Source: Computerworld, September 15, 2003

Country Analysis: Ireland

The Irish software industry most closely resembles the Israeli software industry in that the focus is on providing a variety of software development and support services.  However, a large percentage of the software firms in Ireland are foreign owned, and most of the development work is geared towards supplying other European countries with software localization and translation.  Irish software firms do not compete with low wage countries such as India, China and Russia in providing low level coding and maintenance services.  Instead they have targeted niche software products and services from which they can add the most value.  They also derive a significant portion of their revenue from the implementation, internationalization and localization (adaptation to local European languages) of packaged software applications, rather than on development or maintenance of software.  Currently, there are over 640 Irish owned software firms¹ which export approximately Euros €1.3 billion² worth of software and services.  This figure includes both packaged software and outsourced software services for multi-national corporations.

The key success factors for the Irish software industry are Ireland's location, culture and low-cost business environment.  Ireland is conveniently located within six hours from the eastern US, and two hours from continental Europe.  This prime location, along with excellent transportation infrastructure has enabled the nation to serve as the primary software hub for US companies doing business in Europe.  Ireland also has tremendous advantages in that the official language is English, and that the Irish government has provided a very business friendly environment, which doesn't burden corporations with high-costs such as those in continental Europe.  All these factors have combined to allow Ireland to enjoy one of the fastest growing economies Europe, with particular emphasis on software and high-tech manufacturing. 

Human Capital

The indigenous Irish software industry, made up of over 640 firms, employees approximately 18,000 people.  The average Irish software programmer earns approximately USD $23,500 a year³, with senior level developers earning USD $40,000 a year⁴.  Obviously, the Irish software sector is much higher cost than that of India, China or the Philippines.  However, Irish programmers generally do not engage in the low-level maintenance work low-cost countries focus on.  Instead, one of the biggest strengths of the Irish software sector is that the skilled, highly educated workforce available in Ireland, allows Irish software firms to specialize in such areas as e-commerce, middleware, network security, network management and messaging software.  Unfortunately, Ireland's Achilles heel is that due to its low population (3.9 million in 2002) Ireland manages to produce only about 11,000 software developers a year⁵.  This pales in comparison to the 60,000+ thousand that Russia, China and India produce on an yearly basis.  Such low output of software talent will continue to drive up costs and limit market opportunities for Irish software firms in the software services sector. 

Telecommunications Infrastructure

Overall, Ireland has a very good telecommunications infrastructure.  However, the penetration rate for fixed-line subscribers remains relatively low by Western European standards, at 53.5 lines (per 100 population) for a total of 2,088,000 lines for the entire country⁶.  As for mobile subscribers, there were over 3 million mobile subscribers⁷ in Ireland in 2002, and mobile phone subscriptions overtook fixed line connections in 2000.  In terms of Internet use, Ireland is a very wired country, with over 50% of the nation on-line on a regular basis⁸.  The only downside to Internet use is that Ireland is far behind continental Europe in adopting broadband Internet services.  Ireland has ranked at the bottom of the rankings for broadband penetration among most European nations.

Government Support

The Irish government is one of the most aggressive and governments in all of Europe in terms of its support for the IT sector.  Ireland's tax rate, at 12.5%⁹, is the lowest in Western Europe.  The Irish government also offers numerous financial incentives to foreign corporations for most investments made in Ireland - form training to capital expenditures.  The excellent business climate, coupled with low taxes have played a major part in attracting, retaining and developing the software industry in Ireland.

Industry Association Support

The primary software industry association in Ireland is the Irish Software Association (ISA).  ISA is made up of over 200 foreign and indigenous Irish firms which represent most of the large software developers located in Ireland.  ISA's primary mission is to promote, lobby and consult with the software industry and Irish government regarding matters related to the Irish IT sector.  ISA also provides information and updates on the health of the Irish software industry and sponsors conferences and sales events focusing on the Irish software industry.

Regional IT Cluster

The dominant area for software firms and employment in the software industry is Dublin.  Dublin accounts for 83% of all software employment and 76% of all software companies¹⁰ (MNC or Irish-owned) located in Ireland.  Galway and the Cork area are secondary centers of software activity in Ireland.  All three sites are home to major universities, and have large business parks/National Technology Parks, which account for their popularity as software development centers.