Veteran industry watcher TONY MULQUEEN looks back nostalgically at the evolution of the Irish IT industry.
News | 30 May 2005 :
It’s all a question of where you’re sitting.
Overlooking the Irish software industry from a height – say, from 30,000 feet
by a complacent politician traveling first class – the view is of one of the
key planks of the good ship Celtic Tiger. Phrases like ‘biggest software
exporter in the world’, ‘hub of the semiconductor industry’ and ‘buoyant indigenous
sector’ roll easily off the tongue. Nor are they without a measure of truth.
Ground Zero
The scene looks more like a battlefield littered
with corpses. The list of companies who have perished is a long one. Almost
every successful native company is headed by veterans bearing the scars of
previous disasters and black days, as well as the memory of triumphs. And at
various points – cyclical slumps in the mid-80s and mid-90s and the plunge of
the early 2000s after the Internet meltdown and 9/11 – the overall scene looked
more like a rout than a march to victory. For the ground troops of IT Ireland, it has
been necessary to take Kipling’s advice about looking at triumph and disaster,
and treating both imposters just the same.
Industry icons
The iconic example is Baltimore. At its height, a FTSE company with
a bigger market cap than the Bank of Ireland; at the ignominious end, a heap of
intellectual property bones picked over by the vulture capitalists. Baltimore were
evangelists for the then un-adopted public key infrastructure and encryption
systems that are now universally used by e-commerce. It would have been an
epoch-making event for the Irish software industry if Baltimore
had captured the market in the same way as Iona
gained hegemony in the Orbix standard. Unfortunately, open standards are just
that: open – to exploitation by others. Web browser makers like Netscape and
Microsoft, server software vendors like Microsoft and Oracle, and web services
builders like IBM and Sun all heard what Baltimore
was saying. And all of them slowly but surely added the security bits to their
products. There was no need to call Baltimore.
The success stories have attracted less ink than
the failures, because success often involves investor exit strategies: merger,
trade sale – and the possible disappearance of brand identity. But for
investors – and the employees with stock options – these were life-changing
events. Isocor, a developer of high-end e-mail servers and directory services,
was US-owned but with most of its technology developed in Ireland. At the
height of the Internet boom, it was sold to Critical Path for US$450 million.
Critical Path still has a 90-strong division in Ireland, run by ex-Isocor executive
Dara Mullen, and does business of over US$70 million annually in its chosen
niche. But Isocor – the little company that could, and did – has faded from the
public mind.
Mobile mover and shaker
Aldiscon was the classic example of an Irish
company capturing a planet-sized niche. In the mobile boom that revived the
Irish indigenous sector after dot bomb woes, Aldiscon’s product line dominated
the SMS market. This was at a time when the heavily hyped WAP was occupying
much mindshare. WAP fizzled, but millions of mobile users, especially younger
ones, voted with their thumbs and the text messaging market became a goldmine.
Aldiscon also did strong business in home location registers, the backbone of
the systems that make billions of dollars for mobile operators from roaming
charges. In 1997, Logica acquired Aldiscon for US$82 million, and Euristix,
another telco niche vendor, went for around the same price that year too.
Brands were diluted or vanished, but the expertise and confidence of innovative
companies remained, with some staff fledging away to start their own ventures.
Today, Ireland
remains strong in SMS, with companies such as Púca continuing the wireless
applications story. And even out of apparent failure came the future success.
The staff at Aldiscon and Euristix were seeded with hardcore developers and top-gun
technical deal-makers – from a company that had its hour in the sun but was
eventually left adrift by changes in technology. Retix, a specialist in OSI
communications software, was one of the cutting edge places to work in the
early nineties. It didn’t respond nimbly enough to the massive uptake of
internet standards, and the brand is now among the ranks of the fallen.
Retix alumni
Ex-Retix employees did more than swell the ranks of
Aldiscon and Euristix. The Retix VP of engineering, Raomal Perera, was one of
the founders of Isocor. He is today blazing a trail at mobile payment
specialist Valista, whose platforms carried out over a billion mobile
transactions for customers all over the world in 2004. Valista customers
collectively recorded a 340% increase in premium services, which are rolled out
to 150+ million end users - an achievement that’s starting to look mighty like
another planet-sized niche captured by an Irish company. Declan Conway and Stuart Kelly
took their Retix experience into co-founding Openet, specialising in payment
mediation between mobile operators. Retix engineer Alan Robinson went on to
head up Shenick, who develop high-end test environments for telcos who want to
validate hot new services before going live. And there is still today a rump
section of Retix trading from the original HQ in Dunlaoire. Re-branded as
Airtel ATN, and providing standards-based systems to the airline industry, the
company is led by Retix veteran, Frank O’Connor.
