BIG BLUE WONDER

IT HAS been a good week for IBM, the electronics giant, who announced aftertax profits of £6.4 million for its Irish operation. For the seventh year in a row, the once almost doomed computer manufacturer has returned a profit in its Irish subsidiary, according to Mr William Burgess, managing director of IBM Ireland.

Another milestone was also attained this week - the first 30 employees for IBM's massive 2,850 job campus style project at Mulhuddart west Dublin have begun their training.

For Mr Burgess, it marks the beginning of a four to five year process which will result in several different projects based at Mulhuddart in a $350 million (£233 million) IDA backed investment to Ireland.

Mr Burgess, who has been with the IBM group for 29 years, had been eyeing the possibility of getting more IBM operations into Ireland for several years. Last year, his chance came when the group was seeking suitable locations into which it could invest.

There are two ways of looking at managing a subsidiary of a multinational, according to Mr Burgess. You can either do what the parent company asks, or you can see whether you can contribute more widely to what the parent company is doing. Mr Burgess and his management team - whom he stresses also had a vision - wanted to bring more IBM work to Ireland. "I'm a great believer in vision," he says, "but vision without action is hallucination."

However, Mr Burgess had to bide his time. When he became managing director in 1992, the Big Blue (as it is known) was in big trouble. The multinational was undergoing massive restructuring and downsizing, which was eventually to result in employment plummeting from 420,000 to 220,000.

In Ireland the figure went from 550-600 to as low as 350-400. Within the next five years the company will employ around 5,000 people.

Mr Burgess says that although be and his team wanted to contribute on the "international stage" they had to concentrate on several strategic areas to drive the company out of its problems. "Under the restructuring it was very important to protect what we had," he says.

IBM had an international software division in Ireland and steadily built its exports business to around £12 million.

The breakthrough for IBM in Ireland came when the company was seeking to locate new projects where it had an existing presence. But it came in the form of a PC Help Centre at Ballycoolin in Dublin.

This project took just 98 days from conception to implementation. The speed, flexibility and professionalism of the Government and the IDA in helping to get the project off the ground impressed IBM's US executives. It is well ahead of target employing more than 400 people who deal with queries in 12 languages. It will eventually employ 750 people. Its success gave IBM's Irish management a great lever.

Another important factor was that Mr Burgess had met the group's senior vice president, Mr Pat Toole in the US in 1992. A friendship ensued and Mr Toole made many visits to Ireland over the next five years becoming acquainted with schools, universities and, of course, IBM in Ireland.

This was to become important when Mr Toole became senior vice president in charge of locating overseas operations. A couple of years ago, Mr Burgess invited Mr Toole to speak to the Irish Management Institute. He spoke on how IBM chooses countries to locate projects in, and events grew from there.

Last March, IBM executives from the US and Ireland met the Minister for Enterprise and Employment, Mr Bruton, in the Shelbourne Hotel. Discussions ensued regarding locating a project here, but the details were still sketchy.

As the months passed, the idea of a campus style project took hold. Mr Burgess recalls that there must have been at least 50 visits by US IBM executives. "At times, it seemed like every person in the IDA was dealing with IBM."

Although the initial value of the project was £220 million, it is understood that this could increase to around £250 million. Two phases of the plan are already underway - a manufacturing facility making information storage discs, and a microelectronics project, which will employ 800 people.

To convince IBM that Ireland was the right location, executives were taken on visits to other factories, schools and universities as well as meeting various Government officials.

Mr Burgess says for a multinational like IBM the key requirements are a skilled, competitive workforce, a stable economy and a competitive environment. He says grants are important, but are not everything. (The IDA is paying well above the normal £10,000-£12,000 per job for the Mulhuddart project.)

"If you don't have a skilled workforce and the proper infrastructure then grants are meaningless," he says.

At present, Mr Burgess says IBM is happy that skills shortages will not emerge in Ireland for some years and that the Government has begun taking action to ensure that the demands for various skills are met, through increasing college places.

However, he says the Government will have to tackle the issue of corporation tax very shortly.

The manufacturing tax rate of 10 per cent is due to run out in 2010 for IDA assisted companies, and in 2005 for IFSC based companies. Mr Burgess says it is an issue the Government must resolve, as multinationals and other companies need a long lead in time.

"There is a danger that if the issue is not clarified, multinationals will, in the future, look elsewhere."

He says it is his understanding that around 80 per cent of the companies paying corporation tax in Ireland pay it at the 10 per cent rate. He says a 17 per cent rate for all companies would be revenue neutral for the Exchequer. A rate somewhere between 10 and 12.5 per cent, he suggests, would be more suitable. "It is not some wild dream," he says, "with good planning, such a rate could be achieved.

Another important issue for multinationals is a flexible workforce. It is important that the Working Time Bill is implemented "in the most flexible manner".

Computer literacy is another issue on which he believes the Government could do more. "I heard a suggestion that people should get tax relief on their first personal computer," he said. "It is a innovative idea and could really drive computer literacy."