ISA tackles scale challenge

19 May 2005

The Irish Software Association (ISA) has drawn up a blueprint for Ireland’s indigenous software companies to achieve the scale needed to compete in global markets.

The plan is based on the findings of a report entitled Barriers to Growth – Opportunities to Scale, commissioned by the ISA and launched at its National Software Conference today in Croke Park.

The survey shows that many indigenous companies are small and experiencing difficulties in growing revenues at a satisfactory rate. Only 10pc of the companies surveyed have annual revenues of €10m or more and half of all companies surveyed have revenues of less than €2m.

Furthermore, most companies are modest in the ambition. Of the 90pc with revenues less than €10m, only 48pc expect to break the €10m barrier within three years. Only two companies expect to grow their revenues to more than €100m over the same period.

“To achieve true international scale, companies need to have revenues approaching the €50m mark,” said Bernie Cullinan, chairwoman of the ISA. “The report highlights the challenges companies face in achieving this goal especially with regard to funding and partner strategies. Our blueprint addresses these issues and others that Irish software companies face if they are to achieve the necessary critical mass.”

Despite Ireland’s success at attracting inward investment from multinational software companies, the ability of indigenous companies to become major international players themselves is vital for the continued success of the local software industry.

“Ireland is currently the world’s No 1 exporter of software,” said Michele Quinn, director of the ISA. “That is a significant achievement but as our cost base increases, our attractiveness to multinational firms as a base for manufacturing decreases. Our future is one we must build ourselves. We must provide the right structures and environment to give our indigenous software companies the best opportunity to compete on the international stage.”

The report makes several recommendations with regard to leadership, funding and innovation and lists the main challenges faced by the industry. These include a dearth of revenue-oriented leaders, difficulties in attracting high-calibre non-executive directors to boards, inappropriate funding structures for high-tech start-ups and poor use of channel partners to grow revenue.

By Brian Skelly