Ireland Rapidly Emerging as EU's Silicon Valley
In the following paper, we’ll briefly review the economic landscape of Ireland at the beginning of the global financial crisis and the efforts Ireland continues to make to rebound from the crisis (and how they’re succeeding) by investing in foreign investment, start-up entrepreneurs, and emerging technology. We’ll continue our discussion by looking at the industries with the strongest presence and growth in Ireland. And we’ll conclude by discussing some of the compelling reasons that businesses have chosen to establish their EU-bases in Ireland.
Ireland Then and Now...a Brief Retrospective
If the global financial crisis, which came into sharp relief in 2007, had an apogee, it could well have been Ireland. The global fiscal crisis, which shook and continues to shake the EU (both lender and debt economies), exacerbated the nascent financial crisis in Ireland, which came to a head in 2008. Recapitalisation, coupled with initiatives intended to cope with a hemorrhaging banking sector, resulted in contingent and actual fiscal liabilities that led to the Irish State pursuing external assistance in 2010. Subsequent to this move, the country has been working to adhere to its regimen of financial and structural reforms (austerity measures) and continues its bold pursuit of foreign investment.
FDI, or foreign direct investment, is a substantial contributor to Ireland’s economy, and consequently, to Ireland’s economic recovery. In fact, according to the Deloitte report Investing in Ireland Your move in the right direction, large companies (e.g., multinationals) contribute the lion’s share of corporate tax revenue paid in Ireland (approximately 75%). And while Ireland’s financial crisis continues, the country has made great strides through its rigorous campaign to attract FDI; even as the crisis escalated, in 2009 Ireland procured 2.4% of GDP from corporate tax revenue, whereas two of its strongest lender compatriots only garnered 1.3% and 1.4% (Germany and France, respectively).
The Emerald Touch: How Ireland is Repositioning Itself through FDI
According to the Deloitte report, nearly 1,000 multinational corporations have established their European base in Ireland. Pharmaceutical manufacturers, medical device makers, information communications technology (ICT) providers, and financial services, are leaders of FDI in Ireland. The incentives for these companies are numerous and extend far beyond the highly attractive 12.5% corporate tax rate. Of foreign companies in Ireland, U.S. companies comprise a significant portion: 600 U.S. companies currently operate in Ireland and employ 100,000 workers, according to a report by ‘60 Minutes’. Moreover, the U.S. paid 33% (or one-third) of Ireland’s total corporate tax, according to the Deloitte report, over the past 10 years.
A Package Deal
Ireland’s Investment and Development Agency (IDA Ireland) can offer funding and grants (e.g., interest subsidies, capital grants, rent reduction grants, and loan guarantees) and a range of support services to companies setting up a business in Ireland, such as introducing potential investors to local industry, government, service providers and research institutions and offering advice on property solutions for international investors. ICT, pharmaceutical, medical technology, consumer and universally high-value service sectors (i.e., software developers, etc.) are strongly favored by the IDA. IDA-supported entities have created 135,000 jobs in Ireland. Additionally, foreign and local investor joint-ventures are sought and encouraged by the government.
Where the Action Is
At the February 2012 New York Investment in Ireland Summit, former U.S. president Bill Clinton was quoted as saying, have to be nuts not to take advantage of the unique investment opportunity presented by one of the most business-friendly countries in the world, with the youngest, best-educated workforce in Europe.
It would appear he was preaching to the choir. Heavyweights such as: Eaton Corp, Ensco International, Rowan Cos., Sara Lee Corp.’s D.E. Master Blenders, Oracle, Microsoft, Google, GE, Pfizer, and Merck, have set up shops in Ireland. Nine of the top ten pharmaceutical companies in the world have set up operations in Ireland. Seventeen of the top 25 global medical technology companies have established operations there, engaging in everything from supply chain management, to high-value manufacturing, to R&D.
Life sciences companies operating in Ireland benefit from a convergence of several world-class research institutes and programs, an abundance of young, highly-educated workers (with the requisite science and engineering backgrounds), R&D grants and tax incentives, and relocation packages that draw top-tier talent to the industry. Technology companies are drawn by similar inducements, including a substantial pool of highly-skilled, young workers with technology and software development expertise, as well as Ireland’s vigorous investment in emerging technology, exemplified by the Cloud Computing Technology Research Center (established in 2012).
