The Irish software industry: Anatomy and development (51)

Theme Track: Regional Competitiveness - Regional Cooperation and Cluster

Author:
Crone, Mike

Over the last decade, the Republic of Ireland has emerged as a hotbed of software development activity and a key node in the global software industry. Software has been one of the leading sources of employment growth in the Irish economy; software employment grew at a rate of 19% during 1990s compared to 6% for total employment. In total, there are more than 800 software companies located in Ireland, employing over 25,000 people and generating a combined turnover of over IR£6 billion. To some extent, the development of the Irish software industry has been driven by foreign direct investment. Most of the world`s leading software companies (mainly US multinationals) have operations in Ireland (e.g. Microsoft, Oracle, Lotus, Symantec, Sun Microsystems). However, the emergence of an indigenous Irish software industry - with over 11,000 employees and annual revenues in excess of IR£1 billion by the end of the 1990s - is arguably of greater significance. It is the vibrancy of the indigenous sector that distinguishes software from other leading sectors of the Celtic Tiger economy (e.g. ICT hardware manufacturing, pharmaceuticals and medical instruments) which have grown almost exclusively on the back on foreign investment. The indigenous software sector generates more than 60% of its revenues from exports, has growing revenues per employee and is increasingly innovative. Several leading indigenous software firms have grown to a position of international prominence and listed on public stock markets including the US Nasdaq (e.g. IONA Technologies, SmartForce, Baltimore and Trintech). The paper explores the nature of the Irish software phenomenon; firstly describing its anatomy and key characteristics and secondly exploring the factors and processes contributing to its dramatic evolution. Particular attention is paid to the indigenous sector. In respect of the anatomy of the Irish software industry, the paper highlights the distinctive character of the foreign-owned and indigenous segments. The foreign-owned segment is largely dominated by US multinationals carrying out relatively low value-added activities such as software localisation, manufacturing and distribution to the European market whereas the indigenous segment consists mainly of small and medium-sized Irish firms developing niche software products for export to UK, Europe and US. Another interesting feature of the Irish software industry is its geographical concentration - 76% of firms and 83% of employees are in Greater Dublin. The development of the Irish indigenous software sector is shown to be the outcome of a complex of web of favourable factor conditions, supportive institutions and astute company development strategies. The Irish State has played an important role in underpinning all three of these areas. Whilst the Irish software industry has some of the characteristics of an industrial cluster or regional production system, it is also globally networked on a number of levels. These global links have played an essential role in its evolution.

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