Microsoft has decided to locate all its European online transaction services in the Republic. It marks a significant move which will strengthen the State's future with Microsoft, moving it to the centre of its e-commerce strategy.
However, the company's director of European operations has warned that if telecoms tariffs do not fall to the levels promised by deregulation it may be forced to look to cheaper markets.
Mr Kevin Dillon told The Irish Times, that despite Microsoft's confidence in the Republic's ability to provide an adequate telecommunications infrastructure, it was disappointed with the speed of transition to cheaper tariffs.
"Our internal analysis of the cost of moving bits from Ireland to the US shows a significant gap between here and the UK. While the difference has narrowed considerably, it has not been totally eliminated," Mr Dillon said.
He added Microsoft is now ready to partner with a "tele-host" in the State which would host and manage all the bandwidth necessary to process millions of dollars of electronic transactions daily.
Last year the Republic missed out on an opportunity to host Microsoft's mirror site, for its online content. The business went to a company outside London, Telehouse, which now handles online content for Microsoft client subscribers, and supports Microsoft's homepage, MS.COM in Europe.
"Despite rapid developments in bandwidth and pricing since then, we have still not identified a telehost operating in Ireland today that offers the same services. We would absolutely welcome such a service here," Mr Dillon said.
The European operations centre is continually evaluating the Telehouse facility, and it is believed it would seriously consider relocating the servers to the Republic so both transactional and content servers can be managed here.
The tele-host would extend Microsoft's current transaction services which include electronic transaction ordering, entry management and communications with distribution partners and resellers throughout Europe.
Over time Microsoft wants to clear online transactions with consumers in real time, and deliver products electronically. Mr Dillon sees a good opportunity for Irish banks to pioneer online transaction clearance services in Europe.
"We are keen to move aggressively from just doing order management to actually clearing transactions online, and we would love to see a leadership position taken in Ireland on online multi-currency banking clearance," Mr Dillon said.
No Irish banks have offered secure end-to-end online transaction clearance services to date.
Mr Dillon warned that moving to electronic billing and product distribution will have consequences for some of Microsoft's existing business partners as their role gradually changes. In particular, CD ROM manufacturers need to embrace DVD ROM and eventually look at how they can become involved in electronic distribution of software.
"I would be concerned the CD industry isn't investing in itself at the moment because it feels it has been made redundant, but it is very important Ireland has adequate DVD capacity for several years yet, and the investment needs to be made," Mr Dillon said.
