Ireland strikes back
It was always going to take something special to help dispel the jobs gloom – so who better than a jedi knight to bring some good news? Gaming giant Electronic Arts (EA) plans to hire 200 people at a customer service and operations centre in Galway after landing a deal to develop a Star Wars video game. It is expected that many of the new Irish recruits will work on the project.
Last week’s EA jobs announcement was a welcome fillip for IDA Ireland, which has an ambitious plan to attract 62,000 jobs over the next five years.
The IDA has spent the past year tempting EA to open its first base in Ireland, and is supporting the investment.
For Barry O’Leary, chief executive of the IDA, the technology sector is a bright spot in an otherwise difficult investment environment, with internet firm Webroot also announcing a move into Ireland last week.
It is creating 50 jobs at an international HQ in Dublin.
‘‘The technology sector and related areas are in growth mode,” said O’Leary, who had to tackle bad news in recent days, as news broke of planned layoffs at big-name firms including Covidien and Pfizer.
Against that grim backdrop, O’Leary pointed to a list of tech firms that were expanding.
These firms include Facebook, which has hired 100 people in Dublin; eBay and PayPal, which are recruiting 350 extra staff; and Japanese gaming firm Gala, which is adding 100 more jobs. Other expanding technology firms range from household names such as SAP and LinkedIn, to lesser-known firms like Bentley Systems and Maxim.
A recent announcement by IBM, that it would set up abase in Dublin to research ‘smart cities’ was ‘‘one of the most exciting in years’’, said O’Leary.
There is also expansion in the related telecoms sector, with Telefonica, the parent of O2, creating 100 jobs through a €25 million investment in a ‘people services centre’ in Dublin.
‘‘Telefonica is a particularly good one to get,” O’Leary said.
‘‘Up to now, its involvement in Ireland was through O2, but it will now carry out international activities in Ireland for the first time. It is a really good brand name for our marketing worldwide.”
The good news for the IDA, and the Irish economy, is that the technology sector seems to be weathering the economic storm quite well. Even as the fallout from the property bust has spread to retailing and other sectors, tech firms have quietly gone about their business.
The Sunday Business Post last week revealed that internet giant Google was creating 200 jobs in Dublin, bringing its workforce in Ireland to about 1,800. Apple has also been expanding, hiring 500 more staff in Cork over the past six months.
Irish tech companies are also bucking the trend, attracting investment and buyers, despite the downturn. According to NCB Corporate Finance, seven major IT deals were concluded in the first quarter of this year, including the €22 million buyout of Irish Business Systems by Xerox and the $20 million takeover of Donegal firm Iontas.
Tech companies are still springing up around the country, including many set up by people who had lost their jobs elsewhere. The level of employment in the wider technology sector is up and insolvencies in the area are falling, according to accountants FGS. So what is the sector’s secret?
According to Paul Kerley, chief executive of Norkom, it comes down to one word: maturity.
Norkom had a near death experience after the dotcom bubble burst ten years ago, and Kerley had to completely rebuild his firm. It floated on the junior markets in Dublin and London in 2006, and is now valued at about €135 million.
The share price of the firm, which makes anti-fraud software for banks, rose over the past year while the majority of stocks were under fire.
‘‘We have been here before, with the dotcom crash. We have learned how to survive a crisis and build a resilient business model,” said Kerley, who founded Norkom in 1998.
He said that the dotcom crash took out a lot of the weaker companies in the sector, leaving mainly strong businesses with solid business plans.
‘‘The crash weeded out a lot of the poorer technology companies. It is institutional change,” he said. ‘‘It is happening with the banks now – the bad banks are getting taken out.”
Serial entrepreneur Dylan Collins, who has built and sold a number of gaming companies, said he expected a surge in the number of technology related businesses over the coming years. Collins, the founder and chief executive of Jolt Online Gaming, said it was cheaper and easier than ever to set up an internet or technology business.
