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News : Innovation Last Updated: Jun 11, 2015 - 9:43 AM

Irish Digital Technology Index 2014: Superlatives a plenty but...
By Michael Hennigan, Finfacts founder and editor
Jun 30, 2014 - 2:00 AM

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Irish Digital Technology Index: The Irish Software Association (ISA), a unit of Ibec, the main business lobby, today published an annual survey that has lots of superlatives but as hype is not uncommon in high tech, a reality check is required.

What is termed "a comprehensive new survey of Ireland's indigenous technology companies today shows a significant rise in confidence levels, with 81.5% stating that they were more confident about their business than they were three months ago; this compares to 62.5% in August last year. However, despite significant successes, not enough Irish companies are making it big. Opportunities for collaboration between indigenous companies and global players based here needs to be exploited and access to finance must be improved."

The Irish Software Association says the index [pdf] which is published in association with Tenego Partnering, examines the health of the sector and business sentiment among indigenous digital tech companies. It also identifies key growth opportunities.

CSO data show that 81,000 were employed in the 'Information and Communication' in Q1 2014 up 4,000 on Q1 2013 while 'Professional, scientific and technical activities' numbers rose from 104,000 to 116,000.

Gartner, the US IT research firm, has estimated that only about half of the staff in Irish-based Information and Communication firms are technology professionals.

The ISA says that there are 1,056 technology companies located in Ireland, ranging from startups and SMEs, to large international and multinational companies, "with an ever-growing number of Irish owned multinationals." Over 103,000 people are directly employed in both Irish owned and foreign direct investment (FDI) technology companies in Ireland. "With the number of Irish owned technology companies continuing to grow, we have now estimated 806 indigenous companies, with total annual revenues over of €1.8bn," up from 730 in 2013.

39% of the indigenous companies have less than 10 employees and while the report says: "Ireland has a strong throughput of startup companies, supported by 25 incubation centres, alongside numerous enterprise development and accelerator programmes across the country. In 2013/2014, 220 companies were accepted into these programmes, with 71% of companies successfully bringing a product/service to market," there is not useful data on startups.

Enterprise Ireland has told Finfacts in the past that the tech companies it supports had a 90% survival rate over a decade, the failure rate in the US has been reported as high as 90%.

There are over 15 venture capital and investment organisations investing in the digital and software technology sector.

As in Europe, public funding of about 40% of VC investments is provided by the Irish Government.

72% of indigenous firms have annual revenues of less than €1m.

The estimate of Irish-owned firm employment is over 10,000 and the report says  "respondents representing in excess of 5,000 employees participated."

The survey found that confidence is high, with 81.5% of respondents stating they were more confident about their business than they were three months ago, 94% stated they expected revenues to increase over the coming three months, and 87% expected an increase in export revenues. R&D expenditure is expected to rise for 67% of participants, up from 58% in August 2013, and company profitability is expected to rise for 70%, compared to 66% in August 2013. On a less positive note, almost 17% of respondents indicated that their input costs have increased between August 2013 and Q1 2014.

Collaboration: In relation to opportunities for indigenous technology companies to grow their business, collaboration with the foreign direct investment (FDI) community here was identified providing major growth potential. In the survey:

  • Licensing unused IP: 88% indicated that licensing unused IP to indigenous companies on preferential terms would be beneficial;
  • In-company executive education: 72% of participants said that they would benefit from in-company executive education programmes;
  • Bundling/licensing of products: 70% expressed their belief in the value of bundling/licensing of FDI and indigenous company products as a single offering.

Edel Creely, ISA chair and managing director of Trilogy Technologies said: "The sector is powering ahead. Ireland's strong international reputation means new indigenous companies are setting up and multinationals are being attracted by the competitive business environment and availability for skilled labour. But key challenges need to be addresses for the sector to fully realise its potential.

"Access to finance remains a challenge, the Central Bank numbers show that the level of credit outstanding for the technology sector has been largely unchanged over the last two years, despite growth in the sector. The tech industry has benefitted from the experience of successful entrepreneurs investing and advising new start-ups, but more need to ensure they have adequate access to finance. Government must enhance tax-based investment schemes and the venture capital environment, as well as introduce state-backed capital funds.

Donagh Kiernan, founder and CEO of Tenego Partnering said: "Ireland ranks first for availability of skilled labour, however, the skills demand in the sector remains a concern. Industry must continue to work with government and the education institutions to increase the uptake of STEM subjects, and provide quality conversion course to ensure people have the right skills. We must also encourage the development of critical communications and broader business skills."

"The technology sector has proven to be resilient and innovative during the crisis. This survey shows how confidence continues to grow across the board in the industry with as many as 87% expecting an increase in exports. However we must not be complacent. By showing leadership business will be able to deliver more jobs and sustainable growth."

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