Barrow Street: home to our very own Silcon Valley
Ireland's vibrant technology sector is leading the way to recovery but there are many challenges ahead to safeguard it, writes Peter Flanagan
WHEN Dropbox announced on Monday it would be opening its European base in Dublin next year, the news got extensive coverage – mainly due to the celebrity investors in the company.
Bono and The Edge are about as high profile as it gets in Ireland, but it was intriguing nonetheless that there was little interest in one of the rising players in the technology sector coming to Dublin.
That is probably because of the huge growth in the tech industry in recent years, and much of it has been centred around the Barrow Street and Grand Canal Dock in the centre of Dublin.
The area, which is only a few square miles in size, has gone from an almost abandoned mass of warehouses to one of the most prosperous and fashionable areas of the city in less than a decade.
About 5,000 people are employed in the area, which counts Facebook, Google and LinkedIn among its major tenants, but the IDA's Barry O'Leary, whose agency is instrumental in bringing these firms to Ireland, is quick to point out the gains go beyond just the big ticket names.
"Everyone knows about the big players but there are a lot of small companies that have set up around that area and they are growing rapidly," he claims.
"Ireland has been well known for years for the big companies, whether it's an Intel in Leixlip or Apple in Cork but we began targeting the next 'tier' of firms with a turnover of between €100m and €750m and that has paid huge dividends for us," he claims.
The agency's plan has since moved on to targeting even smaller companies but they all have the same characteristics of growing quickly and having gone through at least two rounds of fundraising.
That has manifested itself in the arrival on these shores of some much smaller companies than might otherwise have been expected.
Yapstone and Hubspot are two companies that have little or no profile on this side of the Atlantic but they are opening offices here as well.
The "cluster effect" of having these companies here cannot be overstated, according to Enterprise Minister Richard Bruton.
"When I go into boardrooms in the US. . . the docklands technology cluster of the internet's big names, as well as start-up companies, incubation labs and venture capital, is most important.
"Senior executives look at this and know that Dublin will work for companies like them, and they also know that Dublin is an exciting and innovative environment where talent and ideas flow," he claims.
In truth Ireland, and by extension Dublin, has a lot of things going for it. As Dropbox's head of European operations Mitra Lohrasbpour says, the location is ideal for a US firm operating in Europe.
"Dublin gives us access to Europe but is still manageable from our headquarters in San Francisco. The local talent pool is excellent and we can attract the skills and languages we need there," she said.
The unspoken advantage of course is the tax regime here. Not only is the corporation tax rate low, personal tax rates are also low compared to most of mainland Europe, making Ireland attractive to immigrant workers.
Recent controversies highlighting how large US companies avoid paying tax on overseas profits has created consternation in the UK, but it appears to be of little concern to our Government.
Finance Minister Michael Noonan and Mr Bruton have repeatedly pointed to the fact that our tax regime complies with international regulations, and there is a belief that the close link between our nominal and de facto tax rates show there is no impropriety in this regard.
That is not to say all things are rosy, however.
John Herlihy, as well as being vice-president for international SMB sales at Google, also heads the web behemoth's operation here. He is one of the most influential figures on the Irish technology scene.
At over 2,500 people, Google is by far the biggest employer in Silicon Docks, and while Mr Herlihy is clearly happy with what his company gets out of Dublin, he would like to see the Government do more in preparing students for what is now an internet-based world.
"Ireland needs to invest in developing our young people for the new digital economy," he claims.
"We speak about being a knowledge economy yet only 30pc of students use the internet for schoolwork – that's according to a recent OECD report which put Ireland last out of 29 countries.
"Our education system needs to adapt more quickly to the digital economy and the use of information technology should be core in all our schools," he adds.
That's not all, however. Echoing the likes of Louise Phelan of PayPal, who has adamantly defended hiring staff from overseas to fill roles that need certain languages, Mr Herlihy believes a second language is vital in a multilingual business world. "We have a real opportunity for Ireland to become a true exported-services hub if we could improve on our language skills, and to maximise this opportunity we need to be able to 'talk the talk'.
"Three-quarter of the world's population does not speak English and less than one in 10 speak it as a mother tongue. If we are to realise the potential offered in the growth economies of Asia and Latin America, we need to be able to transact business in the native language," he believes.
While education issues are obviously a concern, for the IDA the worry is competing with other countries that are now desperately seeking foreign investment.
"With the downturn across Europe, there are countries that would not have traditionally tried to attract foreign direct investment that are now working really hard to do that," says Barry O'Leary.
"The UK and London in particular has really come on strong in recent years, and while there would always have been competition from somewhere like Switzerland through the years, it is more intense than ever," he adds.
Given those challenges, it is heartening for Mr Herlihy to lay out just how far Silicon Docks has come in the last few years, and what hope there is for the future.
"When we first arrived in Ireland, we had two floors in the Gordon House Building on Barrow Street. Today, Google owns three buildings on Barrow St, it has opened a new data centre in west Dublin and it employs over 2,500 people.
"There is a very vibrant technology community in the city and there is a real buzz internationally about Dublin as a great city for these companies to locate in," he admits.
For the sake of the economy, let's hope he is right.