Yes please, minister

28 Oct 2004

At no time before has the technology sector mattered more to the Irish economy. Representing one third of gross domestic product (GDP), employing more than 90,700 people, technology has outpaced agriculture as Ireland’s prime export.

Seven of the world’s leading ICT companies have a substantial base in Ireland and Ireland is the largest exporter of software in the world. Despite the decline in the tech sector in recent years and major trends towards outsourcing key business functions to lower cost economies such as India, Ireland succeeded in retaining key multinationals and, if anything, is still one of the premier locations for investment in Europe.

A recent cabinet reshuffle has placed new ministers in the roles of health, education, communications, enterprise and employment appointments that are all pertinent to the ongoing state of the technology sector in Ireland as well as Ireland’s ability to capture its share of foreign direct investment.

It seems the writing is on the wall for the economy, regardless of whether another boom is under way. Higher living standards means higher wage demands and the reality of patchy broadband coverage, insufficient skills availability, gridlock in key cities and poor transport links with the rest of Europe weigh heavily on the minds of CEOs of overseas companies.

Name: Jim O’Hara
Position: General manager, Intel Ireland

Since coming to Leixlip in 1989, Intel has invested more than €4.5bn to date in the operation, which remains the company’s only European manufacturing facility and the largest Intel operation outside the US. The Leixlip fab is made up of Fab 10, Fab 14, the IT Innovation Centre (for research and development) and the recently opened Fab 24. The latter investment will secure long-term employment of the company’s existing 4,700 direct and indirect workforce in Ireland and will bring the total number of employees and contractors to more than 5,000.

The first thing O’Hara would tell the Irish Government is to take a long hard look at the cost of doing business in Ireland. “Utility costs have escalated over the past number of years; these are a critical element of the non-pay cost increases being borne by industry. The National Competitiveness Council estimates electricity prices to industry have increased by 40pc over the three years to September 2004.

“Ireland has overtaken the UK and Sweden to become the third most expensive country in the EU for consumer goods and services and is almost on a par with Finland as the most expensive within the eurozone. Irish wage costs increased by 12pc in real terms over five years to 2003 while the eurozone increased by 4pc. All other non-pay-related costs including waste management continue to rise without the necessary service infrastructure in place,” he warns.

O’Hara also calls for a serious focus on the level of regulation, whether local or European, to ensure “our commercial flexibility and well-being in the future with the minimum bureaucracy” and suggests that Ireland could establish a position of leadership throughout the EU on wireless technology as a means to conquering broadband woes.
In terms of education and skills, he says: “ICT Ireland has recently suggested a novel approach within third-level institutions to allow greater time in industry for certain professional qualifications as part of the core curriculum. This should enable both industry and academia to address deficits in a more focused and co-ordinated fashion. Within secondary schools the recommendations of the Taskforce on Physical Sciences must be adopted and implemented. There is also a need for a detailed analysis of students and teachers perceptions on maths and physical sciences in order to encourage a greater pipeline of well-prepared students to feed university undergraduate programmes in technical disciplines.

Name: Michael Daly
Position: IBM country general manager

Having worked in IBM’s software development lab in Dublin and subsequently growing IBM’s Global Services division in Dublin from 80 to 800 people, IBM’s country general manager Michael Daly knows a thing or two about Ireland’s R&D aspirations and the realities of conducting business here. More than 3,000 people are employed by IBM, otherwise known as Big Blue in the industry, in Mulhuddart, Co Dublin, in a variety of roles ranging from software and hardware design to manufacturing and logistics as well as customer support.

If Daly was to sit in front of the government’s newly reshuffled Cabinet, he would say that foremost on Irish-based chief executives’ minds is “being positioned to take advantage of the emerging opportunities in the new economy. The unacceptable and unsustainable rise in costs has overshadowed much of the progress that has recently been made. The country’s image as a consequence has been tarnished and the “Why Ireland” sell has become much more difficult.”

Daly also cites increasing regulation as a big concern for multinationals here.

But it is skills availability that concerns Daly the most. “We need an education system that is in sync with the needs of industry as it develops and that is also capable of delivering people with the right skills at the right time. Starting with 2nd level the curriculum needs to be reflective of this thinking. It is also imperative that the teachers have the facilities, equipment and skills required to support a 21st century knowledge economy.”

Looking ahead to the forthcoming Budget, Daly says: “It is critical that the budget does not add to inflation. We need to continue to control public spending. Any increase in public spending needs to be linked to economic gains. The R&D incentives announced in the last budget need to be revisited as its implementation has proven difficult. With regard to investment the government needs to view the situation in a holistic way, actioning the many recommendations and findings from the various reports to ensure that we are well positioned to win and progress in the new global economy.”

