POLICY:Dell Ireland has expanded beyond manufacturing. How about moving up the chain into the promised land of R&D?
THE IMMEDIATE loss of jobs in the Dell Raheen plant will be 1,900, with potential risk to a further 1,500 jobs in direct suppliers and a further 7,000 jobs in other industries at risk. The personal devastation is heartbreaking and affects the very fabric of our society.
We aspire as a nation to have stable and well-paid jobs and sufficient national wealth to afford high-quality social support for our weaker members. The core of Dell's business model has always been price competitiveness - low-cost commodity products, rather than high-value differentiated products. What is the best national policy to leverage and exploit multinationals operating in Ireland?
Press reports say the taxpayer invested €53 million in Raheen since 1990 and a further €26 million in grants to Dell in other Irish locations. Almost every public office in the State has purchased Dell computers. However, Dell paid €160 million in salaries to its staff in Ireland in its 2004 fiscal year alone, together with a further €55 million in corporation tax. In general, tax breaks, grants and procurement are necessary but insufficient for most multinationals operating here, while essential, fiscal incentives are insufficient on their own.
Dell's presence led to a supplier cluster in Limerick: Banta, Flextronics, RR Donnelly and others in logistics, catering and travel. Some are following Dell to Lodz in Poland, thus expanding their exports. Should our national strategy therefore be based on establishing supplier clusters? A national policy to embed us into the supply chain of a multinational can only be sustainable if the value is location independent. If Dell moves to Poland today, China tomorrow and Antarctica next week, are our indigenous suppliers still critical? If not, there is just a "temporary little arrangement".
Dell Ireland, together with the taxpayer, has expanded to services beyond manufacturing. There is a proof-of-concept centre where corporate solutions can be tested before purchase; an advice centre for dense environments and EMEA marketing operations, among other services. We understand these jobs remain in Ireland. The transition of manufacturing to Lodz could result in a loss of intimate product and process know-how from Dell, and thus create further opportunities for services, offered within Dell or independently.
How about moving up the value chain into the promised land of R&D? A credible strategy is initially to focus on testing, fault diagnosis and repair. Engineers based in Ireland thus learn the intricacies of specific products. These insights can be used to re-engineer and modernise these products for even lower cost and higher robustness. Similarly, pre-sale, proof-of-concept services to customers and after-sales technical support can provide valuable insights as to how specific products can be improved. An Irish operation can thus give insightful comment to the corporate design team, in turn improving the corporate appreciation of Irish knowledge. The natural next step is to give the Irish operation global responsibility for the continuing maintenance of a product, or even - the ultimate accolade - global responsibility for a new product design, cemented in the core business of the corporation.
To what extent can Ireland's agencies, the IDA in particular, attract commercial R&D? Ireland's historical focus has been on manufacturing and the resulting near-term employment. A key issue is a credible commitment to R&D coming from the "mothership" and into Ireland. It makes sense for a multinational to tap the R&D grant aid Ireland makes available to them. The core issue is whether, in the absence of such aid, the multinational would still invest in R&D in Ireland.
Some wrestle with the dilemma of whether commercialisation of research results should be via multinationals operating in Ireland, or via Irish small and medium enterprises (SMEs) and start-ups. The technology transfer offices (TTOs) of Irish third-level organisations, and perhaps even Enterprise Ireland, grapple with the dilemma of whether to focus academic R&D specifically on multinational licensing versus nurturing R&D uptake by our indigenous companies and start-ups. On the one hand, the multinationals can offer immediate global channels and scale. On the other, an Irish SME or start-up has absolute, chief executive, board, chairman and investor commitment. An SME has all of its eggs in a single basket and risks all: a multinational has many irons in its global fire, but may not have real commercial intent on a specific initiative.
A successful innovation is a venture: it requires an insight into the complex interplay and dance needed to bring a successful new product to a global market. If we are going to grant aid and foster an innovative culture in Ireland, we need to go further than just encouraging R&D. R&D is just one component of a more complex process, and we need to focus on the venture as a whole. We need to understand the entire product-management cycle, corporate commitment and relationship to Irish activities. We should be holistic when committing taxpayers' resources: does the corporate planning stack up and will it enhance Ireland's position as a global innovation leader?
Michael Dell said: "At the heart of both the Irish and Dell character are big dreams, a passion for building and re-building, and the tenacity to adapt to challenging circumstances." Circumstances have clearly changed: do we still have big dreams, are we prepared to re-build, and do we have the confidence to adapt our national strategy?
