Indigenous tech sector in Ireland forecast to grow 20pc in 2018

7 Mar 2018

Bank of Ireland head of technology sector, Adrian Mullett. Image: Bank of Ireland

Latest Bank of Ireland Technology 2018 Outlook boosted by increased debt funding and MBO activity.

The indigenous Irish tech industry is forecast by Bank of Ireland to grow more than 20pc this year.

The bank’s technology sector team said it expects revenues across indigenous Irish IT services and the digital sector to reach €3.5bn in 2018.

The robust forecast is also influenced by a 150pc increase in the level of debt funding to technology firms in software, telecoms and IT services compared with 2016.

About one-third of debt funding was to support acquisitions and management buyouts (MBOs) and the remaining two-thirds went into funding working capital and expansion.

Around 60pc of Bank of Ireland-funded companies were software firms with proprietary products, up from 50pc in 2016.

Bank of Ireland-backed transactions included Storm Technology’s acquisition of Ciall. The bank also provided funding towards a shareholder recapitalisation at Propylon, working capital for digital content firm vStream and trade credit for iHeed, a medical education firm expanding in the Middle East.

The latest report revealed that exports make up 81pc of demand in the digital sector, compared with 57pc of the rest of the economy.

The bank’s research indicated that while the UK accounts for 20pc of exports by indigenous tech companies, their exposure to Brexit could be quite low because potential tariffs for digital services and goods are low.

However, in the event of a hard Brexit, additional legal protections in GDPR will be required to transfer personal data from EU member states to the UK.

Sectors that were growing strongly were edtech, regtech and healthcare, and the technology sector team cited growing convergence between fintech companies and security tech companies, devising new managed services offerings.

MBOs enable change in tech industry

Speaking with, the head of the technology sector at Bank of Ireland, Adrian Mullet, said: “2017 was a very strong year for the sector across all of the key metrics that we were tracking.

“In terms of lending, not only were we approving money but the number of companies that were approved and that drew down the money was significant.”

Notably, Mullett said that MBO activity was driven by a changing of the guard in the leadership ranks of Irish software firms and the evolution towards software-as-a-service business models.

“Often, it is a younger team that is willing to buy out older founders who are now in their 60s and who have steered the business through tough times.

“And now, the younger management have a valuation creation agenda and are willing to drive the business forward and migrate to new cloud business models,” he explained.

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