Saturday 24 March 2018

Google was never meant to be this big in Ireland – but plans change

Google Ireland boss John Herlihy explains to Nick Webb how a brief chat led to the internet giant spending €2.7bn in Ireland

Google Ireland boss John Herlihy
Google Ireland boss John Herlihy
Nick Webb

Nick Webb

Flashing lights, screeching sirens and a security door slowly started to descend as we got out of the lift. Twentysomethingers of 71 nationalities bustling towards the exits as Google's Silicon Docks headquarters began to be evacuated.

It must have been all the questions about that Google tax rate.

I'd just finished interviewing Google's man in Ireland John Herlihy when the shutters came down in one of the world's most powerful but also most security conscious companies. Like all multinationals Google is a bit huffy about how much tax it pays.

Herlihy, "a recovering accountant" from KPMG, has been the top Irish guy in Google since January 2005. The godzilla-sized internet giant has just celebrated 10 years in Ireland. It started off as a small five-man operation in the Regus serviced offices on Dublin's Earlsfort Terrace. Now it employs 2,500 Googlers here plus almost the same again in various ancillary roles. It was never meant to be this big.

"We moved down here and we'd a floor and a half with the option for the top four floors. The ground level unit wasn't even built. There were no stairs down to it. I joined in early 2005 and had Eric (Schmidt – the Google chairman) over. We showed him what we were going to do and that night convinced him to take up the option on the top four floors," Herlihy recalls.

"I told Eric that there's a tremendous opportunity here. What we have is a fantastic talented workforce which is going to enable us to do more than we'd originally thought. There was an original plan to do a certain series of things but we saw that Dublin was a great place to bring other Europeans and work with the local Irish and together we could solve global problems," he said.

"Eric backed us and that was the big thing. We went out and hired more people and the growth plans changed." Google had originally thought of having "100 to 150" staff in Dublin. "It's much , much bigger than we thought it'd be."

"We exceeded the targets. You don't get investment on the basis of hope, you get it from real plans," the 46-year- old Herlihy notes, swigging some fizzy water out of a bottle. His office is on the corner of the 13th floor of the former Montevedro building.

Google Ireland is neck and neck with their New York operations to be the biggest office outside of the Californian HQ at Mountainview. "We are relatively over-indexed, given the size of Ireland," Herlihy says. Google's Dublin footprint is double the size of London's operations.

There's a real feeling of university campus around Google as staffers sit on the floor tapping away on laptops. There aren't an awful lot of Irish around. The numbers have improved slightly, about 30 per cent are now Irish. The other multilingual Googlers are in gym gear or ambling around with squash rackets.

The Google shop across the way is selling branded cups for €8 and Google hoodies for €40. A starting wage of €30,000 helps.

Google, Facebook, Twitter and the other online giants are at the centrepiece of the Government's foreign direct investment strategy. Bung them all in close proximity and see what happens.

"I think because of the cluster you have here that there's a tremendous opportunity for businesses that are focussed on internet delivery. We move incredibly quickly. Exports are vital. Every country in the world is trying to grow their exports.

"The digital economy is growing seven times faster than the other economies in Europe. In Ireland it's growing 10 times faster.

"The general economy here is forecast to grow at 1.6 per cent but the digital economy is growing at 16 per cent," he says. "Companies that embrace the internet are twice as likely to create jobs."

"Where people are tooled up for this, Ireland has a great opportunity because we are very flexible and innovative. But if you're caught in the past it's going to be tough," he says.

Limerickman Herlihy went to the same school – The Crescent – as Microsoft's Paul Rellis. After working in KPMG, Herlihy won a green card in a lottery and moved to the US West Coast in the early 1990s. He worked with Larry Ellison's Oracle before moving to Adobe and Peoplesoft. There was even a start-up.

"I ran a mobile payments company, which would be fantastic to run in 2014. But in 2003/04 it was 10 years before its time. It was a big lesson in life that timing is critical," he says. "It doesn't matter how good the solution is, if the market isn't ready for it ..."

Herlihy was helping a friend restructure a business when he met the then Google chief operating officer Sheryl Sandberg (now running Facebook) and was hired.

"I did over 20 interviews. I always like to say that they weren't sure of me, so they kept bringing me back to see if they could trip me up," he laughs. He's been the big enchillada for Google here for 11 years, so they must have been pretty damn sure he was the man. And he's not even that techy. Relatively speaking.

Google's Larry Page and Sergei Brin are so smart that they have brains the size of pumpkins. What Google does now really will define what we will be doing in the future. It's that influential. Google is on the curve, several miles ahead of the curve.

"I gave a speech a couple of years ago, where I basically predicted the death of the desktop computer and the rise of mobile. I was panned. People said I was nuts," he smiles.

But Herlihy was bang on the money. So what's coming down the tracks now?

"I think you're going to have large numbers of wearables, you're already seeing that in terms of Google glass and people are coming up with all kinds of watches and stuff," he suggests. Last Wednesday Google took the battle to Apple by rolling out its android wear, which brings its android operating system to smart watches.

"I think YouTube is fascinating, with the quality of the content and how people are using it. YouTube is now the second largest search engine in the world," he says. We are helping create a channel on YouTube and to monetise it."

