High value strategy saves jobs

27 Nov 2002

Three of the big network equipment companies have avoided job losses because they have moved their Irish operations up the value chain.

While the ongoing slump in demand for hubs, switches, routers and other networking hardware has seriously affected these global corporations, the impact on their Irish arms seems to be have been relatively mild.

For example Lucent Technologies, the daddy of networking equipment vendors, has cut its global workforce from 158,000 to 48,000 but its Irish operations have barely been affected in headcount terms. A spokesman for the Irish arm reveals that there have been only 20 compulsory redundancies in Ireland.

Another big employer is 3Com, whose plant in Blanchardstown, Dublin manufactures the company’s full range of network switching products, including all NBX (network branch exchange), voice and wireless products. Despite the downturn, the number of employees at the facility has stayed constant in recent years at around 1,000.

Finally, Nortel, a Canadian multinational that made its name in phone systems and optical networks, is both a well-known brand and a significant investor in Ireland. As well as a small customer sales and service centre in Citywest Business Park, Dublin, it has a research facility in Galway’s Mervue Business Park which employs 350 people and a fulfilment operation in Monkstown, near Belfast, employing 850.

What these figures do not reveal is the changing nature of the companies’ Irish operations. In Lucent’s case, manufacturing used to be the cornerstone of its Irish business. However, its cabling production unit at Bray went with its spin-off, Avaya, and the manufacture of network components ended when the decision was taken at the corporate level to outsource these activities.

Lucent’s manufacturing operations now consist of integrating various different suppliers’ components into network systems. The Blanchardstown facility also manages the entire supply chain not only for Europe, The Middle East and Africa but also for most of Asia Pacific.
In addition, Lucent’s financial services operations outside the US are centralised at its Cherrywood, Dublin facility. Cherrywood is also the global centre for the growing and highly skilled area of network management software and employs some 150 people.
All this is good news for the company’s prospects in Ireland, believes David Dunne, Lucent Ireland’s country manager.
“I think Lucent is an excellent example of a company moving up the so-called value chain. We took action very early and now the Irish operation which would otherwise have lost all of its expertise, is running the logistics, supply chain and financial services of Lucent internationally.”

Nortel has a similar story to tell. Monkstown, which takes components from suppliers, assembles them into various product lines and then ships them to countries throughout Europe, Middle East and Africa, holds a key position within Nortel’s global hierarchy. It is one of only two such centres worldwide and employs 850 people. Moreover, its R&D centre in Galway has become Nortel’s global centre for contact centre technologies.

In 3Com’s case, Blanchardstown’s secret of survival has been to shift from low-grade manufacturing to the cutting edge of production technology. Buddy Ceronie, 3Com’s regional sales director for EMEA, describes it as “the highest technology 3Com facility anywhere in the world”.

What we are seeing here are examples of the shift from low-skill to high-skill activities that is much talked about by government ministers and IDA executives. In their quest to slash costs, Lucent, Nortel and 3Com have all moved low-skill commodity production out of Ireland (and other countries) to cheaper locations in central and eastern Europe and the developing world. But, rather than shutting their Irish operations, the companies have seen what they had to offer and refocused them, assigning them strategically important roles in the process. Blanchardstown is now 3Com’s most advanced facility. Nortel relies on Galway to produce the breakthroughs in contact centre technology and on Monkstown for a fulfilment service par excellence. Lucent has chosen Cherrywood as the hub of its network management software and Blanchardstown as the centre of its global services business.

In each case, some jobs have regrettably been lost, but the workers that remain are more highly skilled on average and their long-term prospects much better.

It is now widely accepted that Ireland’s future success depends on its ability to evolve into a knowledge economy. There can be few better case studies of this transformation in action than these three companies.

Pictured: The 3Com plant in Blanchardstown