More and more Irish tech firms embrace spin-out culture

10 Feb 2011

There’s growing evidence of new spin-out companies emerging from established Irish technology companies. The new spin-outs in most cases have the potential to outgrow their parent companies and become established global brands.

Until recently, when you heard the term ‘spin-out’ it usually meant a company that has emerged from commercialisation or advanced research in a college or university. But now there is a trend where home-grown technology companies that have stumbled on a new product or service through serving existing customers are feeling brave enough to go global with their idea.

Pearse Coyle of Corporate Spinouts, a former Iona, Trintech and Eurologic executive, advises technology companies that are spinning out new businesses.

“Technology companies come across many latent opportunities for new business opportunities but often they don’t exploit them because of management’s lack of time or the perception of difficulty associated with starting up a company. In a lot of cases, many think the idea is too small or just a distraction. But now successful technology companies are allowing executives to run with an idea.

“In a lot of cases I deal with a person who may have found a compelling product or service idea but are afraid to speak to the boss or contemplate negotiating with the parent company. But attitudes are changing and companies are beginning to take stakes in businesses that employees believe can be spun out or just enjoy the positive PR when a business emerges.”

Spin-out approach

Coyle models his approach to spin-outs on Peregrine Systems, which emerged out of a project at AIB to handle credit card charge backs and credit control. A number of executives there found a way to automate charge back processing and told AIB they could turn it into a product. AIB agreed and took a 5pc royalty on transactions.

“Twelve banks around the world had deployed the technology before Peregrine was bought by Trintech.”

Among the companies in spin-out mode today is Dublin-based company Tel-Com, which has been in business for more than 10 years supplying PBX systems to businesses. The company came across clients who had been hit by PBX fraud where fraudsters direct calls on businesses’ phone systems to premium-rate numbers.

Tel-Com got to work on spinning out a cutting-edge anti-fraud business called PBX Wall that monitors businesses’ inbound and outbound voice channels and detects if fraudulent calls are being made.

“PBX fraud is a global problem and is estimated to cost firms $45bn annually,” explains PBX Wall’s Paul Byrne.

The spin-out has been identified by Enterprise Ireland as a high-potential start-up. PBX Wall is in the process of raising seed capital and intends to aggressively target this $45bn market.

“We’re identifying the best route to market in terms of partners and we’re field trialling our technology before we commence global rollout,” Byrne says.

OnePlace’s work

Another example of an emerging spin-out is OnePlace, which emerged from the Wicklow-based IT consultancy Ability Software. OnePlace, headed by Ronan Minogue, has created a middleware that sits on top of insurance companies’ back office systems, many of which are 20 years old.

The OnePlace middleware effectively enables these legacy systems to perform modern functions, from email to SMS and social networking via Facebook and Twitter.

“We developed a layer that sits on top of existing insurance systems to create a platform to communicate news and derive reports.”

Minogue says the project emerged from consultancy work Ability was doing in the UK. “The customer was happy for us to adopt a licensing model. We could roll it out and they would benefit in the long run.”

He explains that OneCall is targeting European, South African and Australian insurance firms with the technology that transforms old systems into modern, 21st-century systems. Typically, potential customers would have 80 sites across Europe.

“We haven’t taken on any investors for OneCall yet and there’s a chance we won’t need to; if we achieve the target we have set for ourselves our spin-out business could be self-sufficient,” Minogue adds.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years