Cover Image
close this bookInformation Technology in Selected Countries (UNU, 1994, 148 p.)
close this folder1: Development of information technology in Ireland
View the document(introduction...)
View the document1. Introduction
View the document2. Historical perspective
View the document3. Government policy and the role of key institutions
View the document4. Development of the electronics industry
View the document5. Development of the software industry
View the document6. The telecommunications infrastructure for it
View the document7. Manufacturing applications of information technology
View the document8. IT applications in the service sector
View the document9. The impact of IT on employment
View the document10. Education and training in information technology
View the document11. Summary and implications for developing countries
View the documentAppendix A: IT-related courses in tertiary-level institutions in 1987/88
View the documentAppendix B: EOLAS innovation support programmes
View the documentReferences

5. Development of the software industry

Having reviewed the growth and development of "hardware" - the electronics related manufacturing sector in Ireland - it is necessary to examine the way the software industry has developed. The term "software" refers to both the instructions that direct the operation of computer equipment and the information, or data, that the computer manipulates. It is generally classified into two general types:

1. systems software, including operating systems, which control input and output operations;

2. applications software, designed to apply computer power to the performance of specific tasks (e.g. invoicing, computer-aided design, materials requirement planning).25

Early Software Use in Ireland

During the 1960s and early 1970s the major requirements for computer use in Ireland were in marketing (sales, distribution) and finance (costing, management accounting, etc.). Within the university sector, there was also a requirement for scientific and research information processing.

According to the survey conducted in 1969, few of the commercial in-house or bureau computer users made use of software applications packages. This was interpreted as reflecting the poorly developed state of applications software at the time. Available software packages had a technical rather than commercial orientation, lacked adaptation to Irish conditions, and required excessive storage capacity. It was recognized that the main factors holding back developments among in-house commercial users were the lack of computer capacity, the unsuitability of existing hardware, and the lack of trained computer personnel. Among bureau service users, the main drawbacks were the difficulty in using an outside computer for processing and the geographical remoteness of the bureau. The university sector was curbed by lack of funds and to a lesser extent by the unsuitability of hardware and the lack of applications software.7

The survey also identified the following areas in which packages were sought by potential users: payroll, shore registration, stock recording/order analysis, truck scheduling and routeing, critical path analysis, computerized typesetting, and economic modelling.

The initial difficulties experienced by the early computer users were essentially overcome by several developments:

(a) transfer from bureau to in-house computer use (since the early 1970s); (b) miniaturization of hardware alongside increased capacity;

(c) a reduction in the cost of computer purchase;

(d) growth of data-processing staff and departments to develop and adapt applications software;

(e) development of systems software that allowed more extensive "prototyping" and involvement of computer users alongside computer specialists.

Current Software Industry

According to a survey undertaken by the Irish Computer Services Association (ICSA), employment in the information and computing services sector doubled between 1982 and 1987. Based on the results of a survey of 128 companies in the computing services business, it was estimated that over half of the output from the sector was exported. Indigenous companies accounted for 75 per cent of sales, two-thirds of employment, and half the exports (fig. 1.1). Most of the exports of foreign-owned companies were in the form of software products. One further trend was discerned - towards increasing size of companies, which indicates greater stability and maturity in the industry.26


Fig. 1.1. Irish computing industry: turnover, local and export, 1986 (Source: ref. 26)


Fig. 1.2. Irish computing industry: growth of employment, 1982-1988 (Source: ref. 26)

In 1986, the total turnover of the Irish computing industry was IR£160 million (or US$225 million). The sector employed an estimated 2,800 staff, and achieved a growth rate in 1986 of 13 per cent (fig. 1.2). This was lower than the rate in the rest of Europe, and a number of companies experienced difficulties. The rapid decline in bureau services continued, but at a slower rate than in previous years, suggesting a transfer of information-processing functions to in-house computers. Other developments that were highlighted by the Seventh Annual Survey of Computing Services in Europe (1987) were that Irish computing service exports were increasing at an extremely fast rate of 70 per cent in 1986, compared with 20 per cent per annum worldwide. Employment in the industry was increasing at a rate of 12 per cent per annum. Demand for software and marketing specialists increased by 17 per cent and 16 per cent per annum respectively in 1986. However, a word of caution was included in the reference to growth "being impeded by the brain drain of some of Ireland's qualified and experienced computing services personnel."26 The employment area will be covered further in section 10.

Within the computing services sector, software production was the major contributor to turnover in 1986, accounting for over IR£83 million, of which IR£32 million was generated by Irish companies (fig. 1.3). Computer bureau services accounted for a turnover of IR£23 million, much of which was in non-Irish companies. Approximately half of the computing services consultancy work, amounting to about IR£10 million, was done by Irish companies, which also contributed to the bulk of turnover in education/training and maintenance. The "other" category consists of activities that are value-added, relating to hardware. This was a significant category in terms of turnover.


