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Presentation on the Irish Transformation and the Role of the ICT Industry
From Zero to Hero
November 2006
Ronan Deignan
Managing Director
Agenda
1 ) What Transformation ?
2 ) How was it achieved ?
3 ) Ireland and ICT
Foreign Investment
The Irish Industry
4 ) The Future
A small island in the Atlantic beside Britain
Population 4.2 million people.
1) Ireland theTransformation
History of exporting people and cattle
Ireland’s Economic History
• 1922 to 1958
• A basic agricultural economy
• Self-sufficiency and protectionism
• 1958 to 1973
• Opening up and joining Europe (EEC)
• 1973 to 1987
• some success, adjustments but crises also
“By the 1980s Ireland was referred to as the 'sick man of Europe'
At one point the International Monetary Fund considered imposing strict economic measures”
Economic history of the Republic of Ireland
From Wikipedia
1987 to date
Stunning development and growth
The Irish Economic Transformation
1990 2005 GDP €m 36,312 146,279
GDP per capita € 10,357 36,118
Merchandise exports 18b 85.1b
Total Debt GDP 96.4% 24%
Total Labour Force 1.310m 1.95m
Unemployment 176,000 86,000
Unemployment 13% 4.2%
Inflation 3.4% 2.3%
Ireland in 2006
Sources: Economist Intelligent Unit Limited 2006, Irish Times 31/03/06 & 23/03/06, Central Statistics Office (CSO)
• One of the Global Top 10 Business Locations (6th in 2006)
• High economic growth for an EU country - GNP grew by 5.4% (2005) - GDP grew by 4.7% (2005)
• Estimated for 15 more years of Strong Growth
• Population to reach 5.3 million by 2020
• Labour Force to increase by 2.2% each year for the next 10 years
• Irish economy to sustain Productivity growth of 3%
• Potential growth in economy will remain at 5.75% until 2010
Ireland’s Economic TransformationIreland’s Economic Transformation
The Irish economy has grown at over three times theEuropean and twice the U.S. average over the 90’s.
Real GDP Growth
0
1
2
3
4
5
6
7
8
'70's '80's '90's
% Growth
US averageEU AverageIreland
(Source: OECD Economic Outlook - December 2000)
Food, Live Animals
&Tobacco36%
Other42%
Chemicals & Related
Products8%
InformationTechnology
14%
Food, Live Animals
&Tobacco7%
Other7%
Chemicals & Related
Products34%
InformationTechnologies
39%
Misc. Manufctring
13%
Components of Exports 1970
Components of Exports Today
Ireland’s Economic TransformationIreland’s Economic Transformation
Destination of Exports 1970
UK18%
Rest of EU45%
Rest of World17%
USA20%
Source: Central Statistics Office
Destination of Exports Today
UK57%
USA7%
Rest of EU13%
Rest of World23%
Ireland’s Economic TransformationIreland’s Economic Transformation
02468
101214161820
Ireland
EU
OECD
The Unemployment Rate – Historically the key driver of economic policy
Per cent
Source: OECD; CSO; Census of Population; Labour Force Surveys; Live Register Statements; Dept of Finance
GDP Per Head: Ireland (and UK) Compared to EU Average --- Surpassed the UK in 1999
60
80
100
120
140
1960 1973 1986 1999
UK
Ireland
EU
Ave
rage
.
2) How was it achieved ?
Strategic Development Agencies
Clear Strategy and Objectives
Sector Focus
Many Other things combined to support strategy
The Key Issues
1) FDI for capital, know how and best practice
but also
2) Grow a modern competitive Irish industry at the same time
Dual Strategy
Strategic Development Agencies
Foreign Investment
IDA IrelandIDA Ireland
Policy Research & Advice
Science & TechnologyPolicy Research & AdviceScience & TechnologyCoordination
Forfas
Support for Irish-ownedbusinesses (including
trade & technology)
Medium to Large
Enterprise Ireland
Minister for Enterprise,Trade & Employment
GovernmentGovernment
Science Foundation
IrelandSupport for
Science and Research
Lots of Other Important Agencies including
• FAS TrainingFAS Training• Tourism IrelandTourism Ireland• Bord Bia – Food IndustryBord Bia – Food Industry• Shannon DevelopmentShannon Development• Customs House Docks Authority – Customs House Docks Authority –
International Financial Services International Financial Services CentreCentre
Clear Objectives and Strategy
Last 20 years
Objective ; Employment Creation
Strategy ; Ireland as the European location for investment in
key sectors
Now
Objective ; create a knowledge innovation led economy –
better jobs/global businesses
Strategy : Ireland as an effective location for innovative
creative businesses in high value sectors
Why Ireland?Why Ireland?