‘‘Technology has reached the stage where it is far cheaper to establish an online shop than an actual physical shop, and you have a much bigger potential market,” he said. ‘‘Open a shop and your market is the street. Open a virtual store and your market is the world.”
Collins knows the merits of international expansion – he sold a majority stake in Jolt to GameStop, the world’s largest video game retailer, and one of his computer games has been branded on a Nascar race car.
His business is very different to Kerley’s Norkom, but what unites them – and Ireland’s other technology companies – is their reliance on innovation and international focus. For a government that is pinning its hopes on exports and a so called ‘smart economy’, this is a highly attractive combination.
‘‘Ireland’s economic recovery will be export-led, and information communications technology will be one of the most significant sectors in driving that effort,” the Department of Enterprise, Trade and Innovation said in a recent statement. The department estimated that the indigenous software sector generated annual sales of €1.4 billion, most of which are exports.
The Irish Software Association (ISA) estimated that Irish based ICT companies accounted for €20 billion in revenue terms. Of this, 36 per cent went to Britain and 33 per cent to the US, insulating the sector from the Irish recession.
‘‘The tech sector is surviving because it is global and because it is export-orientated,” said Sean Gallagher, the Dragons’ Den star and founder of Smarthomes, which puts high tech cabling into houses.
Gallagher has invested in a range of companies and said that technology companies had one big advantage: ‘‘They are not reliant on the domestic market.” Greg Turley, founder of Cartrawler, agreed. The Irish company makes booking software for the car-hire sector. It employs 71 people in Ireland, but generates almost all of its business abroad.
‘‘In this sphere, you can be a global company from Ireland,” Turley said.
Many technology firms have also avoided the worst of the credit crunch because, even in the boom times, there was relatively little money going into the sector. During the boom years, banks preferred to fund property deals, rather than risky software ventures.
Instead, technology companies secured money from informed investors and venture capitalists, which has proved a blessing, according to Gallagher, who recently resigned from Smarthomes to concentrate on his other investments.
‘‘Banks give a loan, and then ask for interest payments. VCs make an investment and then they provide expertise and guidance. Companies who get venture capital funding do better and grow faster,” he said.
One of the venture capitalists to have ploughed significant sums of money into young Irish technology and life sciences companies is Niall Olden, the managing partner of Kernel Capital in Cork.
Olden said that more technology companies had received investment in the first five months of this year than in the past two years combined.
‘‘New companies are getting new money. It is a good time to be in the technology industry,” said Olden, whose firm has invested in 35 companies. They include Intune Networks, an Irish firm that has claimed to have solved issues of internet speed and quality.
‘‘There was a misconception out there that tech and life sciences companies were risky.
But, in fact, you are backing value and investing in a god idea. I would prefer to invest in intellectual property [rather] than physical property,” said Olden, who said he expected the sector to grow significantly.
The IDA has identified areas such as cloud computing, services innovation and so called clean technologies as sources of future jobs, while the government intends to increase the supports to the sector.
‘‘The government will ensure that the mix of incentives, direct supports and advice are available to support the smart economy effort,” the Department of Enterprise said.
Enterprise Ireland has placed a particular emphasis on developing indigenous software firms. Of the 73 companies recently selected by the development agency as high potential start-ups, 61 per cent are software or technology companies.
Mike Fitzgerald, chief executive of Altobridge, said that Enterprise Ireland ‘‘really stepped up to the plate’’ for young tech firms.
Altobridge has spent seven years developing technology that slashes the cost of providing mobile phone coverage in isolated locations.
‘‘A lot of guys like ourselves are leaning heavily on EI to get into overseas markets,” said Fitzgerald, who last week opened an office in Jakarta. ‘‘They perform a great function and are one of the reasons for the strength of the sector. The banks stepped out, and they stepped in.”
That will be a welcome boost for the government. The battle for jobs continues, but as EA and its new Star Wars game have shown, at least the force is strong in one sector.