Other standout advantages for companies across all sectors include Ireland’s cultural affinity with the U.S., its fluency in working with multinational corporations, the simplicity of a common linguistic denominator (for English-speaking partners) coupled with a multilingual workforce, an overlapping time zone (U.S. and Asia), and its proximity to London and New York.
The New Convention: Dublin, Ireland - the EU’s Silicon Valley
Insiders are calling the neighborhood in Dublin where Google and Facebook’s international headquarters are located the Silicon Docks. And rightly so. The city has become a tech Mecca, with LinkedIn, PayPal, Amazon, Twitter, and Zynga setting up their EU offices in the city (which is roughly one-fifth the size of San Francisco). When Salesforce set up its EU headquarters in Ireland, the move was considered highly unconventional: “The manufacturing companies were coming here, but not the software companies – they were going to London.” according to John Dillon, Engine Yard CEO. Dillon was instrumental in bringing Salesforce to Ireland and hopes that setting up an EU-base for Engine Yard (a San Francisco-based company that makes software used by application development teams) in Ireland will have the same success Google’s Ireland campus enjoys.
In keeping with Ireland’s commitment to cultivating an environment that welcomes foreign investment and entrepreneurial innovation, Ireland’s government created Enterprise Ireland (the largest venture fund in Europe). The Competitive Start Fund (funded by Enterprise Ireland) invests in 15 seed-stage start-up companies each quarter, and a number of business incubators, such as Launchpad, are also supporting start-ups with seed funding. With the youngest population in Europe, and dozens of top-notch universities, Ireland has become renowned as a place to tap deep reservoirs of highly-skilled and educated young workers (Source: IMD World Competitiveness Yearbook 2012, ranks Ireland #1 for skilled labor and FDI).
Ireland’s lenient work visa process has enabled companies like Google to bring in the best and brightest from all over the world to work at its Dublin headquarters, further augmenting the local talent pool. And the IDA provides crucial support to emerging companies by helping with everything from “getting office space to banking services. You name it, they have contacts that will speed up the process of getting established”, according to Petter Made, co-founder of SumUP (a Berlin-based mobile payment processor) which recently launched an operations division in Dublin[ii].
And as final feather in Dublin’s tech cap, Dublin Web Summit and the F.ounders conference have, in a mere three years, become two of the most popular tech events in the world.
If You Build It...
Four decades of investment in attracting foreign investment and innovative enterprises are beginning to bear fruit in Ireland. The reasons for the influx of companies into the country range from operational expansion to substantial financial advantages – but at the heart of it, they are strategic. Simply put, companies are moving to Ireland because it provides fantastic opportunities to create and expand business frontiers. As Ireland strides into the realm of “industry hub”, a second wave of entrepreneurial immigrants is arriving to support the companies that have moved to Ireland and/or to better support their current EU partners. As a spokesman for the risk management firm Aon expressed it, “We want to be closer to where our clients are.”
Unlike the stereotypical outsourcer of a decade ago, foreign companies are choosing to establish a presence in Ireland because it allows them to better serve their EU-based partners. SaaS provider eMaint (a company that provides computerized maintenance management software [CMMS] to clients around the world) is establishing its Dublin offices for this exact reason. A company spokesperson expressed it this way, “We are a service company and a tech company. We want to extend the same level of service to our clients in the EU we offer clients in North America. That’s what attracted us to set up offices in Dublin. You can operate our platform anywhere via the cloud, but sometimes you need a ‘person on the ground’ that you can speak with in real-time. This will allow us to better serve our current EU partners, so it’s additive for us and them. You can’t outsource that level of service.”
The feeling is mutual. Connor Murphy, co-founder of the start-up Datahug, and a native of Cork, Ireland, sees the influx of foreign entities as beneficial for Irish entrepreneurs as well. “The serendipity part of networking is quite powerful,” Murphy says, adding that the cluster of tech companies in and around Dublin has fostered greater opportunities for him and other start-ups to network with their more advanced peers. “Ten years ago, I had a very good business proposition, but I didn’t have a community around me,” Murphy says. “Today, the support is significantly different. It means things can really happen, now, in Ireland.”
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