Silicon Dublin

Dec. 21, 2004
Lured by Ireland's low tax rates and access to European markets, high-tech companies must cope with labor shortages and a stressed infrastructure.

The small gray plaque is easy to miss as you amble along the main street in Leixlip, County Dublin. Here, you learn, two brothers named Guinness leased a brewery in 1756, giving birth to a company that would become Ireland's most important exporter. Only a few miles away, two other important exporters have set up shop in more recent times. But instead of producing endless pints of creamy stout, these newcomers manufacture inkjet cartridges and silicon wafers. Ireland, for decades the poor relation of Western Europe, has become its much-envied economic champion. The country's GDP has soared at roughly 8% a year for the last five years, with unemployment falling from a mid-'90s peak of nearly 20% to about 5% today. A nation that once held frequent "American wakes" to mourn the departure of its children for distant shores is now sending recruiters all over the world to find workers. Behind Ireland's economic success, you'll find lots of household names with American accents, names like Microsoft and Intel and Hewlett-Packard. Lured by a low corporate tax rate of 10% and barrier-free access to the broader European market, scores of U.S. technology companies have settled here. At Intel Corp.'s sprawling Leixlip campus, crews are scrambling to finish the construction of a 135,000-sq-ft factory by September 2001. The $2 billion project will bring Intel's total investment in Ireland to $4.5 billion in the 10 years since it first started doing business on the island. Hewlett-Packard Co., Microsoft Corp., IBM Corp., and Sun Microsystems Inc. also have begun expanding their Irish presence, though not on the same scale as Intel. At the same time, a rising number of home-grown tech companies have sprung up in recent years, from Nasdaq stalwarts such as Baltimore Technologies PLC and Trintech Group PLC to up-and-comers such as Massana Ltd. Still, all is not rosy on the Emerald Isle. The rapid growth has overtaxed the country's infrastructure. Cars clog the streets of the Irish capital. Dublin Airport is a picture of chaos any time of the year, but never more so than during the summer when hordes of tourists descend on the country to admire the rolling green hills and drink pints of Guinness in rural pubs. Dublin's housing prices have gone stratospheric, with homes in some areas leaping in value by more than 400%. The movement of women into the workforce has created child-care headaches in a society in which, until recently, stay-at-home mothers were the rule, not the exception. Inflation, which had been running at moderate levels, suddenly began roaring ahead this year and has now surpassed the 6% rate. And then there is the shortage of labor. The Ministry for Enterprise, Trade and Employment has estimated that the country will need 200,000 more workers by 2003. Ireland has looked to fill some jobs with workers from its partner countries in the European Union, but the demand for labor still surpasses supply. More recently, the government has hosted trade fairs in the U.S. and, last Christmas, even posted workers at Dublin airport to try to entice emigrants to return home. While some observers see signs that the boom is going to bust -- and soon -- the vice president of IBM's expansive campus in suburban Dublin says the company is confident that the Irish government is taking steps to address all the problems that have accompanied the nation's explosive growth. "It's all about seeing their strategy and their record," says Barbara McLane, a Minnesotan who moved to Dublin last year. McLane says the Irish government has distinguished itself by engaging with business leaders and addressing their concerns. She cites, as do other executives, the government's decision to spend roughly $95 million to bring broadband Internet access to the country; the massive, multibillion-dollar road-building plan; and moves to deregulate the telecommunications market. At the same time, the government is striving to make Ireland a comfortable base for e-commerce with the enactment of business-friendly laws. Bill Riley, public affairs manager for Intel Ireland Ltd., agrees. Sitting down to coffee in a pleasant, well-appointed cafeteria, Riley talks about the efforts the government has made to help train people so that they have the skills to work in the industry. "There's no question," he says, "that the Irish government recognizes the issue and is working on making a difference." Riley, who saw both of his children leave Ireland to find work after they graduated from college, is clearly gratified that the economic boom has allowed the two of them -- and countless thousands of others -- to return, but he acknowledges that there are very serious challenges to continuing the robust growth of recent years. Ireland's advantage, says Riley, is that it can deal with its infrastructure problems by emulating what was done in other, more developed countries in decades past. Indeed, the country's highways have improved dramatically from the Third World standard that existed just a decade ago, and much more work is in the pipeline. Government ministers have implemented a range of measures to bring house prices within reach of first-time buyers. Ireland's restrictive work-permit rules have been relaxed to make it easier for foreigners to fill job vacancies in the industry. As things stand, those who move to Dublin encounter a bureaucratic infrastructure that is simply overwhelmed. On a rainy morning in July, more than 60 people lined up outside the alien registration office to get their passports stamped so they could legally remain in the country for the next 12 months. Those at the back of the line would still be waiting as noon came and went. But Una Halligan, public affairs officer at Hewlett-Packard in Leixlip, says that while Ireland has taken steps to make it easier to recruit skilled workers, it has failed to do anything about attracting people to fill lower-end jobs. "It's actually the unskilled workforce that's a bigger problem," Halligan says. "The government is not doing anything about that labor shortage." All the same, Halligan is confident that Ireland's leaders will listen to the business community as it presses for progress on the issue. "I think it will change," she says. What hasn't changed, she notes, are the conditions that brought the technology companies to Ireland in the first place: the low tax rate, the youngest population in Europe, the country's emphasis on engineering and science education. In fact, one other recent arrival from across the Atlantic could help move Dublin up the digital value chain. In June Nicholas Negroponte of the Massachusetts Institute of Technology's Media Lab presided over the opening of Media Lab Europe on the top floor of the building that houses Guinness Ltd.'s visitor center. Says John Callinan, chief operating officer of the new center, "Setting up the Media Lab here is saying we're not going to rest on our laurels. We're looking at the future." The new Media Lab Europe will throw university students together with top researchers on collaborative projects involving digital expression, e-commerce applications, and technology in education. Callinan, who worked in the prime minister's office during the negotiations that led to the partnership with MIT, says the deal between the university and the government is "a very forward-looking step." Media Lab's arrival has been hailed by some as a sign of the sort of critical mass that makes Dublin and Ireland an attractive proposition for players in the technology industry. For companies like IBM, that's important. Says McLane: "As long as we continue to see that Ireland is the place to be, we'll continue investing."

Major players
Technology company operations in and around Dublin include:
Dell Computer Corp.
Bray, County Wicklow
Internet-enabled call center
Total employees: 700
IBM Corp.
Mulhuddart, County Dublin
Call center, manufacturing of storage media and other components
Total expected employees: 3,000
Intel Corp.
Leixlip, County Kildare
Microprocessor manufacturing
Total expected employees: 4,000
Microsoft Corp.
Citywest Business Park, County Dublin
Sandyfod Industrial Park, County Dublin
Software localization, product development, e-commerce hosting
Total employees: 1,000
Netscape, a unit of America Online Inc.
Citywest Business Park, Dublin
European development center
Total employees: 300
Xerox Corp.
Blanchardstown, County Dublin
Call center and management offices
Dundalk, County Louth
Inkjet manufacturing
Total expected employees: 4,000

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!