As part of a global business that has grown stronger the longer the downturn has gone on, Tim McCarthy (pictured), general manager of Dell Ireland, has more reason than most to be cheerful about the future of the tech sector.
But even he is hedging his bets about when the much-heralded recovery will come. The key signpost to global recovery will be corporate profitability, he believes.
“Technology is an important percentage of any company’s spend and is very heavily dependent on profits. While global profits are down it’s very hard to see how large-scale tech spending is going to come back. I think that’s the key driver,” he says.
He shares the consensus view that global recovery is not imminent, certainly not before the second half of next year, but he is upbeat about the outlook for Ireland’s tech sector.
“I feel good about its prospects,” he says. “We’re at the bottom of a business cycle that will end at some point. When it does, assuming we have the skills in place, we’re ideally placed to take advantage of it. We had a similar situation back in the early-Nineties when we had a mini-recession and people weren’t very positive about the economy, which was just before the next wave of growth hit.”
In his view, productivity will be the key to Ireland’s performance over the next few years. With other locations around Europe able to beat us on wage costs, high levels of skill and productivity will be essential if US multinationals are to continue seeing Ireland as the best place in Europe to invest.
“We used to be a low-cost, low-tech economy. Now we’re a medium-cost, medium-tech economy. It’s cost per unit of output that matters. From a Dell perspective that has been a huge focus. Over the last three years when costs were rising, we concentrated on still being the most productive facility that Dell has anywhere. The same is true for Ireland – we’ve got to out-produce any new competitors that come our way,” says McCarthy.
Being productive doesn’t just happen, he adds. It requires an intensive effort on the part of industry to train and re-train staff to enable the economy to ‘move up the food chain’.
With the tech sector in recession, the skills shortage has eased considerably compared with two years ago. Rather than downplay the skills issue, however, we need to prioritise it to prime the economy for future growth, which is why he finds it worrying that the number of students taking science and engineering in second and third-level education is falling. “If we’re going to be an exporting, productive nation, we’re going to need a lot more scientists and engineers than we currently have,” he observes.
Infrastructure must be another priority. Ireland compares poorly with other countries in terms of transport and communications infrastructure, not to mention PC usage and internet penetration. “In some cases, we’re half the penetration of Scandinavian and other countries and this will come back to bite us in time if we can’t address it,” he explains.
Summing up, McCarthy says Ireland Inc has a lot going for it, but careful management is the key.
“We definitely have challenges, but if we address them and make sure our cost base stays in line, because we’re competing in a global marketplace, I’m sure we can take it forward. We also need to make sure we have the engineers and scientists that will drive the economy in years to come,” he concludes.
Outlook for tech sector: good to very good