Top tech brass lash out at rising costs


21 Oct 2004

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Senior management at five of Ireland’s largest technology employers – Intel, IBM, Oracle, Microsoft and Dell – have warned the Government that an unsustainable rise in the cost of doing business in this country is placing severe pressure on their operations and is tarnishing Ireland’s image in the eyes of overseas investors.

Michael Daly of IBM Ireland, which employs more than 3,000 people in Mulhuddart, Dublin, told siliconrepublic.com: “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.”

The general manager of Microsoft Ireland, Joe Macri, said that it was “disappointing” that Ireland remains in 30th position in the World Economic Forum’s competitiveness table published last week. “This is of particular concern because of the fact that our decline in the past three years is primarily related to performance in innovation and technology,” he said. There are more than 1,200 Microsoft employees based in Ireland, together with 400 full-time contractors.

Macri argued that the Government should closely follow recommendations made in the recent report of the Enterprise Strategy Group, in particular the right level of investment in education. “Specifically ICT in education is very important as is the need to ensure that the country’s infrastructure is upgraded.

“The cost of doing business in one country over another is always going to be a key factor when determining the selection of a location for companies. This is why the issue of corporation tax remains central as it is a key factor in Ireland’s overall attractiveness for foreign direct investment. Other factors include availability of a qualified workforce, the ability to work well with the Government and its agencies and access to the right kind of infrastructure,” Macri said.

Jim O’Hara, the general manager of Intel Ireland, which employs more than 4,700 people in Ireland and has invested €4.5bn in the country, drew attention to the recent National Competitiveness Council report that estimated electricity prices to industry in the past three years have risen by 40pc. As well as this, O’Hara points out: “Ireland has overtaken the UK and Sweden to become the third most expensive country in EU for consumer good 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.

The Government, O’Hara continued, must ensure the level of investment in infrastructure is maintained or increased in order to support the forecast growth of the economy in the medium term. He also argued that a serious focus on the level of regulation whether of national or European origin in order to ensure “our commercial flexibility and well-being in the future with the minimum bureaucracy”.

A year ago Nicky Sheridan, general manager of Oracle also drew attention “hidden costs of doing business in Ireland” and had to lay off 100 people, or 10pc of his company’s 1,000-strong workforce in Ireland, last year. In an interview with siliconrepublic.com, drawing attention to the World Economic Forum’s report on competitiveness, he said: “I would like to stress to the new Cabinet that competitiveness is not all about low labour costs, but critically about technology underpinning efficient work practices.”

Sheridan warned that increasing costs being borne by overseas industries are being exacerbated by the euro/ US dollar exchange rate, unresolved infrastructure issues (including the slow rollout of broadband) and the threat of an insufficient supply of people with the necessary skills to operate in a high-value knowledge economy.

Rising costs in Ireland’s economy are also of vital interest to Dell, which employs more than 4,000 people in Dublin, Bray and Limerick. Dell Ireland’s general manager, Tim McCarthy, said: “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.”

McCarthy continued: “In addition to maintaining the current corporation tax rate, the future economic growth in Ireland will influenced by a shift towards services as a major driver of gross domestic product growth. Ireland needs to focus on building technological and applied research and development capabilities to support the development of high-value products and services. Irish industry, not just technological or manufacturing, needs to focus energies on supply chain management innovation as a source of competitive differentiation. Dell has committed heavily in this area and our facility in Limerick is one of the most efficient in the world, as a result. We are currently sharing our experiences and best practice with our peers in Ireland as we strongly believe that managing efficiencies in this area will have a significant impact on competitiveness.

“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. Cost of doing business in a country is also a critical element and the rate of corporation tax is obviously important in this regard,” McCarthy warned.

By John Kennedy