Tech cluster will help beat economic blues

26 Jun 2008

A tech cluster effect is enabling Ireland to reduce the impact of higher labour costs and the strength of the euro, a US economist claims.

A study for Letterkenny-headquartered Pramerica Systems Ireland, in association with the Letterkenny Institute of Technology, by Dr J Matthew Fannin, a regional economist and assistant professor at Louisiana State University, finds that Ireland’s tech cluster is vital to the country beating the global economic blues.

Pramerica Systems Ireland, which employs 670 people, is a subsidiary of US-based Prudential Financial Inc (PFI), a financial services leader with approximately US$631bn of assets under management as of 31 March 2008.

PFI established Pramerica in Co Donegal in 2000 as a technology development centre for the parent company.

“Because of the success of Ireland in attracting US technology multinationals in the Nineties, a cluster effect has emerged which continues to make Ireland a highly attractive location for international technology firms, despite lower cost centres in other parts of the world,” said Dr Fannin.

He said this cluster is very important to Ireland, as demonstrated by Pramerica, which contributes over €50m per annum from its activities to the Donegal economy.

Henry McGarvey, managing director of Pramerica in Letterkenny, endorsed the emergence of a technology cluster in Ireland.

“We now employ 550 people in a software development centre in Co Donegal. I think it unlikely such a development would have been possible in the early to mid-Nineties in Ireland.”

Dr Fannin said while costs of doing business in Ireland have increased and the problem has been exacerbated by the strong value of the euro against the dollar, these factors have been to some extent compensated for by the lower costs of doing business and benefits as a result of the technology cluster.

Dr Fannin said this would also counter the impact of first-generation tech manufacturing and services jobs moving to lower-cost centres.

“While this will occur, we will also see the increased skill levels caused by Ireland’s technology cluster attracting and retaining second-generation, higher value-added technology jobs and services.”

He said Ireland’s workforce and graduates were probably of higher skill today than those who first attracted the US high-tech multinationals back in the Nineties.

“The cluster impact drives up the knowledge pool and supplier base and Ireland can benefit from this. We are seeing signs of similar cluster activity here in Ireland to those early technology clusters, such as in Silicon Valley.”

Dr Fannin added that Irish venture capital (VC) companies are playing a role in cluster development. Recent statistics show Irish VC companies investing some 84pc in knowledge-based companies, compared to a European average of 17pc.

These figures suggest financial capital is being targeted to promote future technology cluster development in the Republic.

By John Kennedy

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