The race to innovate

The names above the doors may have stayed the same, but behind those doors, some of the earliest US multinationals to establish in Ireland look very different to when they first arrived. Many have evolved their operations over the years, from carrying out back-office or manufacturing functions to high-value work founded on innovation and research that frequently contributes to key strategic product lines for their parent companies.

IBM, which dates back in Ireland to 1956, now has 2,000 employees engaged in research and innovation here, says managing director Peter O’Neill.

The company had a recent win at the 2016 US - Ireland Research Innovation Awards with a big data research project in association with UCD. This and the nomination for the US multinational corporation research in IoT and cognitive computing “are just two examples of our progress in innovation and research at IBM in Ireland,” he says.

Its innovation work in Ireland focuses on areas ranging from healthcare, social care and education to energy, water and transport. IBM Ireland receives on average one patent per week, representing a wide range of inventions but showing a growing focus on cognitive computing and cloud platforms. The company’s Irish R&D labs includes experts in security, analytics, high-performance systems, machine learning, large-scale modelling, data mining, deep semantic reasoning and natural language processing.

Another longtime presence in Ireland, Analog Devices is 40 years in Limerick this year. Its Cork R&D facility employs nearly 100 people and the company has had close to 300 US patents granted to ADI inventors based in Ireland. This is nearly 20 per cent of the total US patents held by the company.

Semiconductor maker Xilinx’s 20-year-old Irish operation has both a product engineering team, and the company’s only corporate research team outside its US headquarters. Last year, it won the inaugural US-Ireland research innovation award for its programmable chip that has since been adopted by some of its biggest customers, says Kevin Cooney, managing director for Xilinx in EMEA.

“We have continued working on it and evolving it to make it more improved and effective over time, all carried out in Ireland. This is a corporate product, part of our corporate roadmap today and into the future, it’s not some niche area,” he says.

It’s a sentiment echoed by Mark Gantly, director of Hewlett Packard Enterprise in Galway. “I don’t think of us as a subsidiary of corporate. We’re part of the decision-making, we’re part of the definition of new products. We chase down blind alleys in our research and go after new opportunities, just as they do in corporate headquarters. I don’t think of it as a Galway operation; I think of it as people in Galway who are leading global teams from here,” he says.

That being said, there are some distinctive projects that are clearly associated with the company’s Irish operation, such as a patented global product authentication service that was innovated and incubated out of the Galway site.

This began as a social innovation project for Africa to allow people to check by text message if a pharmaceutical product was genuine and not counterfeit. HPE has since repurposed this to authenticate products of any type to the end user, including its sister company’s printing ink. Consumers can scan the QR code on the packaging, send the image to a secure cloud service and instantly see if the product is real or fake.

“For a manufacturer of products, this is a very useful service. It provides peace of mind, particularly around something like drugs and pharmaceuticals, and obviously the food industry is very interesting from that point of view,” says Gantly.

Many of these local operations could not have exceeded their original brief without a high-quality talent pool and it’s a recurring theme among senior management in those companies. “The qualities of the workforce that have sustained us in our transformation and allowed us to carry our innovation and R&D is our ‘can-do’ flexible attitude and our ability to embrace change,” says IBM’s O’Neill.

Innovation within an international corporate structure rarely takes place in silos, and this also plays to Irish strengths, Cooney adds. “You need the ability to work as part of a team that’s local or multinational. In Ireland, we’re very good at that ability to be connected outside the island. You need to be personable, a good communicator, and comfortable working in an environment where you might not see the person every five minutes,” he says.

Gantly agrees. “There are locations that are cheaper or closer to HP’s enterprise customers, but what we have in Ireland is a proposition around a combination of ‘soft’ skills and technical skills. It makes us good at doing new things and the product authentication solution is a good example of that.”

Another factor in Ireland’s favour is what Gantly calls Galway’s ‘X’ factor, which can be helpful in attracting skilled workers from continental Europe and elsewhere. “We have relatively low attrition rates and that’s important because what we do here takes time to get to a certain level of productivity,” he adds.

US multinationals aren’t just interested in cultivating innovation within their own walls. IBM’s Peter O’Neill points to the company’s collaboration with universities and research institutes, as well as partnership initiatives with other large companies and innovative SMEs who can bring niche expertise to IBM projects. “We also have some great entrepreneurs and small technology-based businesses in Ireland and we need to continue to attract and develop our relationship with them,” he says.

Other than the bottom-line benefit to the companies themselves, there is a wider economic uplift to carrying out innovation in Ireland, according to Stephen Merriman, tax partner with PwC. “It encourages economic growth through the creation of jobs. The benefit of jobs created through research and innovation is that they tend to be higher value so the level of salary is higher, and they’re much more sustainable. So you move the economy onto a more sustainable trajectory and you’re not just relying on the old construction and manufacturing streams.”

Merriman says there is a multiplier effect to the foreign direct investment happening in Ireland because it creates jobs, boosts exports and the companies undertake expenditure within Ireland. Their contributions to the Irish exchequer come not just as corporation tax but also as PAYE and PRSI.

“The intangible benefit of FDI is about knowledge transfer and scalability. The FDI players really stimulate new sectors and they accelerate critical mass. If you look at our history with the FDI community and the likes of Intel coming to Ireland, that fuelled the tech industry we now have with Google, Facebook, and so on – which in turn has led to sectors like fintech and the technology start-up incubators. If you get the right FDI that is sustainable and has substance, you’re going to create a cluster and convergence effect. You’re forcing a collision of ideas, people and talent that fuel productivity,” says Merriman.

Another benefit to carrying out innovation-driven work in Ireland is that these operations become more shielded from changes in economic headwinds, says Cooney. “It’s a very big deal for me and the team here that we consistently generate new patents in Ireland because that’s the key to the future of innovation for us here. I’ve always said you need to create the types of opportunities that can withstand the downturns. You need to build the teams that are core to the business even when times get tough,” he adds.