Tuesday 20 February 2018

A good year for Irish tech firms but less to like about Facebook

Last year was an eventful one in tech - at home and abroad. Adrian Weckler looks back at some of the highlights

Athenry residents Martin Fergus (left) and Kevin Higgins show their support for Apple’s Athenry data centre as protests and delays cast doubt on its future. Pic Collins Courts.
Athenry residents Martin Fergus (left) and Kevin Higgins show their support for Apple’s Athenry data centre as protests and delays cast doubt on its future. Pic Collins Courts.
Adrian Weckler

Adrian Weckler

1 A record year for Irish venture capital

Last year saw a bonanza of venture capital cash raised by Irish tech firms.

Eir technician John O'Carroll and front line manager Noel McMahon as the company marks the connection of over 101,000 premises to high speed broadband. Photo Chris Bellew/Fennell Photography
Eir technician John O'Carroll and front line manager Noel McMahon as the company marks the connection of over 101,000 premises to high speed broadband. Photo Chris Bellew/Fennell Photography

The first nine months of the year saw Irish tech firms and startups attract €817m in venture capital.

The record haul was 11pc higher than the same period in 2016. The majority of the money (88pc) raised went to companies seeking expansion capital, according to the Irish Venture Capital Association, which measured the activity.

Belfast-based financial cloud firm Options had the largest single fundraising event of the year with a €100m round in the first half of 2017.

Dublin-based IT service company Version 1 was next, raising €90m from UK equity firm Volpi Capital.

Donald Trump’s US Department of Homeland Security (DHS) adviser Tom Bossert and Jeanette Manfra, DHS assistant secretary for cybersecurity and communication at a White House briefing which blamed North Korea for the WannaCry ransomware attack. Photographer: Al Drago/Bloomberg
Donald Trump’s US Department of Homeland Security (DHS) adviser Tom Bossert and Jeanette Manfra, DHS assistant secretary for cybersecurity and communication at a White House briefing which blamed North Korea for the WannaCry ransomware attack. Photographer: Al Drago/Bloomberg

Barry Napier's Cubic Telecom raised €40m in August, bringing the company's total funding close to €80m. The company, which employs 160 people in Sandyford, has deals in place with approximately 80 mobile operators around the world. It recently began trials with China Mobile, the world's biggest operator.

Smaller rounds include €10m each for telecoms firm Blueface and Atlantic Therapeutics.

The majority of funding rounds in Ireland are under €3m, while European venture capital funds have performed above average compared to other investment sources over the last 10 years.

2 The continued growth of tech multinationals in Ireland

Last year saw both gains and losses in job counts for multinational tech firms based here. Facebook and Google continued to add to their huge Dublin presence, with Facebook nearing 2,000 staff and more promised for 2018.

Some other tech firms continued to similarly scale their presence in Dublin.

However, there were some job losses. HP let 500 people go when they announced the closure of their Leixlip site in February.

In October, Swedish tech giant Ericsson indicated that it would cut up to 130 jobs from its Irish operation, which is split between Athlone and Dublin.

3 The EU got even tougher with big tech

While 2016 may have seen the biggest move against a multinational tech company in the form of the €13bn back-tax ruling against Apple, there was no let-up in 2017.

The European Commission fined Google €2.4bn for abuse of its dominant position as a search engine in giving its own shopping comparison service an unfair boost.

The penalty was the biggest-ever fine handed down by Brussels on a business in a competition case. It also made Amazon pay €250m in back tax to Luxembourg, which had allowed Amazon to channel a significant portion of its profits to a holding company without paying tax.

But while critics of the EU regulatory action claim geo-political bias, not everyone in the industry regarded it as a US-EU rivalry.

Oracle, Yelp and a handful of other big American companies supported the Commission's Google fine.

They even sent a letter of support to the European Commission about it. "Google and its allies will no doubt continue to press through its lobbying and public relations machine the fiction that any adverse decision amounts to European protectionism," said the letter.

"As US-based companies, we wish to go on record that enforcement action against Google is necessary and appropriate, not provincial. We have watched Google undermine competition in the United States and abroad.

"Google operates on a global scale and across the entire online ecosystem, destroying jobs and stifling innovation."

4 A year when Ireland's planning system cost it a major infrastructure project

In October, the High Court finally cleared the way for Apple to build a data centre in Athenry in Co Galway.

But after a delay of two years, Apple indicated it may not proceed with the project. The company, which prefers certainty in planning for the long term, lost faith in the country's higgledy-piggledy system of planning appeals and endless judicial review processes.

The company had seen a Danish data centre, announced at the same time as its Athenry project, completed in the time it took Irish authorities to give it the go-ahead. A second Danish data centre has now been commissioned by Apple.

The matter surfaced in a meeting between Taoiseach Leo Varadkar and Apple chief executive Tim Cook in California toward the end of the year.

At that meeting, Mr Cook reportedly stopped short of reassuring the Taoiseach the project would still go ahead.

Other companies appeared to take note. "There has been reputational damage to Ireland from what is happening in Athenry," said Tanya Duncan, managing director of Interxion, one of the biggest 'carrier neutral' data centre companies operating in Ireland.

"This is especially so among the hyperscale players at the level of the Amazons and the Googles. There will be big companies who are thinking about putting their data centres in Ireland and now wondering 'Is there something up here?'

"Maybe when they dig into it, they'll discover that this sort of thing won't affect them.

"But certainly, there would now be certain organisations questioning the option where they wouldn't before."