An example, according to Herlihy, is where a world-famous kitchen designer in California has her own channel. An Irish customer could log into her and see what she has to say about their own kitchen, paying by the hour for her time. She doesn't even need to leave her office.

"There's so many things that can be done in this area. If there's somebody with unique content, we are helping them get new customers. That's a potential new business."

There's a bit of misconception about what Herlihy has actually built up in Ireland. With much – but not all – of the top R&D stuff in the US, Google's Irish operation has sometimes been written off as little more than a giant call centre. Around 60 per cent of Google's staff in Ireland are in sales and marketing, rather than the serious braniac stuff.

"Sometimes you see people make light of what we do here. This is a very sophisticated sales operation," he says.

With its Adwords targeted advertising operations, Google is now the biggest advertising company in the world.

"We sit down with customers and show them their product could interest people in 10 other markets. We show them the Google search trends that show there's an opportunity for them, that they need to advertise into markets where they didn't even know there was a demand for the product," he says without pausing for breath.

This means that an Irish firm producing handmade wooden chopping boards for the domestic market may suddenly find there's a big demand for their product in Argentina or Ulan Bator.

"We're one of the biggest influencers of cross-border trade and were hugely helping small businesses to export." And most people thought it was just a search engine.

Outside of selling ads to tens of thousands of businesses, Google's Irish staff are also involved in working under the hood of the internet giant. You get the sense that the slick hipster twentysomethings are part of the sales and marketing group, while the people working on the infrastructure side are the ones with the bad hair and bad teeth.

Herlihy says that "a huge portion" of Google's infrastructure is managed out of Ireland. As part of standard testing and future-proofing the worldwide Google empire, "we take down parts of the world and run it from here," he says.

Herlihy clams up a little when it comes to the details. Google is phenomenally prickly when it comes to security. Signs down in reception forbid lots of stuff like photography within the building.

The remaining staff are involved in general administrations for Google, running stuff like payroll and accounts receivables out of Ireland. Google's European Learning and Development Centre is in Ireland, so all new European Googlers come to Dublin for a couple of weeks of brainwashing. 'Induction' they call it.

Across the roof is Google's new building. It now has four on Barrow Street. The scale of Google's investment in Ireland is truly massive. It has bought three monster office blocks, is close to sealing a deal for another one and is building a jumbo-sized data centre out in west Dublin.

And then there's payroll. Google's Irish business has sucked in close to €2.7bn since 2003. That's one heck of a bet on Ireland.

On the flip side it pays bugger all tax here. Multinationals such as Google, Apple and Forest have been bashed up for using exotic accountancy rinky dink such as the "Dutch Sandwich" to help legally slash their tax bills by shifting money around from Ireland to Holland and the Caribbean. In 2012, Google Ireland moved €8.6bn to Bermuda via Holland as a tax reduction device. That year, Google Ireland paid €17m in Irish corporation tax, having reported pre-tax profits of €153.9 on turnover of €15.5bn.

"There are huge grey areas in this area," says a well- schooled Herlihy. "My read on it is over the last 20 years, governments went out with a series of economic incentives to attract companies in," he says. "If you look at our overall effective tax rate," he suggests, "It was over 20 per cent." Ireland was, er ... "lower".

The Irish rate is so low because "there were a series of structures put in place by government and in that situation we adhere to the rules."

Is there a moral issue over firms paying too little tax?

"I don't know. I'd be of the view that there's a rule of law and you should always satisfy that rule of law," he says.

And back to that moral issue? "Not really," he says. "If the speed limit is 120mph you should stay below that. If it goes up to 125mph you go to that. At the end of the day, society relies on governments to put in place a series of rules and you operate within these rules."

The hot air and outrage generated in the US following Senate hearings about Apple's tax practices in Ireland has pushed the issue of multi-nationals and their artificially low tax payments right to the front of the queue for political fist shakers.

"Clearly we're moving towards a world where there's greater transparency and things are going to change and rules may change. We look forward to that and we'll be at the forefront of embracing that change," he says. Almost convincingly.

New changes in global tax policy, fronted by national governments or the OECD, will likely bring higher tax bills. Hardly a time for whooping, either for the companies paying more tax or countries like Ireland which may lose a serious competitive advantage by being forced to make resident companies shell out more tax.

But tax isn't the only thing keeping Google here. Its "stickability" is seen in its €2.7bn spend on staff and assets.

"Are you delivering quality business? Can I solve problems here and continue to give economic benefits to my customers? If we can continue doing that, then we have a basis for a business," he adds.

"I think you create the profits first – and worry about what you do with them after."



If I wasn't doing what I do, I would be ... out somewhere playing golf

The last meal I really enjoyed was ... last weekend in Lahinch

If I didn't live in Dublin, the place I would live in is ... Lahinch, Co Clare

My greatest indulgence is ... Manchester United. I was at the Champions League final in 1999

My favourite website is ... Houzz – a house renovation website

The one artist whose work I would collect if I could is ... Paul Henry. But I don't have any

The best gift I've given recently was ... Blue Book vouchers

The last music I downloaded was ... I'd be a disaster. I listen to the radio. I prefer sport

The book on my bedside table is ... a detective novel by Alex Cross

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