, the EU Commissioner for the Information Society Viviane Reding said that building on the potential of the digital economy is essential for Europe’s sustainable recovery from the economic crisis. She said the EU is readying a digital strategy that will be unveiled in 2010 as part of the next wave of the Lisbon Agenda.

“Europe’s digital economy has tremendous potential to generate huge revenues across all sectors, but to turn this advantage into sustainable growth and new jobs, governments must show leadership by adopting co-ordinated policies that dismantle existing barriers to new services,” said Reding.

“We should seize the opportunity of a new generation of Europeans who will soon be calling the shots in the European marketplace. To release the economic potential of these ‘digital natives’, we must make access to digital content an easy and fair game.”

A month ago, the Government through Communications Minister Eamon Ryan TD and Minister of State for the Information Society, Conor Lenihan TD, outlined a broad plan that, if successful, could create 25,000 new jobs.

At the heart of the plan are the construction of an ‘Exemplar’ fibre network, continued investment in science and innovation and the creation of an International Content Services Centre (ICSC), similar to the IFSC.

“We believe the ICSC could replicate and even excel beyond what we achieved with the IFSC,” says Neil Leyden, one of the contributors to the Government’s report: Technology Actions to Support the Smart Economy.

Our nearest neighbour, the UK is a step ahead, having created its own Digital Britain plan, and two weeks ago appointed a Digital Britain minister, Stephen Timms, to keep the Digital Britain proposals on track.

For Ireland – with one of the youngest populations in Europe and a wealth of global IT giants – from Google to Intel and HP – to succeed as a key player in the emerging digital economy, it needs to outline firmly what industries will create the jobs of the future to sustain these digital natives.

Leyden, who is also involved in the Digital Media Forum, says digital literacy will be pivotal to getting people back to work. “At a very basic level, you can have someone on the dole doing nothing or you can teach them basic digital skills, so they can be creating products such as t-shirts and selling them on eBay, for example. They can get to a global market literally over night.

“Or, at another level, you can teach people to start selling digitised content such as music or iPhone apps that only exist in a digital realm. Once you create a digital product, you can sell it ad infinitum,” Leyden says, pointing to the example of Steven Troughton-Smith, a 20-year-old DCU software student who is making more than €1,000 a month selling software applications on the iTunes Apps Store.

“The beautiful thing about the internet is disintermediation – it cuts out the middleman. The best example of this is on our own doorsteps in the form of Ryanair, which began selling over the internet in the Nineties,” Leyden explains.

He warns that although Ireland has no shortage of creative young minds who can create content and services, what’s missing are the business skills to capture opportunities in the emerging digital economy.

Leyden cites one company that emerged out of a digital master’s degree course in IADT Dun Laoghaire,, which arranged €1.8bn worth of transactions for carpenters, electricians and plumbers on over 220,000 home improvement projects.

“The digital media industry is the most low-cost investment a country can make because you are investing in skills and labour as opposed to physical premises, unlike the Eighties where we had to build factories everywhere. I hope that NAMA will take the abundance of office space into account as a smart way to utilise it, instead of waiting for a property upturn.”

Dylan Collins, chief executive of Jolt Online, is a prime example of how young Irish people can lead the charge. Before he left Trinity College Dublin, Collins set up a software company called DemonWare that made video games playable over the internet. Three years ago, at the age of 26, Collins sold DemonWare to Activision for $15m. His

latest venture, Jolt Online, employs 30 people and develops internet games in partnership with brands such as Playboy.

Collins agrees with Leyden that the barriers to entry into the digital media space are tiny, but argues there’s a serious lack of investment in start-up companies.

“The best a country can do to capture a slice of the digital media opportunity is to foster an atmosphere of invention, innovation and experimentation. A tangible example of this is the Silicon Valley venture capital firm Y Combinator, which was instrumental in enabling the young Collison brothers, Patrick (20) and John (18) to build a global business.”

 The Collison brothers from Limerick sought just €15,000 in start-up costs in Ireland, but were flatly refused by local development agencies. Months later, former Google executives bought their company Auctomatic for under $5m.

Y Combinator seeds young start-ups for less than €20,000 and puts them through a boot camp, making them battle-fit to succeed. “There have been repeated calls to Enterprise Ireland to create similar models in Ireland.

“The big opportunity that this digital future presents is the barriers to entry are tiny. The cost of establishing a credible venture is just a fraction of any other industry. We should be looking at awarding once-off grants to young start-ups at €20,000 or €30,000 a pop. If we were to invest in just 200 of these a year, it would cost just €4m per annum. This is less than 10pc of the Enterprise Stabilisation Fund and a drop in the ocean of what we’re putting into NAMA.

“The result would be a generation of people who would be experienced and not afraid to try again and again. If you want to stimulate activity in an industry that has very little start-up costs, get lots of small amounts of money out there.

“Out of 200 new ventures a year, less than 10pc or 15pc may succeed in the long term. Do it small, do it fast, do lots of it,” adds Collins.

“Recessions do make really good businesspeople. But unless things change, anything that happens in the Irish digital space over the next decade will be despite current policies, not because of them.”

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years