Innovation
Dublin's Silicon Docks: Separating hype and reality
By Michael Hennigan, Finfacts founder and editor
Jan 22, 2015 - 6:17 AM

Printer-friendly page from Finfacts Ireland Business News - Click for the News Main Page - A service of the Finfacts Ireland Business and Finance Portal

Click for full scale [pdf]

California's Santa Clara and San Mateo counties were called 'Silicon Valley' by Don C Hoefler, a journalist, in a series of articles in 1971. He had begun his career in electronics journalism as a publicist for Fairchild Semiconductor, which had pioneered the development of the silicon microchip. The tag 'Silicon' has become popular across the world - e.g. Silicon Glen and Silicon Fen in the UK - and in recent times, the area of the south inner city Dublin around the Grand Canal Dock - near the confluence of the Grand Canal, and the rivers, Liffey and Dodder - has been developed and several American companies, led by Google on Barrow Street and Facebook, Twitter, LinkedIn, Dropbox, venture capital companies and others, have established operations in the area, which has been dubbed Silicon Docks by tech or policy folk.

The decision of Charles Haughey, taoiseach / prime minister, in the late 1980s to actively support the development of an offshore finance centre in a once bustling dockland area that had like London's Canary Wharf  become dilapidated over a long period, was an inspired one and the Docklands Business Forum estimated for an Oireachtas committee in 2014 that employment in the area was at over 40,000 including over 25,000 employed in the IFSC (International Financial Services Centre) area alone [pdf].

The Silicon Docks area is part of Docklands and instead of a sometimes cited direct jobs total of 40,000, the number of tech professionals working in technology firms in the area may well be at about 7,000 - see below for more data.

'Silicon Docks: The Rise of Dublin as a Global Tech Hub,' a book written by "a team of journalists who have been covering this story for years, led by Irish Times business journalist Pamela Newenham, and including Joanna Roberts, JJ Worrall, Elaine Burke, Philip Connolly, Emmet Ryan and Ciara O’Brien" has recently been published and The Irish Times publishes two extracts today:  'A seismic shift for Dublin: how Google was persuaded to set up shop in Ireland'; 'Just being sociable: IDA business development executive John Nugent’s crusade to bring Facebook and Twitter to Dublin.'

How much of a "seismic shift" was Google's decision to locate in Ireland when it was likely aware of Microsoft's tax arrangements and it then used the same Dublin law firm as the software giant.

In 2005, The Wall Street Journal brought attention to Microsoft's efforts to route for example profits on sales in Germany to Dublin on which the software firm paid Ireland at the low headline tax rate of 12.5%. The Journal said a subsidiary, Round Island One Ltd., operated from the offices of a Dublin law firm and was one of the country's biggest companies, with gross profits of nearly $9bn in 2004 but it had no direct staff. Google and Facebook then followed on Microsoft's trail.

The Journal said much of Round Island's income was licensing fees came from copyrighted software code that originated in the US. Some of the rights to these lucrative assets ended up in Ireland via complex accounting rules on intellectual property

Through a key holding, dubbed Flat Island Co., Round Island licensed rights to Microsoft software throughout Europe, the Middle East and Africa. Thus, Microsoft routed the license sales through Ireland and Round Island paid a total of just under $17m in taxes to about 20 other governments that represented more than 300m people and $300m in taxes to a country of just over 4m.

WSJ report

The Amazon blurb for 'Silicon Docks: The Rise of Dublin as a Global Tech Hub,' says: "Silicon Docks contextualizes the impact of the sudden spurt of technology companies, from the sudden rise in real estate and enterprise in the area to the instigation of conferences and the influx of immigrants. The impact of the Silicon Docks is far-reaching and powerful."

We haven't seen the book but it would be welcome if it is a departure from a system where there is very little critical analyses with ministers and State agencies chiefs never entertaining downsides while most technology journalists like their property counterparts during the bubble, acting as cheerleaders.

While IDA Ireland, the inward investment agency, does a good job, Finfacts is always happy to make the communications staff angry by presenting unpalatable facts. Credit where it's due, they are also very helpful too.

Hype and the tech world are handmaidens but there was silence when Elan, an indigenous biotech firm founded by an American resident in 1969, first became a shell operation and then it was sold off to an American white-label manufacturer - in 2001, Elan was the 20th most valuable drugs company in the world.

