Technology sector could be the game changer for our economy
Published 07/07/2013 | 04:00
Multinational investment plus indigenous growth make the future for technology look promising, says David Coghlan of Havok
AS WE consider how Ireland's economy can get back on track, I believe that the technology sector has significant potential as a difference maker for economic growth.
The software, engineering and life sciences sectors create high value-added jobs and are already the fastest growing sectors for exports by indigenous Irish companies, growing at 15- to 20 per cent annually. But a real opportunity exists to make the technology sector an even larger part of Ireland's economic make-up and to build a robust, sustainable and high-value added economic driver for the future.
Ireland has a lot going for it as a location for technology companies – a skilled English-speaking workforce, low corporate taxation and an internationally respected business culture. Despite Ireland's current economic issues, our operating environment for businesses remains attractive and we continue to successfully leverage these capabilities to attract international investment from companies such as Facebook, Intel, Apple and Google.
But Ireland's economic recovery cannot depend on foreign investment alone. To take advantage of the opportunity for technology-driven growth, it is necessary that multinational investment is supplemented with indigenous growth by creating an environment that fosters innovation and facilitates Irish companies making the jump from small start-up to larger sustainable business.
In my view, there are four areas that we need to focus on to make this a reality.
* Helping start-ups target international markets
Havok is one example of the many Irish indigenous success stories in the technology space, successfully transitioning from Trinity College start-up to becoming an established software business with a world leading game development platform.
We have operations in more than 10 countries, but the company remains headquartered in Ireland where it was started with core software research and development taking place here.
Havok's software is targeted towards large games and entertainment companies such as Microsoft, Activison, Sony and Nintendo and as a result we needed to target international markets from the very beginning. The fact that we never had an easy option of starting with an Irish indigenous market has been a critical factor in our success, and today we remain a 100 per cent export company.
Technologies such as software, digital media and communications services are inherently exportable. It is very important that indigenous companies operating in these sectors are encouraged and equipped to think globally at an early stage, and government policy needs to be aligned with this.
Enterprise Ireland can be a significant help to growing enterprises, but as Havok expanded, the primary value from Enterprise Ireland was assistance from its overseas offices. Unfortunately a small proportion of Enterprise Ireland's staff are based overseas and that balance appears to have trended in the wrong direction in recent years.
* More discerning support of early-stage companies
Technology sectors such as software, digital media and communications offer a unique opportunity for indigenous-led growth relative to other sectors, because the cost of establishing a viable technology start-up has dramatically declined. Digital distribution methods, availability of open-source software and minimal capital investment requirements combine to mean that the start-up cost for tech companies can be minimal. "Bootstrapped" companies that build market momentum without external help are commonplace in the tech sector.
Facilitating clusters of like-minded tech companies to start up inexpensively can be a very effective way of spawning successes.
Providing a State-assisted minimal-rent environment in which early stage companies could operate for six to 12 months while building an initial product offering would be very effective. One must wonder if the State's portfolio of vacant commercial properties could be creatively leveraged to support this.
Latest thinking also strongly supports the idea that technology companies in particular benefit from Darwin's 'survival of the fittest' approach – a bias towards thinking big, bringing an initial viable product to market early and cheaply, iterating and starting over as needed.
I believe that Ireland could benefit from applying this approach to our indigenous technology sector, but this Darwinistic mindset can run counter to the Irish psyche.
Government agencies appear more comfortable adopting a maternal approach to policy when dealing with start-up companies – wanting them all to succeed and nurturing them in an over-egalitarian way. However, in the process non-viable technology companies end up being supported for too long when it would be better to let them fail fast (often "failing into one another") and start over as inexpensively as possible. Equally this approach reduces opportunities to really back companies showing strong market potential.
* Addressing Ireland's skills availability
One of the key challenges facing the technology sector is the availability of skilled resources.
Havok, like most other Irish technology companies, faces an ongoing challenge in recruiting skilled staff in sufficient numbers. If as a nation we are to realise a vision of more knowledge-based jobs, we need to be doing more to ensure that enough young people acquire the maths and science foundational skills needed for the technology sector. This must be led by strong initiatives at government level, with academic institutions and the corporate sector having an important role to play as well.
Havok has actively participated in initiatives in this space, producing classroom materials to show second-level students how abstract-seeming maths concepts can be applied to exciting applications in games.
* Targeted investment in high-potential subsectors
The broad technology space spans a large range of subsectors, each with different needs for skills, capital investment and resources. A country of Ireland's size cannot hope to master every domain, so government policy needs to align behind targeted subsectors that are demonstrating growth momentum and potential.
The games industry is a good example of such a subsector. Although the games industry in Ireland is still relatively small, globally it is a $70bn industry – considerably larger than the film and music industries.
'Facilitating clusters of like-minded tech firms to start up inexpensively can be a very effective way of spawning successes'
In Ireland the sector has seen significant growth in the past five years and has significant long-term potential for jobs, investment and growth. Ireland has a strong momentum and balance within the games sector: we have multinational investment via companies like Activision and Big Fish; we have established indigenous success stories like Havok and Demonware; and we have more than 50 high- potential companies operating such as Swrve and StoryToys.
Forfas and the Government have expressed an interest in backing early stage indigenous companies, but there is a window of opportunity that needs to be seized in order to preserve the momentum that we are currently seeing in the Irish games sector.
The significant and ongoing support that the film industry has received in the way of, for example, project funding and industry premises has led to significant investment and growth in the sector, to international acclaim and of course to many thousands of jobs.
We have an opportunity to back the Irish games industry in a similar way and nurture a wave of success stories. For example, a minimal-rent "games house" along the lines described above in which game start-ups could be clustered would be a huge advantage to the sector. It is proven that appropriate policymaking at government level can inject significant growth and momentum into the games sector. The Canadian province of Quebec successfully managed to quadruple the size of its games industry within five years through a series of government-led initiatives and incentives, creating over 17,000 jobs in the process.
In conclusion, I believe that a real opportunity exists for Ireland if multinational investment in technology is supplemented with meaningful indigenous growth. If policy making and funding is targeted appropriately, the technology sector offers significant prospects for growth in high-quality jobs and exports and has the potential to be a template for success in Ireland's road to recovery.