“Every success we’ve achieved around the world has been due to the old Irish recipe of big dreams, hard work and
strong relationships.”
Michael Dell, Chairman, Dell Inc.
Many of the worlds
topcompaniesare here
Young, wellEducated flexible
people Highly attractiveCorporation Tax
environment
Flexible andPro-Businessenvironment Quality of Life
English speakingglobal trading hub
-4.4
-1.12
-0.62
0
0.7
1.02
1.48
1.8
2.52
3.29
4.36
5.4
5.67
5.81
7.33
17.48
-22.43
-12.67
-24.54
-18.87
0.44
-20.21
-16.46
-10.45
-16.35
-19.56
-7.83
-9.83
-8.54
-10.96
-11.29
17.45
-30 -25 -20 -15 -10 -5 0 5 10 15 20
Germany
Sweden
Italy
Denmark
Finland
Austria
EU-15
Belgium
UK
Netherlands
Greece
France
Portugal
Luxembourg
Spain
Ireland
age 25-64 age 25-34
Education & Skills Population projections: Growth rates in % (from 2000 to 2010)
Source: Third European Report on S&T Indicators
Education & Skills Science & Engineering Graduates per 1000 population aged 20-34
3.53
3.62
4.25
4.79
5.27
6.19
6.37
6.7
6.85
7.38
8.66
10.04
11.39
12.29
16.26
0 2 4 6 8 10 12 14 16 18
Italy
Netherlands
Austria
Germany
Denmark
Belgium
US
Spain
EU-15
Sweden
Japan
UK
Finland
France
Ireland
Source: Third European Report on S&T Indicators
Flexibility and adaptability of Workforce 2005
Rate• USA: 7.76• Ireland 7.64• Hungary 6.86• Netherlands 6.43 • UK 6.05• Germany 4.49• France 4.36
Source:: IMD World Competitiveness Report 2005
-10,00020,00030,00040,00050,00060,00070,000
Source IMD World Competitiveness Report 2006
Labour Productivity in the Services Sector
$ US
Favourable Tax EnvironmentOne of The Lowest Corporate Tax Rates in Europe
0
510
1520
25
3035
40
Source: KPMG Corporate Tax Rate Survey 2006
%
Business models built
around Ireland’s standard 12.5%
corporation tax rate help
build shareholder
value
Quality of Life
7.7
7.8
7.9
8
8.1
8.2
8.3
8.4
Source: The Economist Intelligence Unit, 2004
Ireland is ranked No. 1 for quality
of life by The
Economist
Criteria•Material wellbeing •Health•Family Relations•Job Security•Social and community activities•Political freedom and security•Gender equality
CountryScore
Top 6 Countries
English Speaking Global Trading Hub
• Ireland has embodied the free trade aspects of the EU since joining the common market over 30 years ago
• Ireland has allowed immediate free inward movement of people from the ten new EU accession states from May 2004
• Recognised and proven management capability
A Truly Pro-Business Environment
• Strong Government Commitment - Prudent spending and borrowing policies, investment in education, pro-business regulatory framework for e-business
• Successive Social Partnerships - Social pacts to control wage costs between employees, employers and the Government
• Consistent focus on developing skill base through Education
• Support for Inward Investment – IDA Ireland / Government
• Strong R&D Support for Companies and Universities for developing newer technologies
• Record Job Creation - One in every 10 jobs created in the EU is a job in Ireland
• Consistent Pro Business Policies – Government strategies implemented
Other Issues ICT
Tax Incentives
• 20% R&D tax credit
• No stamp duty on IP transfer
Infrastructure
• Excellent site availability
• Developed sub-supply system
• World class design
Average % Rate of Return on US Direct Investment Abroad 2000-2004
0
5
10
15
20
Irela
nd
Hungar
y
Hong K
ong
Switzer
land
Singap
ore
Denm
ark
Czech
Rep
Nether
lands
Belgiu
m UK
Germ
any
France
Source: US Bureau of Economic Analysis, 2006
%
Sector Focus
Key Sectors for Ireland
ICT
Pharmaceuticals & Biotechnology
Medical Technologies
International and Financial Services
FDI in Ireland: Key Sectors, Key Players
IntelDellIBM
MotorolaFreescale
AppleHewlett Packard
EricssonLucentEMC2
Analog DevicesSiemens
MicrosoftOracleGoogle
AccentureeBay Hertz SAP
YahooWhirlpool
UPS
GE CapitalGMAC
Merrill LynchABN Amro
Bankers TrustCitibank
Deutsche BankBear Stearns
AIGMorgan Grenfell
Daiwa
Eli LillyMerck
NovartisPfizerAbbott
Schering-Plough
Bausch & LombMedtronic
Wyeth MedicaGilletteJ & J
Information &Communications
InternationalServices
FinancialServicesLife Sciences
The Pharmaceutical Industry in Ireland
No. 1 location in Europe for international pharmaceutical investment
