Because indigenous software companies are more likely to carry out R&D and innovation in areas most beneficial to Ireland’s knowledge economy they are well positioned to drive the country’s future economic growth, the Irish Software Association (ISA) pointed out in its pre-Budget submission.
The organisation said that the sector has the potential to reach employment of 50,000 people and deliver revenue of €7.5bn to the economy.
However, barriers to growth such as minimal public sector procurement of Irish software need to be removed first.
Among the suggested remedies to this anomaly include establishing a “weighting” in award criteria for larger companies who subcontract aspects of their tender to SME as in other EU countries like Germany.
Financial capacity criteria also needs to be amended such as reducing the ratio of required turnover to project cost. At preset this restricts SME involvement in public sector contracts.
Also suggested is the option of dividing contracts into components where SMEs can provide better value for money solutions for the public sector.
Boosting innovation is a strong theme in the ISA’s pre-Budget submission and the organisation has suggested the offering of tax credits on PRSI contributions for technical staff carrying out R&D projects in SMEs without tax liability.
It also called for the establishment of R&D tax credit schemes to match incentives schemes in other EU and North American countries as well as creating a ‘Young Innovative Company’ status scheme that allows SMEs to invest more in research.
“Ireland’s knowledge economy requires companies to be innovative. However, many SMEs are not able to avail of tax credits and must bear the entire cost of R&D. SMEs should be able to offset the cost of investment against PRSI contributions on R&D staff,” explained the chairman of the ISA, Pat Brazil.
“This will stimulate product and service innovation in the economy,” he said.
The problem of fewer students doing honours maths in their Leaving Cert and fewer opting to study science and computers at third level has also been raised in the submission and the ISA reiterates its call for the introduction of bonus points for maths and science and certain third-level courses.
The ISA also called for increased use of technology in the education system in delivering syllabus as well as increased levels of financial and career support for maths and science teachers.
In terms of investing in software companies, the ISA has called on Finance Minister Brian Cowen TD to build on the success of securing Business Expansion Scheme (BES) funding at an EU level by enabling the creation of private sector BES funds as well as allowing for numerous BES funding rounds for technology firms.
By John Kennedy