It was also extraordinary in 2006 when a new public science policy was announced and no lessons had been learned from the demise of the indigenous  tech firms that had triggered high hopes in the 1990s. By 2008, IONA Technologies was sold off to an American firm of more recent vintage and today employment in the indigenous tech sector is about 10,000 - equivalent to the combined employment in the Irish operations of Apple, Intel and Google.

Last November, we published research on the Irish startup scene here:

Dublin Web Summit 2014: Separating hype and reality - Paddy Cosgrave, co-founder of the Web Summit commented in a tweet: "Phenomenal level of research + info in this post about Irish tech policy & startups in general"

  • A global tech hub - with the majority of jobs in administration and hired from overseas for their language skills, it's maybe a little premature in reality to put the area in the same league as Silicon Valley- Europe's top ICT Hubs: Munich, London, Paris in lead; Dublin with rank of 16;
  • International Data Corporation (IDC), the US IT research firm, reported in 2013 that just over half of Irish staff in ICT (information and communications technology - or technologies) firms are tech professionals.
  • 70% of Google Ireland's staff are from overseas;
  • Patenting by resident (foreign + indigenous) firms remains very low;
  • The tech sector is seldom a jobs engine and most firms remain small. In the US, the sector is maturing [pdf] and innovation by the big firms is via acquisition of startups;
  • The oldest tech hub in Europe is located in the area around Cambridge University in the UK, known as Silicon Fen. After more than 50 years there are about 50,000 jobs in 1,400 high-tech firms in the cluster. The biggest success of the cluster is ARM Holdings, a chip designer whose technology has been in 50bn products shipped, from phones and tablets to smart sensors and servers. ARM is the UK's biggest high tech success but its global employment at end 2013 is about 3,000.
  • 40% of firms are micro and employ 1-5 people;
    20% of firms are micro and employ 6-10 people;
    Only about 2.5% of firms employed more than 200 people;
  • High growth firms are not typically from the high tech sector;
  • Daniel Isenberg, a former entrepreneur who created the entrepreneurship ecosystem project at Babson Executive Education and previously taught at Harvard Business School, wrote last year: "THE distinction between tech and non-tech entrepreneurship is false. Today, every business venture, entrepreneurial or otherwise, requires technology to be competitive, whether it is diamond trading, transportation, construction, or energy. There is nothing intrinsically more technological about Twitter and Facebook, say, than about Harley-Davidson or American Express. In fact, medical devices and alternative energy are arguably more technology-intensive, generically, than any of the report’s wide-eyed examples. Furthermore, for any business, anywhere, ignoring the opportunities and necessities presented by technology is backing light speed into oblivion, and no different than ignoring the existence of electricity or cars. And research is showing that as many, if not more, social and economic benefits of entrepreneurship accrue from non-tech entrepreneurship and that the new public policy focus on startups may be badly misplaced."
  • An Irish tech startup with international potential and venture capital funding does not typically scale up in Ireland - the promoters and VC cash out before the taxpayer gets a return: Enterprise Ireland said this month: "In 2014 we transferred a total of 29 clients employing over 700 people to IDA Ireland as a result of mergers and acquisitions that resulted in the Irish entity becoming majority foreign owned. These leading Irish technology players are expected to continue to grow substantially in the future and help embed MNCs even deeper in Ireland. It is a testament to the quality of their products and services that they have attracted the interest of the world’s best companies" - yes but that is hardly the best strategy: Focus on Irish food industry's bigger potential than chemicals or high tech.

Silicon Docks is a sexy story with the likes of Google and Facebook drawing attention - that is fine and the jobs are welcome but Patrick Honohan, the central bank governor, who is a former professor of economics, said in a speech [pdf] last March: "In the interests of robust diversification, most Irish economists observers would hope for a greater convergence towards normality in this aspect of Irish economic development, with a stronger emergence of innovative Irish companies alongside those steered from abroad."

Less spin and more inspired policy making is needed:

Ireland has 4,000 exporters, Denmark has 30,000

Ireland: Government explains how it understates recession job losses

Ireland: Government's spin and lies damage the economy


© Copyright 2011 by Finfacts.com