Compiler conquest
Glockenspiel, which eventually failed, is another
software house spoken about in hushed tones among Irish geeks. The company had
the confidence and expertise to tackle one of the blackest of computing arts –
the development of a compiler. In this case the compiler was for a language –
C++ – that was to dominate systems programming for decades to come. In spite of
making it first to market with a C++ compiler, the company didn’t thrive
financially and fell prey to a takeover by Computer Associates. Nonetheless, if
you get to look at the CV of many a principal engineer or chief technology officer
in Irish systems outfits, you will find that ‘Glock’ is present and correct at
the start of the career curve.
Adaptable enterprises
Other companies have impressed less by stellar
brilliance than by nimbleness in hard times and sheer staying power. Founded in
the early seventies by ex-IBM technical gurus who saw a chance to compete with
IBM’s own professional services, System Dynamics performed steadily if
unspectacularly through the years when IT meant air-cooled monsters in
“dinosaur pens” and legions of users working away at “Russian tellies” – the
green-and-black terminals that preceded the PC. Code was cut in COBOL, and the
customer base was the financials, large companies and government departments
who were the major computer users of the period.
The untimely death in 1994 of charismatic founder
Tom McGovern shook the company to the roots, and this came at a time of hard
scrabble in the big computer sector. The emerging client/server trend was
taking air away from the mainframe market. Heads of IT were under management
orders to start adopting the flavour of the month, and mainframe budgets were
trimmed. Taken over shortly after McGovern’s death by a British holding company
called Arrival, System Dynamics was one of the boats lifted by the rising tide
of mainframe services in the run up to the millennium. Old COBOL hands were
back in demand as the Y2K bug played a lead role in the nightmares of IT
managers across the land.
The late nineties also saw the company come under
the flag of Insight founder Tony Maguire, and back into Irish hands. After some
adventures in the American software market, System Dynamics is once more on its
traditional turf: the care and feeding of the code running on the big machines
in the air-conditioned rooms. And the big machines aren’t going away any time
soon.
As well as hardy annuals, the Irish services sector
has provided examples of acorns grown into oaks. LAN Communications was founded
by Sean McNamee and two colleagues who parted from Apple resellers Typetec in
1993. Like the Three Musketeers, the founders had contrasting characters that
worked brilliantly together: the ebullient CEO, the canny business developer
and the technical guru. The three of them worked from tiny serviced offices on Baggot Street,
fired by a vision with laser focus. Big networks were on the way up. Cisco was
the dominant technology. LAN Communications would form a strong relationship
with Cisco, and in time, with other leading network hardware vendors. They
would grow a powerful technical team and install the biggest and most advanced
networks in the land. And that is pretty much what happened.
Fast forward
Today, LAN Communications is now a wholly owned
subsidiary of Eircom, but it trades under its own well respected brand, with
thousands of successful customer installations to its name. It’s the largest systems integrator in the country, with annual revenue
of €50 million, over a thousand customers and 130 employees: a long
way indeed from the trio in Baggot
Street. E-learning – the use of computer software
as a learning tool – was a poster child of the dot com era: nowhere more so
than in Ireland,
where it held the promise of a sector where native talent could bring Irish
companies to world-leading status. Unlike the chip market dominated by Intel,
and the office productivity sector ruled by Microsoft, here was a niche where
indigenous capabilities – a strong educational infrastructure and a new
generation of Irish entrepreneurs capable of operating at a global level –
mattered at least as much as inward investment. Companies such as SmartForce
and Riverdeep led the way, swiftly taking on the lucrative US market and
growing into market-dominating companies in the process. Recent years have
brought more bad news than good, as outfits such as EMC, Unlimited and NetG
either went to the wall, were taken over, or severely downsized. Suddenly,
e-learning looked like a crowded house on this island. A slew of take-overs and
consolidations gobbled up the smaller players: for example, Intuition acquired
EmergeSmart, Unlimited and EMC.