Name: Tim McCarthy
Position: General manager, Dell Ireland

Employing more than 4,000 people in Dublin, Bray and Limerick, Dell has the distinction of being Ireland largest exporter and operates one of Dell’s most productive operations in the world. As chair of ICT Ireland’s Education Committee, Tim McCarthy never hesitates to flag important industrial issues. “There are a number of concerns facing any multinational when considering locating outside its home market. From a technological viewpoint the calibre of the workforce is crucial. We need to continue to produce high-quality graduates in the technology and engineering sector. The cost of doing business in a country is also a critical element and the rate of corporation tax is obviously important in this regard,” he adds.

He would tell the newly reshuffled Cabinet: “As Ireland’s largest exporter and technology company, we have maintained our competitiveness by continuing to focus on managing efficiencies and driving down cost. To ensure that Dell can maintain this growth, labour flexibility, low rates of inflation and taxation, ongoing investment in education and general infrastructure will ensure that we can continue to meet new challenges.

“In addition to maintaining the current corporation tax rate, the future economic growth in Ireland will be influenced by a shift towards services as a major driver of GDP growth. Ireland needs to focus on building technological and applied R&D capabilities to support the development of high-value products and services,” McCarthy says.

“To achieve the calibre of graduates required by the existing ICT industry and to encourage inward investment, we need a co-ordinated ICT strategy for schools. We have participated in the Department of Education’s result consultation ptocess to give our views as to what this strategy would look like. In addition, we have shared some best practices from other markets and in fact Dell has some local examples of how ICT can be integrated into schools through our community-based projects — specifically Coláiste Chiaráin in Croom,” says McCarthy.

Name: Nicky Sheridan
Position: Vice-president and managing director Oracle Ireland

One very unfortunate memory this writer has of Nicky Sheridan is that of a press conference a little over a year ago where Sheridan implored the Government: “Ireland needs to be vigilant in terms of costs, indirect costs as well as wage costs.” Two weeks later, Sheridan had the unsavoury task of announcing that Oracle’s local operation was to layoff approximately 10pc of its local workforce, some 100 people. Oracle employs approximately 1,000 people in Ireland and its operation here handles sales of Oracle products in the EMEA region worth in excess of US$2bn in revenue. In 2002 alone, the company spent €130m in the Irish economy.

Sheridan cuts straight to the chase: “I would refer to the World Economic Forum Report on Global Competitiveness where Finland came first and three Scandinavian countries came in the top six (US came second) and stress to the new Cabinet that competitiveness is not all about low labour costs, but critically technology underpinning efficient work practices.

“Ireland now needs a dedicated e-minister to ensure we progress towards automated efficiencies in both public and private sectors as well as lead our critical IT sector in Ireland,” he states.

According to Sheridan, the three urgent issues concerning the managing director of a multinational company in Ireland today are: increasing costs exacerbated by the euro/US dollar exchange rate; infrastructure issues, including the slow rollout of broadband; and the supply of people with the necessary skills to operate in a high-value knowledge economy.

Name: Joe Macri
Position: General manager, Microsoft Ireland

One of the most accessible and colourful figures on the ICT scene in Ireland, Joe Macri has been vociferous from the start on vital issues such as skills and broadband. Australian-born Macri brings a diverse career to the table and after eight years working and living in Ireland is astutely aware of the growing problem of competitiveness.

“Maintaining Ireland’s competitiveness is a critical challenge for the future. It was disappointing to read that we remain in 30th position in the World Economic Forum’s competitiveness table published this month. This is of particular concern because of the fact that our decline in the last three years is primarily related to performance in innovation and technology.

In terms of skills, Macri believes: “A key element in addressing this issue is to ensure that students are introduced to science from an early age and that technology becomes totally integrated into the curriculum across all subjects. Currently IT is, in the majority of cases, treated as a separate subject; until we can integrate it fully and use technology as tool to bring learning alive we are going to continue to have the challenge of making science and technology relevant to our young people.”

Looking to the forthcoming budget, Macri would like to see a commitment from the Minister for Finance to fund an integrated ICT strategy for Ireland’s schools. “There has been a lot of very useful consultation between the Department of Education and the IT industry about how best to approach the issue and we have collectively explored how we can ensure that all pupils in all schools are getting the right level of access of IT. Regardless of what the policy looks like in this area it is clear that significant funding will be required.

“Another area that I would encourage the finance minister to look at is the promotion at European level that the Vat rate for online trading be applied at the point of consumption rather than at the point of sale. Currently EU companies selling services over the internet to individuals are currently required to pay Vat at the rate that applies to the vendors country. At 21pc, Ireland is one of the highest,” Macri concluded.

Next month Digital Ireland talks to the CEOs of some of Ireland’s best-known indigenous technology companies to see what issues they would like to raise with the Government in terms of conducting business in Ireland.

By John Kennedy