The year ahead for the Irish software industry will consist of mergers and acquisitions as well as teaching the sector how to sell in order to grow revenues.
What comes first, the chicken or the egg, the revenue or the actual sale of something? It seems miraculous that faced with this conundrum since its inception, the indigenous Irish software industry has managed to somehow remain intact despite going through the biggest ever downturn and a recent war. The fact is Irish software companies lack the sales skills that are commonplace and expected in the boardrooms of the world’s biggest corporate players; we’re just not at the races.
According to Donal Daly of International Ventures and author of the Irish Software Association’s (ISA) report entitled Software Industry Outlook 2003, this lacklustre sales performance is not just an issue that is hurting the software industry but all sectors of Irish business; not a good thing for an export-oriented nation. “There is no professional sales education in this country, no one grows up wanting to be a salesman. It’s a mindset in Ireland that it’s a dirty thing to sell; in the US the salesman is king. The fact is that the success of any small company is entirely dependent on sales and the respect that Irish firms give the sales function and the ability to execute sales strategy is sorely lacking,” Daly warns.
“Salespeople are viewed as taboo, as people with an inherent talent or knack of selling rather than something that is trained professionalism…an art rather than a science. That is rubbish. It’s a discipline like engineering and needs to be learnt in all aspects of Irish business, just like in the US.”
Daly’s cutting criticism echoes a sobering realism voiced by over 220 senior executives of Irish software companies that revenue growth is the key challenge for the Irish software sector and that investment in sales and marketing is essential. The global downturn is an area of real concern for Irish companies and events in the US have reduced their focus on that market. The UK has returned to vogue as a growth market, followed by the domestic market and the eurozone, with the US trailing in third place. As well as this, 75pc of Irish software companies are accepting the possibility of merger and acquisition activity as being a possible strategic route for growth or survival.
The ISA study found that almost three quarters (71pc) of Irish software companies expect revenue to increase this year over last year, while about half (48pc) plan to increase employment in 2003. Almost nine out of 10 (86pc) see revenue growth as their key challenge – a challenge solidly backed by the local venture capital community, whose current tactic is not to invest in companies unless they have a proven revenue stream.
Less than half (39pc) of software companies are seeking funding this year. Targeted funding sources are identified as venture capital (22pc), Enterprise Ireland (16pc), EU funding (16pc), bank loans (8pc), business angels (6pc) and business expansion schemes (5pc).
Kathryn Raleigh, director of the ISA at IBEC, notes some obvious obstacles: “One of the more worrying factors in the drive for revenue is the expectation by a significant minority of companies (two out of five) that they can grow sales without spending more on sales or marketing.”
“The industry needs a sustained series of initiatives to fundamentally impact the apathetic sales psyche that has prevailed for too long,” says Donal Daly. He refers to initiatives such as the SalesStar programme run jointly by the ISA and Enterprise Ireland aimed at assisting companies to develop their international sales and marketing activities.
Despite the need for all sectors of Irish business to grasp the fundamentals of international sales capabilities, Daly is upbeat about the potential of the indigenous software industry in the medium term. “The situation – with the downturn, the war and health scares like SARS [severe acute respiratory syndrome] – is no worse than it was 10 years ago. In many ways, this is a great time to do business. It is a much better environment and far more conducive to growth than the early Nineties. In terms of infrastructure and confidence, the industry is in a much better place than it was 10 years ago and there is no reason why we can’t experience the same level of growth. That said, the professionalism of sales and marketing efforts in Irish firms sorely needs to be enhanced,” Daly concludes.
By John Kennedy
Kathryn Raleigh, director, Irish Software Association, and Donal Daly, International Ventures and author of Software Industry Outlook 2003