The Friday Interview: Iain MacDonald, Perlico

19 Nov 2004

What do you do when a market segment or service that you depend on dissatisfies and frustrates you? Well, Iain MacDonald of up and coming Irish telecommunications firm Perlico was so frustrated in finding an efficient telecom provider in the Irish market that he took the bull by the horns and set up his own company.

Perlico was formed in 2001 by MacDonald, who was a significant investor in Irish call centre Solar Marketing before it was sold to US company IMS. Perlico’s board of directors and private investors include Dr Jim Mountjoy, co-founder of software firm Euristix. Perlico’s chairman is Malcolm MacDonald, former senior manager of Corporate Finance at ICC Bank. Other directors include Roger Bannon of chartered accountants Bannon & Co and former financial director of ThirdForce (formerly RTG) where he headed up the flotation process.

In recent months the company hit the headlines by announcing 30 jobs at its new 4,000sq ft Sandyford HQ, a move that will bring the company’s headcount to 50 people by the end of this year.

At the same time as announcing the 30 jobs, MacDonald revealed plans to spend in the region of €1m on a nationwide marketing campaign to target every household in the country as well as the corporate and SME sectors. He said at the time: “We guarantee our customers that we are less expensive than Eircom and in some cases up to 91pc cheaper,” MacDonald commented. “We are committed to offering cheaper telephone and internet costs to telecom users combined with great customer service.”

He claimed that Irish business and residential consumers were “becoming increasingly frustrated with the bureaucracy of Eircom and the outrageously high prices they are being charged. Our pricing policy is straightforward, simple to understand and includes no hidden charges – the customer can be guaranteed to get low prices without having to worry about the small print.”

But it is the realities of conducting business in the Irish economy, particularly as a start-up that are currently on MacDonald’s agenda. Foremost amongst these is the need for greater expenditure by the Irish Government on indigenous technology companies as well as a fairer spread of the business among smaller telecom players that offer innovative technology.

He told “Government purchasing power could play a major role in facilitating the development of Irish technology companies. Early-stage and mature companies alike would benefit greatly from an increased focus by government on segmenting large contracts into component parts that match an Irish company’s core skill set. I agree with the recent Irish Software Association (ISA) comment calling on the development of a central research and development fund for local and central government to suggest new ideas for innovative software systems that would deliver tangible benefits to their departments as well as supporting innovative and enterprising software companies. Furthermore, I believe a programme of positive discrimination in favour of innovative technology should be put in place (ideally equal to 10pc of IT spend).”

MacDonald argues that one of the primary challenges facing Irish companies is operating in a high-cost economy, which erodes their access to international and EU economies. “Irish technology companies are now competing on a global stage. Real competition exists from lower-cost economies that have equal access to EU and international markets. The primary challenges facing Irish companies today are operating in a high-cost economy, the lack of broadband infrastructure and an ongoing skills shortage. These issues have the potential to erode Ireland Inc’s position as one of the world’s most attractive locations to develop a technology company,” he said.

Skills issues are also foremost in MacDonald’s mind, and with the perceived onset of Celtic tiger II, believes that indigenous companies will have to punch above their weight to attract skilled workers, particularly if they have to compete against well-minted multinationals to do so. “The knowledge economy will thrive in an environment that is characterised by a high-skills pool, combined with a low-cost economy and easy access to broadband infrastructure. Therefore, increased government focus on education, an attractive tax regime and the fast-track rollout of broadband are critical. Such steps will facilitate indigenous technology companies in investing further in development, fostering additional talent and thus enabling Irish companies to underpin the economy’s future success,” he added.

As a remedy to indigenous technology company fears about getting fair access to skilled graduates, MacDonald cites a initiatives that he is confident will bear fruit. “The issue of being able to attract skilled graduates revolves heavily around the issue of available supply. Continued initiatives aimed at encouraging school leavers to enter the tech sector are imperative. An example of such an initiative that is delivering results is the Discover Science and Engineering, the new National Integrated Awareness Programme aimed at encouraging uptake of education in these areas. With available supply of graduates, indigenous companies can continue to secure and retain high skilled graduates with the promise of bleeding-edge innovation, continued investment in ongoing training and the advantage of working in one of the world’s leading technology environments.

Having engineered the journey of a company from start-up in 2001 to the point where it can create 30 new jobs and attract talented players such as Dr Jim Mountjoy to the board, MacDonald has developed a keen insight into funding companies in the Irish technology sector and hints at an over-reliance on venture capital (VC) amongst his peers. “Privately sourced VC is certainly available for companies with well thought out strategies and realistic commercial ambitions. However, there exists an over-reliance on this form of funding.”

Recalling his own experiences, he concludes: “It is a reality, that despite engaging in extensive discussions, no state agency was able to provide adequate grant or support aid to Perlico and thus, we remain an entirely privately funded organisation. The current emphasis on providing employment and similar grants to encourage foreign direct investment needs to be replicated with a portfolio of state supports being made available for indigenous companies as well. Complemented by such a renewed approach to support for Irish technology companies, I’m certain Ireland’s ambitious technology entrepreneurs will provide a consistent flow of initial public offerings in the years to come.”

By John Kennedy

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