Plugging into silicon success offers hope for economic recovery

IT’S rare that the opening of a corporate office can be regarded as really good news.

Maybe we’ve reached the stage of clutching at straws but the news this week that Twitter, the social media service, has chosen Dublin as the location for its first European office may be highly encouraging and significant for a number of reasons.

Let’s start with the fact that Twitter, along with other “cutting-edge” technology companies I’ll mention later, regard Ireland as a suitable location in which to base, despite the massive amount of negative publicity about the country in recent times and speculation as to its continued membership of the euro. That vote of confidence is important.

“Twitter is a fantastic addition to Ireland’s dynamic digital media cluster,” said the IDA’s chief executive Barry O’Leary after Monday’s announcement, which appropriately was made in a 140 character tweet and quickly trended around the world. (If you need it, here’s the explanation: twitter is a bit like texting, except you are limited to 140 characters and the recipients are all the people you have accepted as your “followers” rather than just the person you have decided should receive a text. Trending describes the most popular topics dominating twitter traffic in an area or globally, the putting of a #hashtag in front of a word or combination of words allowing for the measurement of what’s got the social media site abuzz).

We haven’t been told how many jobs Twitter intends creating and there is no guarantee of course that Twitter will use Dublin as a location for something big. Although I’m a regular use of the site, both for posting messages but more usefully for finding out what’s going in the world and being amused by the wit of various posters, I can’t see how it is going to end up making money because there seems to be no sizeable revenue potential, at least that’s obvious to me. Twitter is nowhere near as popular as Facebook for example. “As our international presence expands, we’ll continue to evaluate the need to designate a location for our non-US headquarters,” Twitter explained last week. Hopefully Twitter will continue to progress so that it reaches the size of needing a major non-US headquarters.

But the omens are good. When Google came to Dublin in 2004 it had plans to create just 300 jobs. Now it employs over 2,000 people. It took a major office block in Dublin’s Grand Canal Basin off the hands of Treasury Holdings for just over €100 million, removing at least one of NAMA’s main headaches. Facebook started with 80 people and now has 200 jobs in Ireland. When companies come to Ireland they tend to get bigger. Electronic Arts (EA), the American games developer that is based in Galway, has decided to hire up to 200 people for its call centre, who will handle customer support for its game Star Wars: The Old Republic. It will create 200 jobs at its call centre, doubling the number employed there already.

Zynga, eBay, PenPal and Linkedin are other new internet based companies that have chosen to locate major facilities in Ireland. Software developers such as Microsoft also have massive operations in Ireland, providing services to Europe and Asia, and the world’s choicest device developer and manufacturer, Apple, has maintained a long tradition of investment in Cork, being now to the City what Ford as a car manufacturer was a couple of generations ago. For all the stories of the likes of Dell moving part of their operations to Poland, dealing a hammer blow to Limerick with the reduced number of jobs, there are at least as many positive business stories to tell.

We cannot be complacent of course. We are in big competition for these jobs. There were other places Twitter could have gone. British Prime Minister David Cameron and Mayor of London Boris Johnson had sought very publicly to seduce Twitter into choosing a London location for its own Tech City UK project, known as “Silicon Roundabout”, a cluster of hundreds of start-up companies in the Shoreditch area. East London has its own “Silicon Valley” and the British were hoping to replicate this at Tech City. Beating them was an achievement.

So why did Twitter come here? Ireland has many attributes, some of which are shared by other countries admittedly, but which add up to a considerable package. We have a ready supply of suitably qualified available labour (note to government: don’t cut back spending on the education that produces such people). We have the IT infrastructure (there may be problems with broadband provision in the regions but it is up to speed in the major urban areas). There is plenty of commercial property available to rent at very good prices, compared to a few years ago when it was very expensive to set up in Ireland. We also have significantly lower operating costs to offer to multinationals locating in Ireland than would have been the case a few years ago. Membership of the EU, and euro area, and our use of English as our working language, are other major attractions. Ireland has become far more attractive to multinationals.

We also have the corporation tax advantage that thankfully both this government and the last have refused to surrender to the European Commission (and in this regard it seems that the International Monetary Fund has been our friend). Some people believe that we could get more money out of the corporate sector by increasing the 12.5% tax rate and indeed that might well be the case. However, do we really want to take that chance when it is exports from multi-national companies that seem to be keeping the economy afloat.

Ireland’s economy grew by 1.6% in the second quarter, even with the austerity measures and the sickly domestic spending. Only Estonia had done better (at 1.9%). Exports increased nearly 24% year on year in 2010. Holger Schmiedling, chief economist at Berenberg Bank, was quoted this week as saying Ireland is his “top candidate for the first turnaround at the Euro periphery”. We have to hope so that the increasing euro crisis can somehow be rectified, that there will finally the political will to take tough decisions that seem necessary and the necessary skill to persuade electorates to go along with them. Otherwise our export led recovery might be short-lived.

There’s another reason too why Twitter came to Dublin. Twitter is young company with no obvious links to Ireland that would have led it to chose here ahead of other locations. That it came here can be put down partly to the work of the Dublin Web Summit. Created by a young Trinity graduate called Paddy Cosgrave and a gang of associates, these twentysomethings managed last year to persuade Twitter founder and chairman Jack Dorsey to come to Dublin. He spoke at the summit and then I conducted an interview with him at Trinity College in front of an audience of students. (We broadcast it later on The Last Word and it is available on our website). Cosgrave managed to impress upon Dorsey the attractions of Ireland as a location to do business (and enjoy life too). He wasn’t the only heavy-hitter that Cosgrave brought to Dublin, the creator of Skype being another who visited. He has loads more of some of the most influential tech people coming to Dublin at the end of October. This is the type of stuff that gives hope of economic recovery.

The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm. His new book How Ireland Really Went Bust is to be published by Penguin in early October.