Cisco lends Ireland Inc an intelligent air

A tech giant's decision to locate its R&D centre in Galway supports the Government's desire to develop a knowledge-based economy, writes Karlin Lillington

With the announcement this week that networking giant Cisco will establish a research and development (R&D) division in Galway, the Government and IDA Ireland have finally reeled in one of their most elusive and desirable big fish.

For years, the Government has badly wanted to add a significant Cisco presence to its roster of prominent technology companies with operations in Ireland.

On Tuesday, Cisco said that it would create aR&D centre with an initial $40 million (€31 million) investment to create 50 jobs - a figure that would eventually grow to 200 over three years.

The centre will be part of the company's voice technology group and will develop applications and services for Cisco's unified communications business.

The high-end jobs will employ skilled graduates and postgraduates and will be the much-desired "knowledge economy" jobs that the State covets.

It's not that Cisco wasn't already here. The company has maintained a modest salesforce, support and finance team in Dublin for just over a decade, currently numbering 66 people. But in marketing terms for Ireland Inc, this is not the kind of showcase operation that the Government loves. An R&D centre will be just that.

Indeed, Minister for Enterprise, Trade and Employment Micheál Martin could hardly contain his glee at the official announcement:

"Cisco has been a major target company for IDA Ireland for quite some time and the location of this R&D centre here was achieved against strong competition," he said.

"For quite some time" doesn't quite capture IDA Ireland's agonising wait for Cisco to make a decision on whether to make a more significant commitment to Ireland, or not.

In mid-2000, the company came to the very brink of establishing a huge high-technology manufacturing centre in Dublin.

In an Irish Times interview a year later, Cisco chief executive John Chambers revealed that the company backed off at the last minute when it became painfully clear that the tech downturn was biting hard in precisely the area of networking and telecommunications that had been Cisco's bread and butter - and fortune - for years.

Cisco drew back on new investments and thus, the big fish slipped through the Government's net and swam back into deeper waters.

However, Chambers noted that the company was very interested in getting a larger operation into Ireland when the time was right.

That time seems to be now, and, though the facility will be smaller than what was originally proposed six years ago, the major consolation is that an R&D centre is exactly the type of investment that the Government wants right now as part of its nascent R&D strategy.

Why? Because unlike manufacturing, R&D work is the crème de la crème of technology employment, and boasts the highest value jobs.

R&D by its nature is anchored more deeply into a particular location because of the synergies that develop among researchers and with regional partners. Jobs are far less likely to be relocated on the basis of cost.

Hence, the Minister was eagerly touting his new Ireland Inc selling points at the investment announcement.

"It is a significant further increase in the benchmark by which other global companies can judge Ireland's abilities to successfully support cutting-edge, highly sophisticated technological R&D," he said.

In addition, the operation will be an important gain for the regions and, in particular, for Galway, which hasn't had a really prominent technology company name associated with it since Digital ran its large base out of the area in the 1980s.

Yes, Digital maintained a smaller R&D centre there which went to Compaq when it bought Digital, then to HP when it bought Compaq, but none have had that immediate association with the city in the way that Limerick has with Dell or Cork with Apple.

IDA Ireland too will be delighted at location of this new R&D centre.

It has felt the heat in recent years from disgruntled local governments, frustrated that new inward investment, especially on the high-tech end of things, still tends to go to Dublin.

The regions, including Galway, tend to do better with pharmaceutical, life sciences and medical devices investments.

Now the Government and IDA Ireland can point to an excellent technology gain for Galway; use Cisco's new presence to help sell the idea of basing in the regions to multinationals; and look for new relationships between Cisco and potential regional business and research partners and educational institutions (Cisco has already built good connections at many Irish universities and institutes of technology).

Reading between the lines at the announcement of the investment, 200 jobs seems to be a conservative figure, based on modest growth at Cisco.

The company said that the actual numbers would be linked to the overall business climate and, right now, that seems to promise more than modest growth.

Cisco's strong results on November 9th indicated solid expansion despite - or perhaps because of - a consolidating market. Analysts say growing demand for high-bandwidth internet services such as broadband has meant that the company's once core business of selling routers and switches has bounced back from the gloomy days of circa 2000-05.

In addition, Chambers has successfully pushed the company into fresh business areas such as voice over internet protocol (VoIP).

Now, broad areas of security, large-scale networking, storage, IP devices such as phones and the associated management services around them have proved to be the saving grace for what was a hardware company focused on the volatile telecommunications market.

Management at Cisco's Irish operations will hope that the new facility will be able to duplicate the steady expansion of the existing sales and services operation here. A one-person office in 1995 that UK headquarters doubted would find enough business to survive in Ireland, Cisco Ireland grew exponentially to handle the rapid growth of telecommunications markets in the late 1990s.

And the Government will be hoping that Cisco's significant R&D investment can be parlayed into further commitments from multinationals as the State works to rebrand Ireland as an R&D innovation nation.