Ireland can continue in elite of software sector

Ireland is unlikely to be the incubation centre that gives birth to the next global consumer-facing tech giant, in the mould of Facebook, Google, or Twitter, but can continue to rival the world’s elite in other areas, according to Enterprise Ireland’s software chief.

Despite Irish software firms being “as good as or probably better than” many of their rivals, their success has largely come in the B2B (business-to-business) segment rather than as customer-facing (B2C) companies, such as the giants of global tech, Enterprise Ireland software division department manager Pat Byrne admits.

The financial firepower to propel a business of that kind into the upper echelons of the software elite — and onto the bookmark tab of millions of customers — is likely to be beyond Irish capabilities.

“That’s a fair point, I suppose,” Mr Byrne said when asked to consider the issue of Irish success being predominantly in the B2B arena.

“B2C companies tend to require enormous resources in order to generate sales themselves, and in order to do that they require a lot of funding behind those companies.

“In general, those companies look to the US — and the west coast of the US specifically — for that type of funding firepower. So that’s probably a fair comment, I would say. Most of our companies are B2B and the ones that have been successful in terms of trade sales have been in the B2B area.”

The financial backing available in Silicon Valley is “several orders of multiples of what is normally available to Irish companies seeking funding here”, Mr Byrne added, but he claimed that a B2B company of huge scale could yet land in our lap.

“It doesn’t necessarily mean that at some point we’re going to come across a company that has a really unique and very attractive offering from a B2B perspective that’s going to catapult the company from a valuation perspective and make it a really large company.”

Nowadays, companies are no longer confined to sourcing capital from within our borders either, but can land investment from across the world “without even having to get on a plane”.

The biggest impediment to software start-ups scaling up and resisting a buy-out offer — something Enterprise Ireland chief executive Julie Sinnamon has said she would like to see more Irish companies achieve — is their ability to sell themselves in overseas markets rather than any issue with the quality of the product or service offering, Mr Byrne said.

“The companies and individuals that develop them are really top class,” he said. “The problem is that from the point of view of articulating the marketing and value proposition, that’s where there’s a weakness and that’s why I think the scaling of these companies can be a limiting factor.”

Asked what supports were in place for companies to improve, Mr Byrne pointed towards a range of management development programmes and separate courses for earlier stage start-ups at some of the world’s most prestigious colleges, including Cambridge University in England.

In terms of direct financial support, a direct contribution of up to €40,000 per year for two years for companies looking to supplement their management team is another helping hand Enterprise Ireland (EI) can offer.

A looming threat to firms under Mr Byrne’s watch — as with every Irish exporter — is the potential of Britain leaving the EU in the next number of years should a growing eurosceptic presence take hold in a planned referendum on the matter.

ESRI associate researcher Edgar Morgenroth projected a so-called ‘Brexit’ could wipe as much as €4bn off the value of Irish exports, even if bilateral trade agreements were struck.

While EI software companies see this as “an unlikely scenario”, according to Mr Byrne, such a situation would have a profound impact if it came to pass.

“It certainly would have an impact there’s no doubt about it… I can’t put a figure on what the actual impact would be if it did happen, but it certainly would be a significant concern if that did materialise,” said Mr Byrne.

The UK remains a key market for software firms here representing about a quarter of total exports with the ongoing devaluation of the euro against sterling presently boosting business across the Irish Sea.

Offering a significant upside potential for Irish software exporters, however, is the continued emergence of developing economies across the globe. Currently, €1.2bn of the indigenous software sector’s €1.9bn of total revenues comes from exports.

The intention is to grow that export contribution to €3.2bn by 2020.

“There’s a very significant opportunity in emerging markets, there’s no question about that,” said Mr Byrne. “Developing economies in South America; China, in particular; India; the Middle East; South Africa; [and] sub-Saharan Africa is a really keen growth market for a number of the companies in our particular area.

“Developing markets do tend to offer really exciting opportunities, no question about that.”