Home-grown IT sector faces sales challenge

The Irish market is small and Irish software firms lack the skills to push products into international markets - ISA chairman.

It's the classic entrepreneur's motto - anything worth doing is worth doing at least twice. For Mr Paul O'Dea, the new chairman of the Irish Software Association (ISA) - his second stint in the job - that applies to starting companies as well as heading up the Irish software sector's main industry voice.

He was working for Cognotec when he and a few others left to spin out a new electronic banking software firm, Credo (eventually purchased in the mid-1990s by British firm Misys, which also snapped up Kindle). Mr O'Dea stayed with the company until 2000, when he left to establish International Ventures, a strategic consultancy to tech companies.

Given the amount of change that's happened since 1995, the last time Mr O'Dea fronted the ISA, he might as well be a newcomer to the job in 2002. "It was a great, fun time, but it was very different," he says of the industry back then.

In 1995, no one was talking about Celtic tigers or boom economies. The indigenous software sector employed only about 5,000 to 6,000 people, and no one really thought of the State as a technology centre, though its reputation was growing.

The biggest challenges the indigenous sector faced then? "Venture capital funding. It was extremely difficult to get, and there were very few VCs [venture capitalists].

"Companies also didn't understand the process of working with a VC. And most companies were service-oriented, rather than having products." A lack of graduates in information technology was a serious concern as well, says Mr O'Dea.

And now? Identifying the issues that confront the indigenous sector is a key role for the ISA, which lobbies Government and relevant bodies on behalf of its members. But it also has a social function, running an annual awards programme and co-ordinating social activities such as the annual association dinner every autumn.

Minding the issues remains the ISA's main role, however. In comparison to 1995, "we're in significantly better shape on the VC side, but there are still problems with early stage capital", Mr O'Dea says.

Creating some alternative ways of funding young companies is a major plank of the ISA's current lobbying efforts. Mr O'Dea claims that, if the tax system were tweaked in some subtle ways, most viable start-up companies would be able to generate €1 million through a mixture of tax relief on seed capital, BES relief for support from friends and family, and grants from Enterprise Ireland.

The British more readily fund companies at an early stage than the Irish market, he says. "There could be a lot more start-ups if we made it easier to access seed capital and BES funding," he notes.

He acknowledges that, with dwindling Government finances, now may not be the easiest time to persuade the Minister for Finance, Mr McCreevy, to give tax breaks to the industry.

"But facilitating the funding of new businesses creates more jobs." A young technology company might need 10 engineers, each paid about €50,000 annually, generating "at least €250,000 to Revenue", he argues.

The Government could also boost the industry by committing to buy a percentage of its software from indigenous producers, the norm in many countries and US states, he says. It also needs to provide better leadership. "The e-minister's scope has been disappointing so far," he says of the decision by Government to restrict Ms Mary Hanafin's role to that of a co-ordinator of programs and departments. "The e-minister needs to ultimately effect change," and perhaps the role is too broad for a single person, he adds.

But he thinks the most crucial issue the indigenous sector must address at the moment is a widely acknowledged weakness in sales and marketing among Irish companies. Given that the Irish market is so small, nearly all Irish software firms must export, but they lack the skills to push products and services adeptly into international markets, particularly the US, says Mr O'Dea.

Therefore the ISA is pushing a dramatic proposal: to create a business institute within the ISA, led by a combination of experts in international industry - "of a sufficiently senior level to make this happen", he says - Enterprise Ireland and FÁS. The experts would primarily be drawn from the US.

While the State has acknowledged the need to advance research and development abilities, it has done "zero on the sales side".

The ISA believes this is a "fundamental challenge" for the software sector. But Mr O'Dea admits that establishing the institute, which would conduct about 30 days of teaching a year with "students" at chief executive or sales director level, will require a significant level of funding from both the State and individual companies.

"Until we put the capability into the indigenous sector, it won't achieve what it's capable of achieving," he says.