Business Technology

Thursday 30 March 2017

Technology leading the way as fun and games zone plays a niche role

It's tough to compete with Silicon Valley, but markets are global and domestic difficulties are less of a concern to start-ups

John Mulligan

John Mulligan

Last week was a good one for the Irish technology sector at a time when the domestic-orientated eco-nomy is on its knees.

Chip-maker Intel announced that it plans to spend $500m (€373m) upgrading its massive manufacturing complex in Leixlip, Co Kildare, which will result in the creation of 200 permanent technical jobs.

Meanwhile, Irish financial software firm Norkom received a €217m takeover offer from UK-based defence giant BAE Systems in a deal that represents one of the single biggest acquisitions ever of an Irish technology company.

The technology sector is being shouldered by the Government with a key responsibility in helping to dig Ireland out of its economic morass.

It's unlikely to be the engine of growth on its own, but certainly can be a pivotal component. All over the country, new and old technology firms are busy trying to plough their furrows in sectors and markets that are extremely competitive.

But these days, the markets are global, not just domestic, making the difficulties at home less of a concern for fledgling tech companies.

Paddy Murphy, the 27-year-old chief executive of Limerick-based computer game development start-up Open Emotion, says the market for the company's budget games is pan-European and that the firm is starting small but aiming high.

"We have a 10-year plan and we'll build our way up to the type of games we want to ultimately develop," he explains.

Ireland's two most successful firms operating in the computer games sphere are both middleware operators, developing systems that games developers use to produce their products, rather than developing games themselves.

Dublin-based Havok was acquired by Intel in 2007 for $110m (€79m at the time), while Demonware, also based in the capital, was acquired the same year by US games giant Activision for $15m (€11m).

A co-founder of Demonware, Dylan Collins, formed another gaming firm, Jolt, in which US retail giant GameStop has acquired a stake, while Havok has just recently bought technology developed by its original founders.

Meanwhile, international games developers such as PopCap and Blizzard have established bases here.

Open Emotion's other co-founders are Colm English, who is the lead programmer, and Mike Naughton, who is the lead artist.

The now four-member team secured some financial backing from two local businessmen, while Mr Murphy injected €5,000 of his own capital into the business when it was formed in 2010.

Having been accepted as an official developer by Sony following a presentation given by the firm to executives from the company in London, Open Emotion can sell its games on Sony's online store which is accessed via the PS3 games console.

The company has also developed titles for the handheld PSP. There are just 250 official Sony developers around the world and the company provides significant marketing input and development advice to them -- all gratis.

"Nowadays you'll find that a common attitude among small game developers is that they want to stay small," says Mr Murphy.

"We're probably a bit ostracised because we really want to scale up." One of the company's games has also just launched on the Apple Store.

But the scaling up that Mr Murphy wants to achieve will be dependent on revenues. Big-name titles developed by major studios can cost more than a blockbuster Hollywood movie to produce, but gaming sales now often eclipse those from the box office.

Sony will take an estimated 20pc of revenues from sales of Open Emotion's upcoming release on the network, called Mad Blocker Alpha, which will probably sell for somewhere between €4 and €5.

"We need to sell 500 copies a week for six weeks to make it pay, but who knows, it could sell more than that," explains Mr Murphy.

Kerry-based entrepreneur Jerry Kennelly, who sold his Stockbyte image library to Getty Images in 2006 for €110m, says that people behind start-ups need to take the risk and not rely on government-backed supports or agencies to drive their ambition.

"We probably suffer in Ireland from too many start-ups being nannied for too long," thinks Mr Kennelly, who doesn't have much truck with state agencies that are meant to support start-ups.

Mr Kennelly also believes that Ireland doesn't produce enough computer programmers of the quality required to give genesis to the types of companies that have emerged from Silicon Valley over the past number of years, from YouTube to Facebook.

He's also not keen on what he says is a culture here of start-ups immediately concentrating on where to get cash invested in their businesses, rather than simply knuckling down and developing their idea as much as they can before seeking backing.

But Dermot Berkery of venture capital firm Delta Partners believes that agencies such as Enterprise Ireland have been instrumental in providing support -- not just financial -- to start-ups where the founders need to get to grips with important elements such as direct selling techniques and penetrating markets.

"I don't really think we have a nanny culture here and the reality is that start-ups need money," he says. "Any business requires capital, but at the same time while supports are great, people need to have the spark of creativity."

He also thinks that this is a good time to be starting a business and points out that while a smaller number of firms now approach Delta seeking venture capital, the number of serious enquiries is far higher than it would have been a decade ago.

"The barriers to entry are so low now. Basic input costs such as labour are down while technology itself has become totally commoditised and is very cheap compared to what it used to be."

Sean Mitchell, the chief executive and co-founder of Dublin-based chip design firm Movidius, says that his firm has had difficulties in Ireland in hiring the type of specialised talent it needs, but that's probably partly due to the fact that some potential employees might be wary of a start-up and instead opt for employment with a more established firm.

The company employs 60 people, 20 of them in Ireland and the company also has a development office in Romania.

Movidius, which has raised $21m (€15.6m) in financial backing since 2008, designs high-end chips that are used in video processing on mobile devices.

At the recent annual consumer electronics show in Las Vegas, it unveiled its 'Myriad' chip for mobile devices that enables the display of high definition 3D images without the need for the user to wear special glasses.

A number of manufacturers have agreed to buy the chip for devices that should make it to market this year.

Securing a profile in international markets is crucial for a company such as Movidius, but Mr Mitchell, who once worked for Irish chip firm Parthus, warns about going to potential customers without being properly armed.

"Customers won't engage seriously with you until they see some sort of demonstration of your product," he explains.

Mr Mitchell says Ireland still has some way to go to replicate the type of culture witnessed in the technology sector in Silicon Valley.

"One of the most powerful effects in Silicon Valley is the continual cycling of investment in the system after people sell their businesses. They don't retire to Portugal and play golf, they reinvest their proceeds. It has happened here, but it needs to happen more."

Harry Goddard, technology integration partner with Deloitte, stresses it would be very difficult for Ireland to be able to compete directly with Silicon Valley.

"For Ireland to compete with Silicon Valley is very tough. There's a very unique sub-culture there that really facilitates the industry, but what we can do in Ireland is develop the type of companies that firms in Silicon Valley want to buy and expand."

Among the firms that will benefit from some Silicon Valley expertise in coming weeks is TCD spin-off Miravex, which has developed 3D imaging technology used to analyse skin. Last year it won the Irish Technology Leadership Forum University Challenge and one of its directors will travel to California in March to the Technology Leaders Silicon Valley Awards.

One of its founders, Roman Kantor, who originally hails from the Czech Republic, says that the award helped to put the firm on the radar.

"We're selling the product at the moment and we're currently involved in trying to establish distribution in the Middle East and other countries in Europe."

He acknowledges that it's going to be challenging, but that the potential market for Miravex's product, particularly in the US, Asia and Brazil, is enormous.

Meanwhile, Paddy Murphy of Open Emotion jokes that he sometimes feels success comes down to "80pc luck", before explaining that he and the team often work 14-hour days, or more.

The harder they work of course, the more luck they'll probably find they'll have.

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