We need to nurture the innovation economy, says Microsoft Ireland boss

26 Feb 2009

The future of Ireland lies well beyond manufacturing, says Microsoft MD Paul Rellis.

There are two things occupying the minds of workers in Ireland today: the plight of fellow workers who have lost their jobs, and their own fate in light of the worsening economic situation.

From his office high over the bustling Sandyford Industrial Estate, managing director of Microsoft Ireland Paul Rellis thinks the country needs to remember the advantages it still has and to act fast if it wants to come out on the other side of the recession and thrive.

“Building an ‘innovation economy’ focused around intellectual property (IP) development could have a greater impact than manufacturing ever had,” Rellis explains.

Microsoft, which came to Ireland in 1985 to set up a manufacturing operation, was in the vanguard of the many technology giants who have since invested in the country. It currently employs some 1,700 people here.

The company has also had to deal with the changing global economic situation. In recent weeks, it announced plans to lay off 5,000 people worldwide after profits fell 11pc to $4.1bn. The company’s Irish operations got off lightly with only 17 redundancies announced.

Central to the continued survival of Microsoft Ireland’s operation has been its ability to adjust and evolve in order to stay relevant.

“We’ve always been a strategic part of the Microsoft ecosystem. The one thing we did well over the past almost 25 years was challenge ourselves to be better. Every year, we evolved into something higher,” Rellis explains.

When Microsoft set up in Ireland in 1985, it created 100 jobs in primarily assembly line work – sending boxes of software out to the rest of the world. Today, the local operations are spearheading the development of strategic products such as Windows 7, Windows Live and Office 14.

The company is also currently building a data centre in Dublin that will be central to its global software and services strategy, codenamed Azure.

“When I joined Microsoft Ireland nine years ago, the then managing director, Kevin Dillon, pointed out that Microsoft spent less than 1pc of revenue on manufacturing or costs of goods, but 16pc a year on R&D. That focused our minds and, today, if you look at Microsoft, there’s not much manufacturing left in software anymore, it’s all online. We decided to get ahead of that trend and not be fearful for the future.”

Fear of the future, Rellis says, can have a paralysing effect on an economy, and Ireland needs to remember that there are one million more people at work in the country than there were 10 years ago.

“One of the most emotional challenges facing this country is the fear factor. The country needs to focus on being ahead of the curve.

“In terms of Microsoft, Ireland is at the core of the next wave of development. We moved from manufacturing to operational activities and software development.”

Fibre-optic networks need to be deployed nationally to benefit schools and businesses but, fundamentally, Ireland’s core advantage in the years ahead will be its people, says Rellis.

“We have a huge amount of people here who know how to work internationally. One of the biggest investments the country can make is in its people. The ability to work cross-culturally will be as important as the quality of graduates coming out of university.”

Rellis believes the creation of an ‘innovation economy’ focused on developing and managing IP will be vital to Ireland for decades to come.

“If we can innovate more, particularly in software and creating and developing IP, we will develop a whole cluster in Ireland that could be unbeatable.”

Central to this are more successful Irish start-ups, and through Microsoft’s BizSpark programme, the company is providing start-ups and entrepreneurs with easy access to development tools and server products with no upfront costs, except a €100 deposit.

The Irish programme includes discounts on the purchase of Dell hardware and preferential rates from hosting providers such as Blacknight, C-Infinity, Digiweb, Eircom and Hosting 365.

“This country is making important steps that aren’t being noticed with all the bad economic news. The past 20 years were all about Ireland exporting and selling technology. The next 20 will be about developing technology the rest of the world will use.”

I put it to Rellis that, at an official level, Ireland has never fully recognised the gift the tech sector represents for the country. “This is changing and I think the €500m ‘smart economy’ plan revealed by Taoiseach Brian Cowen TD puts things in perspective,” he says.

“It’s not perfect, it could be done faster and greater, but the concept is sound. Ireland needs to develop core clusters in the areas of renewable energy and digital media.

“This is a chance for Ireland to be a world leader in emerging sectors by pumping in venture capital in the same way that Israel and Finland did.

“The innovation economy is not just about cutting spending to come out of the tough economic environment, but also about investing our way out of it.

“We are now at a moment in time where there are a lot of open ears and open minds in the public and private sector for building future industries.

“Do they get it? I think so, yes,” Rellis concludes.

By John Kennedy

Pictured: Microsoft Ireland managing director Paul Rellis believes Ireland needs to act swiftly to be seen as a core development hub for future technologies, a move that could make the country unbeatable in decades to come

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