Fig. 1.3. Irish computing industry: division of turnover, 1986 (Source: ref. 26)

Irish Software Companies

A total of 305 software companies are currently listed by the IDA. Of these, only 9 employ more than 50 employees, and none has more than 200 (table 1.6).

Of the nine medium-sized companies, only five are foreign owned. This contrasts with the ownership of medium (and large) electronics-related manufacturing companies. Almost three-quarters of the IDA listed small software companies are Irish owned. Medium-sized companies are concentrated in the East Region, with seven companies, and Mid-West, with two firms (table 1.7). This represents an even greater concentration than with hardware companies, probably reflecting the need for medium-sized software companies to be located beside a large potential market. Just over 70 per cent of the small companies are also in the East Region. Foreign companies are located only in the East, Mid-West, South West, and West regions whereas Irish software companies are represented, albeit tokenly, in all regions.

Table 1.6. Irish software companies


Irish companies

Foreign companies

Total

Size category

No.

%

No.

%

No.

Medium (50-199 employees)

4

44.4

5

55.6

9

Small (<50 employees)

218

73.7

78

26.3

296

Total

222


83


305

Source: Unpublished IDA data, July 1988.

Table 1.7. Location of Irish software companies


Medium companies


Small companies


Region

Irish No.

Foreign No.

% of medium firms

Irish No.

Foreign No.

%of small firms

Donegal




4


1.4

East

4

3

77.8

149

59

70.3

Midlands




9


3.0

Mid-West


2

22.2

12

5

5.7

North East




2


0.7

North West




2


0.7

South East




5


1.7

South West




24

11

11.8

West




11

3

4.7

Total (305)

4

5

100

218

78

100

Source: Unpublished IDA data, July 1988

Promotion of the Computer Services industry in Ireland

As with the need to attract overseas investment for the creation of a hardware industry, the IDA actively promotes Ireland as an "ideal location" for international services. The switch to non-manufacturing production investment represents a significant change in emphasis from the traditional industrial policy followed by the IDA in the 1960s l970)s, and early 1980s. Prior to the mid-1980s, investment incentives concentrated on grants towards plant, machinery, and equipment, along with training grants and tax concessions. This tended to attract capital-intensive rather than labor-intensive industries.

The International Services Programme currently operated by the IDA seeks to attract investment in computer services, R&D services, healthcare, training services, and international financial services. To be eligible for aid, companies must provide an internationally traded service and be able to export. Whilst grants towards capital costs (e.g. computers, furniture, buildings) are still available, the emphasis is on feasibility grants (up to 50 per cent of research costs up to a maximum of IR£15,000), employment grants (in two instalments), training grants, as well as tax and other concessions.

As a result of this new policy, and a realization of the growing market for computer services, there has been a rapid increase in the number of startups among software companies. Of the 305 companies listed by the IDA, 158 (52 per cent) were established since the beginning of 1980. Of these, 100 (approximately one-third of existing companies) came into existence only since the beginning of 1985. This suggests a considerable achievement, particularly in the small company category.

The financial systems area has been well represented in the new inter national services sector and includes companies such as:

- Insight (Irish owned), with financial packages sold in 30 companies for IBM and ICL users,
- Kindle Group (Irish owned), with specialized banking systems for main frames,
- GC McKeown (Irish owned), which specializes in financial, accounting, and personnel packages,
- IBM (US owned), which develops applications software for export to Europe, Africa, and the Middle East,
- ICL (UK owned), which has a UNIX-based R&D centre for applications software.

The IDA also claims that hardware manufacturers based in Ireland (DEC, Nixdorf, Westinghouse, Wang, Measurex, and Philips) have been taking advantage of the abundant supply of computer science graduates to develop software in Ireland.

Another specific segment of the computer services market that has been targeted for growth potential is that of "courseware." It encompasses a whole range of computer-based educational or training material that enables a student or trainee to acquire knowledge or skills. Conscious of its potential, a committee was set up to report to the Minister for Industry and Commerce in February 1986.27 The committee recommended that the state and its agencies should encourage the sector through:

(a) industrial promotion for both indigenous and overseas projects to assist courseware firms,
(b) venture capital funding to assist start-ups,
(c) marketing assistance from CTT in liaison with the National Software Centre,
(d) skills training by FAS to meet market demand for "conventional" and interactive video-based skills,
(e) demand stimulation through public sector "priming" in the educational field and other areas of activity,
(f) awareness stimulation to be created in the Irish Management Institute and the Confederation of Irish Industry and, with the public service, to publicize the advantages of computer-assisted training and to encourage identification of applications,
(g) video production/editing using Radio Telefis Eireann's pool of skills on commercial production,
(h) coordination by the Department of Industry and Commerce of various state agencies' activities.

The total value of Irish software exports is estimated to be around IR£100 million and this is expected to double within five years. The prevailing mood in the Irish software industry is one of optimism, despite some closures of software houses. It is predicted that a greater emphasis will have to be placed on marketing, rather than solely on product development.28