9 of the world’s top 10 companies
34,000 employed in Life Sciences including 18,000
in pharmaceuticals
World’s largest biopharma plant (Wyeth)
Exports of €30 billion in 2004
Blockbuster products
• Lipitor, Viagra, Botox , Zyprexa, Zocor
Medical Devices
Europe’s leading location for the medical device industry
Over 90 companies exporting over €6.4bn
Employing 19,000 people
13 of the World’s top 25 companies present in Ireland
Integrated manufacturing, R&D, customer support and value added services
International Services
Strong clusters built
• Software Development
• Shared Services
• Financial Services
• Customer Support Centres
Financial Services in Ireland
Ireland is recognised as a centre of excellence for a range of internationally traded financial services More than 450 leading financial institutions More than 700 managed financial entities Key Financial Sectors
• Banking and Asset Management
• Fund Management, Custody and Administration
• Insurance, Reinsurance, Life Assurance and Captive Assurance
• Corporate Financial Services Source: FIBI, 2005
Who’s here?
.
3) Ireland and ICT
ICT in Ireland
• 200 companies, employing 37,600 approx.
• ICT Industry accounts for €50 billion annual exports
• 6 of the worlds top 10 leading ICT companies have operations in Ireland
• Over 900 Software Companies – both Irish and foreign owned
• Software Sector exports over €14 billon worth of products and services with a total revenue of almost €15 billion
Value added in the ICT sector in Ireland is 11.6%of GDP compared to 5%EU averageSource:: Economic Intelligence Unit
Ireland: A Home to Global Players
Novell
Top 10 ICT Companies in Ireland
TOTAL EMPLOYMENT
Intel 5,200Dell 4,400IBM 3,300Hewlett Packard 2,300Xerox 1,600Ericsson 1,400Analog Devices 1,200Microsoft 1,100EMC 1,100Apple 1,000
ICT Ireland – Recent Greenfield Wins
Internet Space, Security, Storage, Telecoms
Research & Development
Recent Expansions
ICT in Ireland
ICT in IrelandCurrent Focus / Sub-sectors
Software
Semiconductors
Telecommunications
Computer Systems
Storage Activities • R&D• New Product Development and Design• Supply Chain Management• Software Development including localisation• Services: Customer Facing Functions – Sales & Marketing• Tech Support: Contact Centres• EMEA OPS / HQ: Shared Services, Financial Accounts & Management
Services, Brand Management, IP, etc.
Irish Owned ICT Sector
The Importance of the ICT Sector in Ireland 2005 Source Enterprise Ireland
• Small companies but growing• Sales Euro 2.2 B• Exports Euro 1.4 B • Annual Growth Rate in sales 9%• R & D Spend Euro 230m 10.5% of sales• Annual Growth Rate in spend 23%
Irish Software Industry Export Markets
0
5
10
15
20
25
30
35
USA UK RestEU
Asia RestEurope
Other
Irish Software Industry
• eLearning• Financial Services• Mobile & Wireless• Public Sector• Digital Media• Middleware• Lifesciences
Key Clusters
Developing Sectors\Technologies•Travel & Leisure•Webservices•Games•Wifi/WiMax
Software “High Potential Start-Ups”
• Total 245 Software Start-Up companies – 74% success rate
• Software companies now account for 66% of all start-up companies
• 70% of start-ups come from industry, 20% from third level
2.5 19 36 45-50
0
10
20
30
40
50
1989-1996 1997-200 2001-2004 2005-2007
Key Factors in Success of Irish Software Industry
• Strong Product / Market Niche based• Export focussed• Significant Investment in R&D• Infrastructure to support the commercialisation of Intellectual
Property• Local Venture Capital Industry• World Class Telecommunications Infrastructure
Irish Software Industry Success Stories
• eLearning – Skillsoft, Riverdeep• Financial Services – Eontec• Middleware – Iona Technologies• Electronic Payments – Trintech• DSP/Communities - CEVA
Evolution of the Irish Software IndustryEvolution of the Irish Software Industry
First Phase:First Phase:1970-19851970-1985
Characteristics- Software Services
- Some products- Low profits
Second Phase:Second Phase:1986-19951986-1995
Characteristics- Products- International sales, including the USA-Niche technologies/high growth markets
Third Phase:Third Phase:1996-present1996-present
Characteristics- Venture capital- Serial investors - Stock market listings- Take-overs
.
