Half of indigenous Irish software companies believe they will more than double in size within three years, according to a survey carried out in association with the State agency, Forbairt. All of the companies believe they will achieve further jobs growth, while about a quarter believe they will increase employment by 100 per cent. Almost one third of the smaller firms, employing less than 20 people, hope to use venture capital funds to finance expansion, while four big companies indicated that they were considering a stock market flotation. "Venture capital companies, private investors, State support, and Business Expansion Schemes will all be relied upon by most firms," the report states. The report, by strategy consultants Prospectus, called "Strategies for Sustainable Growth - the Software Industry in Ireland", says the sector's expansion has made it increasingly competitive, both in building up customers and in employing quality staff.
But the report states that customers still find the industry difficult to understand. "Although the industry has largely moved on from the days of unreadable technical manuals, it still has a long way to go in the area of customer-friendly service," it states.
In addition, many companies fail to carry out customer research, leaving themselves vulnerable to better-placed competitors. "Many software start-ups are very product-focused, and, after initial success, can neglect to undertake research on the market, their customer requirements and customers' opinions of them."
The report recommends the creation of knowledge management strategies, so the personnel who leave a company do not take its "intelligence capital". Two-thirds of the 108 respondents see the problem of attracting and retaining key personnel as the main barrier to growth. "The report shows that, as company size increases, so does the significance of skills shortages," Mr David Duffy, managing director of Prospectus, said. Mr Dan Flinter, chief executive of Forbairt, said the Republic was the world's largest exporter of software products and services. "Its strength as an industry is reflected in its intensive investment in new product development, and by a steady flow of between 40 and 50 company start-ups each year," he said. Many of the Irish people who started up their own businesses got their experience with foreign companies, such as Apple and Digital, operating in the country.
Respondents found that the organisational structures of their companies had changed as they grew larger. "As these companies grow, a major challenge will be to introduce more formal structures while retaining the entrepreneurial spirit upon which they were founded," Mr Duffy said. The report states a software company's maturing phase is necessarily shorter than a traditional, manufacturing company. Almost 40 per cent of respondents found that finance had been available when they wished to expand but "smaller firms indicated that a lack of finance and an inability to access suitable distribution channels were the most significant barriers inhibiting international growth". Britain is the most important foreign market for 70 per cent of software companies, but this will fall to 48 per cent by 2000. The US will become the most important market for 44 per cent of companies, up from the current 16 per cent of companies who have it as their main market. "A significant finding of this research is that the USA is set to become as important as the UK as a market for Irish software firms."
