Tech sector looks to another successful year

5 Jan 2005

Last year will go down as a year of solid achievement for the Irish tech sector. As the IDA Ireland’s end-of-year review recently revealed, this was especially the case on the multinational side. In aggregate, IDA-supported enterprises contributed more than €2.7bn to the Exchequer in 2004.

The agency negotiated a total of 70 business projects and 36 research and development (R&D) investments with new and existing clients, many of them in the strategically important ICT and biotech sectors. The business projects represented an investment of €5bn while R&D investments amounted to more than €140m. The momentum seemed to build throughout the year, moreover, with proportionately more investments secured in the final months of the year. To IDA old timers, it must have felt like the mid-Nineties all over again.

The year was doubly satisfying because it seemed to confirm that IDA’s strategy of attracting the higher-value jobs was working remarkably well. Although the net number of jobs that stemmed from new IDA projects rose by only 197 over 2003, the IDA’s chief executive, Seán Dorgan, stressed in his end-of-year statement that quality not quantity was now the agency’s main goal. “It is not just the good number and range of investments but the substantive quality of the investor companies, investment projects in both business and R&D and the increasingly higher skilled nature of the jobs; that is most noteworthy about the results in 2004,” he commented.

Brendan Butler, director of ICT Ireland, IBEC’s lobby group for the tech sector, sees 2004 in similarly positive light. “Overall, 2004 was probably the best year of the millennium so far. The industry is a stronger position globally in January 2005 than it was in January 2004,” he comments.

It was the multinational sector that shone brightest, he feels. “Some of the existing blue-chip companies with well-established functions extended them in 2004. In the past couple of years the feeling was we were going to lose bits of these companies. What’s in fact happened is that the IBMs and the Dells have become more embedded in the economy and that’s very positive. A couple of announcements were for higher-level jobs. You’re also beginning to see a little bit of scale for R&D in Ireland. The highlight there was the Bell Labs announcement [of the €69m R&D investment at Lucent’s facility in Blanchardstown].”

More disappointing for Butler was the more sluggish performance of the indigenous sector but here too there was reason for optimism. “On the indigenous side, it was still a tough year and my wish for 2005 would be to see some more positive indicators here. The positive signals from the multinational sector have yet to translate themselves to the indigenous side but I’m hopeful that this will happen in the next year or two.”

Butler sees several potentially serious obstacles facing the indigenous sector however. There are question marks over whether or not Irish companies have the right skillsets to compete in the international market, with selling skills being one recognised weak area. The continued fall of the dollar is also a big challenge to export-led Irish technology firms that, unlike their multinational brethren, do not have the scale and treasury management capabilities to hedge on currency movements. Finally, the recovery in the IT jobs market, though a welcome development, will become a millstone, he feels, if it boils over into a full-blown skills shortage, with a subsequent rise in wage levels.

Similarly, in the IDA’s end-of-year statement, Dorgan’s optimism for the coming year is also tempered by some reservations. While he expects to see “similar advances in quality in 2005 as were achieved this year” he notes that the country needs to continue to improve its infrastructure, both physical and digital, and above all to invest in training, education and research. He feels the latter to be especially important “as it is the quality of our people and their skills that will keep Ireland ahead of the rest”.

What should give the IDA, ICT Ireland and other interested parties great cause for optimism is that economy seems to be in better shape than it has been for years. The Economic and Social Research Institute’s quarterly economic commentary published last month predicted that 2005 would see gross domestic product growth of 5pc, employment growth averaging 2.6pc, wage growth of 4.4pc and price inflation of just 2.1pc. Rarely, if ever, has the economy started a year on such an even keel. And it gives the tech sector the perfect platform to continue on its growth curve.

By Brian Skelly