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