ISA raises public sector purchasing concerns

1 Dec 2005

In its pre-Budget submission, the Irish Software Association (ISA) has expressed concern over funding issues for technology companies as well as public procurement methods practiced by the Government.

Last month, the IBEC-based lobby group urged Irish public sector organisations to adopt a policy of ‘fixed term, fixed fee’ contracts when issuing tenders for major IT projects as a means of ensuring delivery of quality software solutions at the best possible value to the taxpayer.

The ISA today said that Irish software companies need to win more business from the public sector and need to gain better access to funding in the early stages of their development if they’re ever to achieve the scale necessary to genuinely compete on an international level.

In its submission, the ISA asked the Government to encourage more procurement by public sector bodies of products and services from indigenous technology companies and also called on the Government to extend its current Business Expansion Scheme (BES) and Seed Captial Schemes (SCS) and to offer better tax incentives for people investing in Irish software companies.

“The single biggest challenge for indigenous software companies is the ability to achieve the scale necessary to compete successfully in global markets,” said Michele Quinn, director of the ISA. “The measures we are calling for will assist in the growth of innovative and competent companies, both by freeing up funds for investment beyond the very early stages of their growth and opening up a large part of the local market to which they have traditionally had difficulty gaining access.”

She said that other recommendations include an amendment of the current system of research and development tax credits to encourage greater investment in development by indigenous companies and the identification of means to reduce the current disincentives to experienced industry leaders to become involved in non-executive roles with start-up companies.

A major bugbear of indigenous software companies is the propensity of the Government to award IT contracts to large, established companies to the detriment of the local software sector.

“The burgeoning indigenous software sector is comprised of companies with innovative products whose success is vital to the future of the software industry in Ireland,” said Quinn. “A recent European Commission study [entitled The Access of SMEs to Public Procurement Contracts] shows that the Government in Ireland awards larger contracts than many of our EU neighbours. This implies that Ireland’s public sector market is the most difficult market for SMEs to tap into, making it harder for such companies to build competencies of scale locally.”

The ISA is urging the Government firstly, to put in place a mechanism within the procurement tendering process to ensure that larger companies are encouraged to partner with SMEs as part of their public procurement contract. Secondly, the Government should allow SMEs the opportunity to present their world-class products and services and purchase a greater amount of technology from these companies.

Another major problem on the horizon for Irish software companies is that corporate governance regulations are making seasoned industry leaders reluctant to accept non-executive directorships of new start-up companies because of the personal liabilities involved. The ISA says it is keen to work with the Government to identify a mechanism to reduce the current shortcomings that discourage seasoned entrepreneurs from becoming actively involved in the next generation of software players.

By John Kennedy