Once upon a time, not so long ago, I pondered on the idea of writing a book (what journalist doesn’t?) about the days leading up to the dot.com implosion, tales of excess and greed, or something to that effect from an Irish context and what caused some notable Irish technology companies to ignominiously disappear.
Before I could call the idea “new” it had already been done, and very well too. Books like Ernst Malmsten’s “Boo Hoo: $135 million, 18 months… A Dot.com Story from Concept to Catastrophe” and David Kuo’s “Dot.Bomb: My Days and Nights at an Internet Goliath” helped set the trend. And don’t forget journalist Robert X Cringely’s “Accidental Empires.” Get my point?
Despite the fact that many of these stories and events happened at least five years ago in another time and in different places, and would probably make some Irish executives who’ve since shifted lanes to different industries wince with the memory, they still make compelling reading.
Still counting the costs of such times are individuals who invested (and lost) savings in long forgotten ventures and there is not one person with an index-linked pension in this country that hasn’t been impacted by the times that were.
The idea of telling the tale of avarice and excess has fallen away to an overwhelming respect for the surviving companies and ruthless, nonetheless heartbreaking, decisions that owners and managers of these companies had to make in order to survive – everything from making committed employees redundant to perhaps engaging in punishing trade sales.
Companies like Iona Technologies, regarded as a pathfinder for Ireland’s relatively young indigenous software sector, have had to lay off hundreds and radically change their products and services. Fineos shelved ambitious flotation plans and stuck to its knitting, sealing deal after deal within the insurance industry. Riverdeep cut costs and headcounts, de-listed from the stock markets and engaged in a management buyout (MBO) only to re-emerge lately with plans to float again within two years. Eurologic, once regarded as the most profitable of indigenous technology firms, was acquired by Adaptec and has since laid off 75 workers from its north Dublin operations. Others that we may never hear about simply disappeared.
Into the early months of 2004, stockbrokers, venture capitalists and analysts are talking of things bottoming out. IDC is predicting double-digit growth for the long-suffering PC sector. Semiconductor sales, ever the bellwether for the health of technology industry the world over, are predicted to rise 23pc this year, according to Gartner.
Shades of 2000 are returning in the form of a long discounted acronym – IPO (initial public offering). Eircom has become the first Irish company to IPO since 2000 and local stockbroker Goodbody Corporate Finance estimates that with over €500m in venture capital funds, Ireland is ahead of the rest of Europe in terms of venture capital as a percentage of GDP and that investment in Irish technology companies could be up 40pc in the coming year.
With the all-pervading “tide has turned” mentality that appears to be colouring everyone’s language and sentiment right now, it may come as a surprise to many to hear that there is evidence that in 2003 more Irish technology companies went to the wall than in the black year that was 2001 when the technology downturn was in full swing.
Each year for the past three years ex-Accenture employees John O’Connor and Caroline Wardle of HotOrigin track the health of Ireland’s indigenous software sector and publish an annual report. Meticulously researched, the document stays on my desk all year round.
Each year, a new theme comes to bear. In 2002 it was cost-cutting and falling venture capital investment. In 2003 the major theme was that Irish companies had to learn how to sell properly. With a report due in May, O’Connor is well into his research. “From what I am seeing, my main suspicion is that sales and revenue generation is still a big problem for Irish technology companies. We’re still a relatively immature industry and there are not enough seasoned professionals driving the indigenous industry.
“My feeling is that we have probably seen more failures in the software industry in the past 12 months than two years ago. This may be due to the fact that in 2002 there were many companies hanging on for dear life and had made it through at that stage. Even though the market has picked up a lot, there are a lot of examples of people who ran out of cash and lost their nerve. There were more failures in 2003 than there were in 2002,” O’Connor states bluntly.
On a more optimistic note, O’Connor says that the companies that remain today stand to reap rewards if the technology market has indeed bottomed out. “People who’ve made it through are in much better shape. Getting through two-to-three bad years is not a bad thing and if you’ve made the sales then you are in pretty good shape for the future.”
Goodbody Corporate Finance director Mark O’Donovan qualifies succinctly. “Hard lessons have been learnt in getting companies into profitable situations.”
It is clear those failures of three or four years ago no longer matter. The harsh lessons of jumping through hoops, losing dedicated workers, learning how to sell and battering a company into shape, make more compelling reading.
By John Kennedy