4) The Future
Government Strategy Now :
• Move Ireland up value chain: research- and innovation-driven economy
• Attract, Grow R&D activities within Ireland
• Broaden the activities of MNCs within Ireland
• Be supportive of indigenous SMEs, start-ups
‘Ireland will be internationally renowned for the excellence of its research and be at the forefront in generating and using new knowledge for economic and social progress, within an innovation driven culture’
SFI – Built for Research
Focus
• Biotechnology
• Information & Communications Technologies
• Frontier/emerging opportunities
Continued Investment in R&DContinued Investment in R&DContinued Investment in R&DContinued Investment in R&D
• Strategy for Science, Technology & Innovation
• New Government strategic plan, launched June 2006
• Will invest €3.8bn over next 7 years
• Will double output of PhDs
• Develop sustainable career paths for researchers
• Significant investment in technology transfer and
commercialisation of IP
• Development of competency centres and industry-led
networks
IDA approaching task in three ways:IDA approaching task in three ways:
• Marketing and branding Ireland internationally as a knowledge, innovation and technology business location
• Major operational focus on developing R&D capability in-company
• R&D Capability and RTI grants for incremental R&D
• Last year over 50 R&D projects and €260 m investment
• Focus on “development” of products and processes.
• Developing “connectedness” between Industry and Academia
Strategic ICT Clustering in IrelandInterdisciplinary Research: components, systems, software & networks
Tyndal InstituteIndustry Academic
CollaborationAnalog, Siemens, Philips, Intel etc.
NCSRDublin City Univ
Sensors & Diagnostics
NCSRDublin City Univ
Sensors & Diagnostics
Bell Labs / CTVRTelecoms, software
Value chain etc.Xilinx
Bell Labs / CTVRTelecoms, software
Value chain etc.Xilinx
CRANNTrinity College DublinNanostructures &
NanodevicesINTEL
CRANNTrinity College DublinNanostructures &
NanodevicesINTEL
DERIUniv. College Galway
Semantic WebHewlett Packard
DERIUniv. College Galway
Semantic WebHewlett Packard
A I CUniv. College Dublin
Dublin City Univ.PervasiveComputing
Ericsson, IBM, Mitsubishi
A I CUniv. College Dublin
Dublin City Univ.PervasiveComputing
Ericsson, IBM, Mitsubishi
ISERCUniv. of LimerickDublin City Univ.Software Eng.
IBM, Oracle, Sun,Motorola & Iona
ISERCUniv. of LimerickDublin City Univ.Software Eng.
IBM, Oracle, Sun,Motorola & Iona
TSSGWaterford Institute
of TechnologyTelecoms SoftwareLucent, Motorola, Siemens& Nortel
TSSGWaterford Institute
of TechnologyTelecoms SoftwareLucent, Motorola, Siemens& Nortel
Centre for Intelligent Systems
Univ. of UlsterCognitive assistance
Artificial Neurons
Centre for Intelligent Systems
Univ. of UlsterCognitive assistance
Artificial Neurons
Success in the Future
“Ireland a Knowledge Economy”
Re-enforcing Ireland’s claim to be a knowledge economy :• A Quality and Relevant Education System • Innovation Systems that bring together researchers and
businesses in commercial applications of science and technology.
• Socio- economic Framework that ensures a stable economy, competition, flexible labour markets and social protection.
ConclusionsAction Points
1. Seek to be a player – select an exciting but relevant focus but - be bold
2. Set in place a strategy to achieve it
3. Back it politically and with money and resources and ensure that it works
4. Be flexible and fast 5. Keep working on the
strategy – it will need to be updated regularly
ConclusionsAction Points
6. Empower key public sector agencies with private sector ethos to help the private sector make it happen
7 Eliminate bureaucracy and make it easy and profitable to do business
8 Be consistent