Minister Michael Ahern’s address to the Enterprise Ireland Software Seminar in Cork

Address by Mr. Michael Ahern TD, Minister for Trade and Commerce, at the Enterprise Ireland Software Seminar on Thursday 2 June, 2005 at 5:30pm in the Clarion Hotel, Cork

As Minister for Trade and Commerce I am delighted to be invited here this to speak at the closing of your Software Seminar and I would like to thank Enterprise Ireland for this invitation.

I trust that the input from the various speakers here today has given you useful and practical advice on a range of software development processes.

I am aware that software companies and others in High Technology sectors face significant challenges as a result of globalisation and increased global competition. Ireland is at a turning point in its economic development.

The reality we must face is that the low cost model is no longer an option for Ireland. Irish companies must increasingly compete through innovation, increased investment in Research & Development and with a strong focus on export growth.

Without doubt, the Irish Software sector is a substantial contributor to export based revenue generation in the Irish economy. The sector has experienced sustained growth over the past 10 years and today accounts for exports of over €14 billion annually. The Indigenous sector has seen an increasing number of entrepreneurs starting high value added, high export growth and high potential companies. Over the last number of years Enterprise Ireland has supported over 470 high potential start-up companies, which today employ 7,500 people and have a cumulative turnover of approximately €1 billion each year.

These companies, which include a strong contingent of software companies, represent a new globally competitive breed of industry based on knowledge and innovation.

For future success, we will need to see substantially increased levels of applied research in Irish firms and we must foster an environment where there exists a close working relationship between companies and Third Level Institutions.

The aim of the Government is to continue to foster a culture of R&D in Ireland by encouraging companies to increase their spend on R&D, so that in the long-run, they will have products, services and processes that will help them compete more effectively in the global marketplace.

Increased business investment in Research & Development is essential for sustaining competitiveness and future employment creation in the enterprise base.

There can be little doubt that R&D is an activity that should be developed in Ireland, and, in this regard, the new R&D tax credit scheme announced last year will assist in stimulating Research & Development activity here. Incremental R&D expenditure qualifies for a tax credit of 20%, in addition to the normal deduction for R&D expenditure at the effective corporation tax rate. The credit can be carried forward indefinitely against a company’s Irish corporate tax bill where there are insufficient profits to absorb the credit. This gives a potential tax write off for incremental R&D expenditure of up to 32.5%.

The repositioning of the Irish enterprise sector higher up the economic value chain is dependent on stimulating and strengthening business R&D. This tax credit should assist firms to increase their expenditure in Research & Development.

With this in mind, the Department of Enterprise, Trade and Employment has already sanctioned an increase of €20 million in Research & Development expenditure by Enterprise Ireland in 2005. Also, a new cabinet sub-committee on R&D has been established and charged with providing a detailed map towards the achievement of a 2.5% spend on R&D in line with the Lisbon Agenda.

The future growth and prosperity of the Indigenous Business sector is also vitally dependent on its capacity to win sales in export markets. Innovation and clearly differentiated products, services and customer solutions are key factors in winning business in international markets. Moreover, as an export market driven nation, Ireland needs to continually develop and improve skills in sales and marketing.

In this regard, the very successful “Sales Star” programme which is a joint initiative of Enterprise Ireland, FÁS and the Irish Software Association and which is focussed on the development of the sales capability within growing software companies, is an example of what can be achieved when we collectively work together to achieve a common goal.

The development of Ireland’s software industry is one of the most striking examples of our emergence as an international high tech centre. According to OECD figures, Ireland is one of the world’s top three leading producers and exporters of software.

Ireland has become a leading software centre because it has many of the characteristics of the industry – an innovative, knowledge-led culture, inherent capability, an entrepreneurial drive and an experience that has been shaped by the demand for adaptability and customisation.

Now, and in the future, technology innovation is the pacesetter of economic and company development. Innovation and knowledge are the most important commercial resources and internationally competitive, knowledge-driven enterprises are increasingly the engine of a nation’s growth.

The Enterprise Strategy Group’s Report “Ahead of the Curve – Ireland’s place in the Global Economy” has provided a blueprint for the actions that need to be taken to secure and build on Ireland’s position as a developed economy.

It clearly focussed on the need to accelerate the development and internationalisation of the Irish owned business sector as a priority for future economic development. Following Government consideration of this Report, the Enterprise Strategy Group Action Plan, was published and it specifically set out actions for implementation across a range of Government Departments. I know that in particular, Enterprise Ireland were asked to creatively re-think how best to help business as we deliver on the Group’s recommendations.

I am aware that Enterprise Ireland has now undertaken a complete business process and organisational re-engineering of its overseas and marketing supports with a clear focus on client need linked with a performance driven mission. It is putting in place initiatives to underpin the future performance of Irish Industry making it central to industrial policy going forward.

Enterprise Ireland will follow-up today’s conference with a programme of events and workshops on Software Process Improvement which I trust will address this gap and will be of further benefit your business.

I would like on your behalf to thank keynote presenters today Tom Gilb and Michael Cusumano. Finally, I would also like to thank the following Irish companies, Qumas, DeCare Systems Ireland Limited and LET Systems Limited who presented case studies and shared their experiences.

ENDS/TC157