In other cases, consolidation enabled strong niche
players to take on the heft of global operations: for instance, the entry of
Electric Paper into the ThirdForce group backed by the pioneering e-learning
entrepreneur, Pat McDonagh. That move brought the company the potential to
evolve beyond a commanding position in the computer literacy sector, and
onwards into the lucrative educational market. Recent ThirdForce announcements
have included a major deal with British publishers Harcourt and Australia’s
largest ICT project for schools. Previous Electric Paper success stories have
included breaking into the Arabic, Chinese and Latin American markets.
The e-learning companies that have survived the
shakedown now have the wind behind their sails. The original teething problems
in the area can be summarised as follows. A gold rush in e-learning around 2000
spawned a me-too mentality where everyone in sight seemed to have new
e-learning products. A general lack of understanding of what e-learning really
is saw some truly awful products – some no better than PowerPoint slide shows –
brought to market, giving the e-learning sector a bad name in the process.
Standards had yet to be defined, and there was no herd of references or success
stories to point to.
These problems have been generally resolved, as
market leaders emerge, financial security is put in place, and the success
stories gather momentum. Standards have gained maturity, too – for example,
ECDL and ICDL as definitions of computer literacy, and SCORM as a measure of
e-learning design and delivery. And the wide adoption of internet and web
standards has provided a common delivery platform that is a lot easier for companies
or governments to buy into than bespoke solutions. For Ireland, world
leadership in e-learning is a tangible, achievable goal.
US behemoths
From the plane cruising at 30,000 feet, the cut and
thrust of the Irish software development scene is nearly invisible to the naked
eye. The view is dominated by the American giants: the Microsoft campus in
Sandyford, with futuristic buildings set among green lawns; the mighty Intel
complex, itself looking like a circuit board from this height; the vast car parks
surrounding Dell units – alleviating the top issue of the politician: jobs,
jobs, jobs.
The politicians and their servants at the IDA care
little that the top geeks want to work in small companies doing ‘core
development’. What played well on the news was the stream of jobs announcements
as Dell, Microsoft and Intel dug in for the duration. The good news stories
might hit a speed bump from time to time, as Intel delayed a fab plant, a
manufacturer like Gateway departed the scene, or Apple took a fit of the blues.
But by and large the inward investment story has been an excellent one, and a
major driver of Ireland’s
economic success.
The reasons for this success are the subject of
frequently asked questions, not least because if we don’t identify the reasons,
there’s a good chance the business will be taken away from us. The Irish
corporate tax rate, underlined with gusto by our jealous neighbours, is
undoubtedly a factor. The UK
has done us a massive favour by remaining outside the euro zone and allowing sterling
to become expensive. For historical reasons, Irish people gel well inside
American corporate culture, and the English language is a unifying factor
rather than a reminder of colonial days. And an influential trend, strangely
enough, has been emigration, followed by immigration.
Irish men and women worked in US companies, and
came back with the corporate vocabulary and attitude that Americans understood.
Irish men and women went to Europe, and
elsewhere, and came back with spouses from those countries. Some of these
spouses were to become the core of a major Irish success story: the
localisation industry. Often, the Irish half went to work in one of the tech
start-ups that were bubbling away, while the spouse went to Microsoft or one of
the localisation companies that were feeding an insatiable appetite for new
language products.
The demands of global leaders such as Microsoft,
Lotus, Claris and Symantec drove localisation from an ad hoc cottage industry
to a highly formalised process. Much of this development – including standards,
automation software and specialist project management – happened here.
Localisation stands shoulder to shoulder with data communications, e-learning
and mobile applications as an area where Ireland can claim world-class competence.
While much of the spade work such as translation nowadays takes place in the
target countries, the shots are called from Ireland.
The big hardware houses are perhaps the places with
the lightest allegiance to Irish skills. Past experience has shown that
hardware manufacturing is portable, though it’s fair to say that fab plants are
less portable than computer assembly. As Irish operations grow more costly, it
gets harder to justify manufacturing here. Irish staff have faced stiff
competition from Eastern Europe, India, and an increasingly tigerish China. Irish
managers have played hardball at the board table to keep projects on Irish
soil. Leaders such as Intel remain vocal about on-going loyalty to their
operations here. Nonetheless, the successful long-term future of Irish IT
industry leadership has more to do with those small, chaotic start-ups and the
daring and vision of the people who started them.