Irish software sector: stuck on red?
14-03-2008
by Emmet Ryan

Irish software companies are hungry for success but struggling to break through the glass ceiling.

Words like innovation and entrepreneurship get bandied around so much that they have lost meaning and become bland background music. Yet there is a reason that people keep harping on about these terms and they aren't doing so in some bid to become the next Muzak.

The Irish software sector is at a crossroads (there's one of those terms again); it's been at the same crossroads for quite a long time and the light has been stuck on red with a queue of traffic building up.

Ireland is developing bucketloads of promising SMEs in the sector but making the breakthrough to a larger scale is proving difficult. The Irish Software Association (ISA) feels that many are failing to move to the next level because they aren't getting the rub they need from the public sector to enable them to develop internationally.

"Irish software SMEs are finding it particularly difficult to get access to public sector projects," said Shane Dempsey, director of the ISA. "We have a whole heap of businesses around the EUR2 million to EUR5 million mark [in value] but without public sector backing they won't be able to break out internationally," he said. "The public sector has EUR9 billion to spend but there tends to be a conservative focus on cost rather than value for money."

This focus on the immediate bottom line rather than long-term benefit coupled with a complicated application structure is making it difficult for indigenous software businesses to get involved in government contracts.

The picture is changing though, albeit slowly. The Government has shown an interest in shifting the focus, which was in no small way signified when they opted to appoint Michael Ahern to the new post of Minister for Innovation Policy.

The ISA feels that the steps being made are in the right direction but need to come faster. "There is a willingness now on the part of the public sector to look at implementing policies that might make it easier for Irish software companies to apply for contracts," said Dempsey. "Things are moving along but they need to move faster."

On the private side the industry's prospects are looking a tad brighter. People in private industry essentially speak the same language which makes it easier to press forward quickly with projects. There are still limitations though as that glass ceiling continues to hamper Irish businesses looking to go head-to-head with the big boys in the US and Europe.

In order to truly break out and compete with these businesses Irish firms need to be able to do battle on foreign soil as the local market offers too small a customer base to enable this kind of growth. "The Irish opportunity is not in what Irish people buy; it's in what Irish people sell," said Colm Lyon, managing director of payments software firm Realex.

Lyon recently spoke at the Irish Web Technology Conference (IWTC). The event is part of a seven-conference series known as IxTC 2008 series aimed at mobilising the Irish software community into demonstrating that they are involved in an exciting and rewarding sector.

The series is being run by IrishDev.com, an organisation that aims to help ICT professionals network and collaborate, and part of the event's aim is to help those in the sector realise that they can go head-to-head with their counterparts overseas.

Ivan MacDonald, chief executive of Java and Bluetooth software firm Rococo Software, also spoke at the IWTC and he feels there needs to be shift in the focus of investment within the private sector.

"Traditionally Ireland has been very good at developing enterprise software businesses," said MacDonald. "There are a lot of start ups in internet-based industries such as photo and video storage and we haven't really had any big successes there yet."

There is a recognition amongst both industry and government agencies that internet-based applications present an opportunity for indigenous software firms to develop. "Enterprise Ireland is now backing a lot of these firms and that wouldn't have happened two or three years ago," said MacDonald. "There has been a mindset shift towards these kinds of industries."

This change of viewpoint needs to come faster though as there is still a tendency to focus heavily on the traditional solid options rather than the innovative concepts that are coming through.

"An awful lot of focus is on the enterprise side. The Government needs to focus more on the internet side," said Paul Walsh, chief executive of compliance and certification software firm Segala Software.

It's not just those supporting the industry that need to adjust their focus. Irish software firms themselves need to take a different approach to the international markets they target and pay more heed to business outside the US.

"Look east, look to Europe. Collectively Europe is larger than the US and is probably in better health economically," said Sean Hanley, co-founder of business software firm Exoftware.

If both government and industry take a more widespread approach to the type of industries supported and the markets targeted the future of sector could be promising. Failure to make this progress though will result in even more businesses being stuck in traffic.