Software industry ‘needs mergers’

NEARLY 70% of Irish software companies have annual revenues below €1 million and may have to merge or be bought out to survive, according to a new report.

The venture capital group HotOrigin said that most Irish companies are still finding it’s hard to break the €10 million plus revenue range which is seen as vital for long-term success.

“While the sector continues to grow, the majority of companies are still too small to effectively enter international markets. Mergers or acquisitions could help to address this,” HotOrigin chief executive David Dalton said.

Mr Dalton said just 8% of the total number of firms in the sector have sales above €10m and that and many smaller firms are still finding it’s difficult to grow.

However, the report shows that an increased number of companies have reached profitability compared with previous years, and 55% of firms are now earnings positive compared to 52% in 2002.

Mr Dalton said the outlook for 2004 is looking more positive after a poor couple of years.

“The software cluster on the island of Ireland is cautiously optimistic about 2004 but there is a need for greater scale and consolidation in the sector for it to become a global force.”

The report also found that the number of new firms being set up continues to grow at a fast past - up 16% last year.