"The companies surveyed have increased the numbers involved in software development by over 30% in the past three years. However, given the shortage of suitably skilled workers domestically, there is a danger that thousands of jobs could be created overseas rather than in Ireland,” commented Professor Brian Fitzgerald, chief scientist at Lero.
The report suggests that indigenous companies, which make up almost 80% of the total number of software firms in Ireland, have created employment faster than foreign/multinationals over the last three years. The indigenous firms which responded to this survey grew their software-related employment by 39%, while multinationals grew theirs by 23%.
Professor Fitzgerald added: “The Irish software industry has the potential to be one of the core engines of Irish economic growth, high income employment and exports but we need to address a number of critical issues including a skills shortage.”
He said that a major barrier to growth is the availability of skilled technical staff. For indigenous firms, accessing personnel with appropriate sales and marketing expertise is also a major challenge.
“The challenge is particularly acute for our vital indigenous sector as graduates tend to be more attracted to multinational household names. Even amongst multinationals there is the danger of an ‘arms race’ whereby firms compete for top graduates, salaries are pushed up and, as a result, Ireland loses competitiveness.”
He said that it was significant that after lack of availability of able technical employees, multinationals cited competition from low cost countries as the second most limiting factor for future growth. “This is a wake up call that competition from low cost countries reflects the fact that the software industry is truly a global one and Ireland cannot afford to be complacent.”
The report finds that access to venture capital funding especially to second round, the vital growth stage, remains challenging for many indigenous software companies.
“The study confirms that Ireland hosts a vibrant software industry with tremendous potential to be a global leader,” continued Professor Fitzgerald. “But the UK has now moved ahead of it in relation to incentivising investment and a number of Eastern European countries have eliminated income tax for software employees. Ireland needs to review its current investment and taxation policies to ensure that it does not lose out to more highly incentivised models in the UK, including N. Ireland, and Eastern Europe.”
In noting how pervasive software and innovation are across all industry sectors, Dr Eoin O’Sullivan, Director of the Centre for Science, Technology & Innovation Policy at the University of Cambridge commented: “Our survey’s respondents included physical product manufacturers – notably ICT hardware, electronics and medical devices, but also firms in emerging sectors such as green technologies and even traditionally less software-intensive sectors, such as food and agribusiness. In particular, the number of respondents which produce embedded software for devices or production technologies is worth noting given such software can be high value-adding and is likely to become ever more prevalent in high tech products and manufacturing systems.”
Professor Helena Lenihan of the Kemmy Business School at the University of Limerick added that the shortage of suitably qualified Irish candidates has encouraged companies down the route of inward immigration.
“Currently somewhere between 40% and 55% of jobs are filled in this manner. These immigrants make a major contribution to Ireland but more attractive tax jurisdictions may attract them home. It would be a real missed opportunity if the success of the Irish software industry had more employment significance for Eastern Europe than for Ireland.”
The report finds that the structure of the Irish software industry has changed. “The dominant business model is a blended products and services model, with the latter very much complementing the product business. This is a significant change from the all too common problem of the past where services were a way of earning revenue but a distraction from the main product business”.
The survey also highlighted a number of key technology platforms of growing importance to driving the competitiveness of Irish-based firms, including cloud computing, data analytics and cyber-security
The report suggests that building Ireland into an internationally renowned global software centre may require understanding by policy makers that margin and sales growth are more important priorities to owners and investors than jobs.
