Sales still a big issue for indigenous software players

12 Mar 2004

Poor sales skills amongst indigenous local software companies are still dogging the industry, according to experts currently engaged in compiling a major industry report. Despite an improved technology outlook around the world, more Irish technology companies went to the wall in 2003 than in 2002.

Every year John O’Connor and Caroline Wardle of venture capital firm HotOrigin, which has invested in local tech companies like Similarity Systems and PrimeCarrier, compile an annual report on the health and economic outlook of the Irish software sector. The report is usually the culmination of interviews with around 200 CEOs of Irish software firms.

In 2002, they discovered that the sector was reeling from the knock-on effects of the global technology downturn in full throttle allied with a declining rate of investment by local and international venture capitalists in Irish software start-ups. In 2003, the instrumental problem facing the Irish software sector was a noticeable lack of advanced sales skills needed for the complicated process of selling technology into large organisations such as US multinationals.

While Irish companies appeared to be streets ahead of other nations in terms of original intellectual property and technologies, they were sorely lacking in sales skills. Unless Irish software firms could prove that they were making sales, and therefore revenues, venture capitalists were not interested in investing in them.

Despite falling sales, HotOrigin found that Irish software companies in 2003 were nevertheless entering a new era of maturity and were adapting to the challenges of a technology downturn. As a year, 2002 left an indelible mark on the Irish software industry in the form of a 10pc reduction in employment and software exports and revenue generation experienced single digit growth.

Currently engaged in researching the 2004 edition of the annual “Ireland’s Software Cluster”, which is due out in May, O’Connor says the evidence so far is that poor sales abilities continue to dog progress for the sector. “From what I am seeing, my main suspicion is that sales and revenue generation is still a big problem for Irish technology companies. We’re still a relatively immature industry and there are not enough seasoned professionals driving the indigenous industry.

“My feeling is that we have probably seen more failures in the software industry in the past 12 months than two years ago. This may be due to the fact that in 2002 there were many companies hanging on for dear life and had made it through at that stage. Even though the market has picked up a lot, there are a lot of examples of people who ran out of cash and lost their nerve. There were more failures in 2003 than there were in 2002,” O’Connor states bluntly.

On a more optimistic note, O’Connor says that the companies that remain today stand to reap rewards if the technology market has indeed bottomed out. “People who’ve made it through are in much better shape. Getting through two-to-three bad years is not a bad thing and if you’ve made the sales then you are in pretty good shape for the future.”

By John Kennedy