Irish software firms just aren’t scaling fast enough – ISA study

30 Jun 2014

Pictured: ISA chair and managing director of Trilogy Technologies Edel Creely

Not enough Irish software companies are making it big, a new study from the Irish Software Association (ISA) reveals, as more collaboration among companies is needed along with more access to finance.

There are 1,056 technology companies located in Ireland, ranging from start-ups and SMEs, to large international and multinational companies, with an ever growing number of Irish owned multinationals.

Over 103,000 people are directly employed in both Irish owned and foreign direct investment (FDI) technology companies in Ireland.

With the number of Irish owned technology companies continuing to grow, the ISA Digital Technology Index for 2014 estimates that there are 806 indigenous companies, with total annual revenues over of €1.8 billion.

Despite the reality that firms aren’t scaling fast enough, Irish software companies are more confident than ever.

The survey found that 81.5pc of respondents were more confident about their business than they were three months ago, 94pc stated they expected revenues to increase over the coming three months, and 87pc expected an increase in export revenues.

R&D expenditure is expected to rise for 67pc of participants, up from 58pc in August 2013, and company profitability is expected to rise for 70pc, compared to 66pc in August 2013.

On a less positive note, almost 17pc of respondents indicated that their input costs have increased between August 2013 and Q1 2014.

Indigenous and multinational tech firms need to talk

Reading between the lines, it is quite clear that there is still not enough cross-pollination in terms of collaboration between indigenous software companies and their multinational counterparts.

Some 82pc of companies identified that collaboration between indigenous companies and multinational companies would stimulate growth. Some 88pc indicated that licensing unused IP to indigenous companies on preferential terms would be beneficial.

Around 70pc expressed their belief in the value of bundling/licensing of FDI and indigenous company products as a single offering.

“The sector is powering ahead. Ireland’s strong international reputation means new indigenous companies are setting up and multinationals are being attracted by the competitive business environment and availability for skilled labour,” said ISA chair and Trilogy Technologies managing director Edel Creely.

“But key challenges need to be addresses for the sector to fully realise its potential.

“Access to finance remains a challenge, the Central Bank numbers show that the level of credit outstanding for the technology sector has been largely unchanged over the last two years, despite growth in the sector.”

Growing pains

Creely said that the tech industry has benefitted from the experience of successful entrepreneurs investing and advising new start-ups, but more need to ensure they have adequate access to finance.

“Government must enhance tax-based investment schemes and the venture capital environment, as well as introduce state-backed capital funds,” Creely added.

The ISA’s Digital Technology Index was published in association with Tenego Partnering.

“Ireland ranks first for availability of skilled labour, however, the skills demand in the sector remains a concern,” said Tenego founder and CEO Donagh Kiernan.

“Industry must continue to work with government and the education institutions to increase the uptake of STEM subjects, and provide quality conversion course to ensure people have the right skills. We must also encourage the development of critical communications and broader business skills.

“The technology sector has proven to be resilient and innovative during the crisis. This survey shows how confidence continues to grow across the board in the industry with as many  as 87pc  expecting an increase in exports. However we must not be complacent.

“By showing leadership business will be able to deliver more jobs and sustainable growth,” Kiernan said.

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