5 Ireland inched toward better rural broadband coverage

For businesses in rural parts of Ireland, 2017 was a case of modest progress mixed with a little frustration. The improvements came in the shape of buildouts from Siro (the joint fibre broadband venture between Vodafone and the ESB) and Eir in regional towns.

In all, at least 150,000 additional premises (between residential and commercial) were added into fibre broadband connectivity during the year.

Eir also committed to an overall net connection increase of 300,000 businesses and homes in rural and regional areas not served by proper broadband by the end of 2018.

That's a sizable chunk of those outside cities who cannot get decent internet connectivity.

On the other hand, there were also setbacks. Siro decided to withdraw from the state-subsidised National Broadband Plan process at a late stage.

It meant that the shortlist of competitors for the massive scheme, which aims to connect every last rural business and home to fibre-grade broadband (540,000 in number), was reduced to two players: Eir and Enet.

That means less competition, which could yield a potentially bigger bill for the taxpayer and longer to wait until it begins (because the Government has fewer options if one of the remaining players asks for more time).

The event that caused Siro to withdraw was a deal between the government and Eir, which reduced the National Broadband Plan intervention area from 840,000 to 540,000. This, said Siro, made the proposition uneconomic for it to consider, subsidy or no subsidy. All of this contributed to further delays to the National Broadband Plan, which look set to affect timescales in 2018.

Whereas the Government had been intimating that rural businesses and residents would see the first wave of subsidised connections in 2018, this now looks likely to be confined to a handful of the 540,000 premises, if any at all.

6 Eir changed ownership again

The biggest tech-related acquisition of the year in Ireland was Eir, which changed hands for the ninth time in 20 years.

This time, the new owner is Xavier Niel, a French telecoms billionaire who owns the 'Free' mobile operator and internet service provider in France and also co-owns 'Le' newspaper.

The deal, which saw Niel's NJJ consortium take a two-thirds stake in Eir in a deal that values the company at €3.5bn, reportedly led to massive bonus payouts for Eir's senior management, running into the tens of millions for some high-ranking executives. The existing owners retained a minority share in the company.

7 The year that Facebook made enemies

2017 was the year when public opinion started to turn sour on the world's biggest social networks, treated as plucky, loveable underdogs up until this point. Facebook, in particular, became a target on multiple fronts, from its perceived role in facilitating 'fake news' stories to privacy, allowing Russian provocateurs to buy subversive ads and the psychological effect its services have on users.

Founder Mark Zuckerberg performed an about-turn on his view that the platform had little to answer for with regard to other countries' agencies undermining US elections through the purchase of ads and gaming of sharing algorithms. It also came under sustained pressure from social commentators, politicians and former executives over the behavioural effects that its service has on users.

This included criticism from Chamath Palihapitiya, a former Facebook vice-president between 2007 and 2011, who said that he felt "tremendous guilt," about the products he built because they were addictive and that Facebook was "ripping apart the social fabric of how society works".

Former Facebook president Shawn Fanning also piled on, claiming that he helped Facebook grow by "exploiting a vulnerability in human psychology". "We need to sort of give you a little dopamine hit every once in a while," he said. "Because someone liked or commented on a photo or a post or whatever... it's a social-validation feedback loop."

Last year was also when media companies, long under siege through the loss of digital ad revenue to Facebook and Google, decided to ramp up their own hostility toward big social media and digital firms. However, the antipathy was not shared among the general public, who continue to use Facebook in growing numbers. In Ireland, Facebook has 2.4 million adult users with 1.7 million using it daily. That's a bigger overall audience than almost any other media entity.

8 The end of mobile roaming finally occurred

Last year saw one huge gain for ordinary phone users, as the EU banned most mobile roaming fees between its 28 countries.

It was widely hailed as big step forward in consumer rights across the continent. However, the occasion was soured a little by a get-out clause for operators on mobile data. According to the law, consumers became entitled to around 2GB of EU roaming data for every €10 they spend on their normal monthly mobile plan here, up to the limit of what they get domestically. This can be imposed by the mobile operator even if the consumer has a large or 'all you can eat' data allowance at home.

So a person who spends €20 per month on a prepay mobile service that includes 30GB of data here would only be entitled to around 4GB of that data when travelling in the EU, before big roaming fees kick in again.

The EU move came as figures from Ireland's telecoms regulator show that Irish people now use their phones more for data services such as Facebook than for calls or texts.

9 IT security and privacy breaches soared

It was a year which saw an epidemic of ransomware attacks on businesses' computer systems and a large number of companies admitting that they had suffered cyberattacks.

The 'Wannacry' ransomware outbreak in May saw the HSE forced to take systems offline while they worked to fix them. That same ransomware malware caused havoc in UK hospitals.

Surveys showed that Irish small firms were particularly vulnerable to security woes during the year.

One poll by the business lobby group ISME indicated that 81pc of Irish small firms fell victim to cybercrime, with two-thirds saying they suffered a computer virus infection. Cybercrime is now the third most common crime reported by small businesses in Ireland after burglary and vandalism, according to the ISME survey.

But it wasn't just small companies who were attacked.

Toward the end of the year, Yahoo admitted that all 3bn of its email accounts were hacked in 2013.

In what was described as the biggest shambles in recent security history, the company says it underestimated its initial tally of a 2013 breach. Names, email addresses, telephone numbers, dates of birth, hashed passwords and security questions and answers (some of them unencrypted) were stolen.

Irish Independent

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